A few things to look at today…

Look for a summer pause on commodities, based on an overbought status as we come into a seasonally softer period. Energy, base metals and precious metals may take a breather. To me, this represents a buying opportunity. The mid-long term case for commodities remains strong.

Election BS & oil.

Here we go again. During the mid-terms, Biden opened the taps on reserves to lower prices and enhance the Democrat vote potential. This brought reserves to record lows (reserves are there to protect against Black Swans, wars etc). This is, in my knowledge, the first time I’ve heard of oil reserves being used for political gain despite the questionable ethics behind doing so.

Well, here we go again: BIDEN IS RELEASING 1 MILLION BARRELS OF GASOLINE FROM A NORTHEAST RESERVE IN A BID TO LOWER PRICES AT THE PUMP. Story here.

My take: seasonality is weak for energy over the summer. With the use of oil reserves as an election tool being used once again, this might lead us to expect little movement on energy until post-election.

After the election, reserves will need to be topped up, and prices might be expected to move strongly via that demand.

Note the cup formation on the oil chart below. Technical targets are (resistance) at $83, $93, $117. For now, a pause.

 

Base metals overbought?

We love the sector, and own this ZMT ETF (base metals ETF). But, yeah, its overbought – see my notes on chart. We are not selling it (although we reduced another metals position by 1/3rd). We anticipate a pullback to about the mid-$60’s on this metals ETF, and similar in direct metal producer stocks.

Canadian inflation numbers improve

Beyond monetary policy (rates), taxation can be used to slow economic growth and fight the inflation. You know, the inflation that was caused by Canada’s Liberal 9 year spending spree and mass immigration?

Carbon tax and grocery inflation are being offset by a globally high debt service ratio, record business failures, globally low GDP, globally lowest productivity, and other factors noted on this blog.   All showing our economy is softer. But inflation is falling! Feels good, doesn’t it?

CANADA CPI (MOM) (APR) ACTUAL: 0.5% VS 0.6% PREVIOUS; EST 0.5%

CANADA CPI (YOY) (APR) ACTUAL: 2.7% VS 2.9% PREVIOUS; EST 2.7%

CANADA CORE CPI (MOM) (APR) ACTUAL: 0.2% VS 0.5% PREVIOUS

CANADA CORE CPI (YOY) (APR) ACTUAL: 1.6% VS 2.0% PREVIOUS

What does this mean to you and I as investors?  Stronger bonds (lower rates), commodity producer strength (commodities trade in USD), possibly negative for the loonie. I just recorded a video on the bond markets (CDN, US, and Junk bonds) – to be released next week

Here’s the loonie chart – as I suggested two months ago, it has now reached around $0.72. If that cracks, look for $0.68, representing the lows of 2016 and 2020.

US inflation

Reality: U.S. households continued to feel pinched by inflation in late 2023 even as price pressures ebbed, the Federal Reserve reported. “19% of renters saying they had been behind in the rent at some point in the prior year, up from 17% in 2022.”

Same goes for Canadian renters, as seen here.

This probably means no rate cuts for the US yet. But for Canada and its damaged economy (you can’t fix stupid!), we may see easing very shortly.

Keith’s BNN episode on Tuesday

Here’s the link.

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