From the Desk of Ian Culley @IanCulley

Holy reversals, Batman!

The tactical direction flipped for the dollar and rates this morning on the heels of stronger-than-expected job growth. 

Whipsaws are dotting the charts, erasing weeks of progress.

How should we react?

Today, I want to show you a trade we can take to sidestep the market chop.

Live cattle futures are posting modest gains today (up roughly 0.50%) as they mosey toward last year’s high. 

Most importantly, they’re shrugging off the broad intraday volatility.

Plus, the structural uptrend remains intact. And I can’t help but wonder if and when lean hogs will catch up to cattle. 

Check out live cattle overlaid with lean hog futures:

These two markets tend to peak and trough together, often trending in the same direction.

Interestingly, cattle and hogs diverged in 2022. Live cattle futures rallied to a new all-time high while lean hogs wallowed in fresh multi-year lows.

I outlined a trade setup for hogs at the beginning of the year, highlighting a potential bullish reversal and the November pivot low as our risk level.

From the Desk of Ian Culley @IanCulley

Stocks aren’t the only assets catching a bid.

Commodities are, too. 

Despite their current rallies, the average investor isn’t concerned with cocoa, cotton, and lean hog futures. 

I get it… What do lean hog futures have to do with Tesla $TSLA?

But Dr. Copper – with its Ph.D. in economics – is ripping higher this week. 

And crude oil is trading above our risk level outlined last month.

Check out crude oil futures slicing through the 75 level:

Kudos to those who took the signal, as it’s over a third of the way to our target of 83. 

Crude is up 0.75% today alone, heading into the close with an intra-day high of 78.21. I like seeing strength heading into Friday’s close, as it often spills into the following week.

I imagine crude will hit our target within the next few weeks.

I’m taking profits at our target without question. The 83 level marks a logical potential resistance zone. And crude trades closer to the lower bounds of a much larger consolidation.

I believe crude will eventually break above 83 further down the...

From the Desk of Ian Culley @IanCulley

Houthi rebels are rampaging in the Red Sea.

The result: Many carriers are taking the scenic route around the Cape of Good Hope in South Africa instead of the Suez Canal. 

The longer route brings weeks-long delays and increased costs as the price to ship a 40-foot-long container has nearly doubled since late November.

It won’t be long before those additional charges trickle down to us, the consumer.

What are you going to do?

Buy marine shipping stocks!

Check out our custom equal-weight marine shipping index posting fresh eight-year highs:

I like buying base breakouts, especially when they reclaim critical shelves of former lows (notice the polarity zone marked by the ‘12 and ‘14 troughs and early ‘23 peak).

These often overlooked stocks (seriously, when’s the last time you bought a shipping stock?) are also on the verge of breaking out versus the broader market:

It always bears repeating: The strongest trends outperform their alternatives.

Many of the names in our index will post new highs upon completing this bullish reversal...

From the Desk of Ian Culley @IanCulley

Danger Will Robinson, Danger!

Cocoa futures have violated a parabolic trendline. 

And it may not be safe for bulls to hold their long positions…

Cocoa fell -2.50% on Monday, cementing last week’s trendline break.

Commodity markets tend to experience steep selloffs following dramatic rallies. Escalator up, elevator down.  

But buyers are refusing to throw in the towel here. In fact, Monday’s potential top is yielding a fresh 46-year high today – not bearish.

I will not short those new highs. Nevertheless, I want to prepare for Cocoa’s eventual decline.

Check out the March contract:

For now, 4094 marks the line in the sand. A break below that level flashes a sell signal. But only if today’s run-up in price fails to hold.

My bias remains higher toward 5000 (key extension level) as long as cocoa trades above 4343.

On the other hand, I’m ready to get short on a decisive breakdown with an initial target of approximately 3400 (the Oct. ‘23 low) and a secondary objective of roughly 2900.

The zoomed-out weekly chart...

From the Desk of Ian Culley @IanCulley

What goes up must come down.

It’s an old commodity market maxim that never fails to deliver. The cattle, sugar, and OJ markets embodied this truth last year. 

But as the calendar flips to 2024, it’s time to track those markets that failed to launch in 2023.

Here are three of my favorites…

Coffee

Unlike other softs such as cocoa and sugar, coffee failed to produce monster gains last year. 

But it’s now attempting to carve out a multi-year double bottom:

Notice the resistance level at approximately 197 coincides with a key retracement level and a shelf of former lows. That’s our breakout level.

Also, note that the 168 level proved an excellent area to define our risk and get long well before our current line in the sand. A similar early-entry opportunity is taking shape in the cotton market. 

But first, a daily chart of March coffee:

I like buying coffee futures on a decisive close...