Last week, I noted that we may see another quick n’ dirty relief rally on the SPX. Near termed technical indicators provide some evidence for that potential. Relief rally or not, I am still targeting 3400 or thereabouts on the SPX in the coming months. One reason for this continued bearishness, scoping beyond the technical downtrend of the index itself, lies in the “sell everything” breakdowns of late. True, I noted in last weeks blog that markets illustrating such fear indicate that they are nearer towards the end of a bear than the beginning. Still, as we shall see below, such technical breakdowns can result in further avalanche before the last of the downside is finally seen.
Below is a major sector collection of the SPX for the YTD. The SPX index is the first chart in the top left. Note how even the defensive sectors like consumer staples (XLP), communications(XLC) and healthcare (XLV) have broken support. Utilities (XLU) broke recent support – although are only just now testing their lows from March – an area that has been cracked by literally every other sector on this list.
Here is the collection of commodity classifications, with the CRB broad commodity index in the top left. You can see that the broad CRB index is in an uptrend, despite the neartermed pullback. It remains holding its prior peaks and troughs with now breakdown. While one could argue that Agricultures (GKX)are looking weak. The industrial metals (GYX) appear a bit weak on the 6 month charts, but but if you go back a bit further (late 2021) they are holding major support. Energy (GJX) remains in a bullish trend, while precious metals and Livestock (GVX) are trading sideways.
The big picture
I’ve posted this commodity cycle chart in the past. Interestingly, when I posted it, the prediction was for a trough by the CRB index in 2020, and a rally thereafter. This as one of the pieces of evidence that drove ValueTrend to take a stand in and buy commodities when they were cheap in 2020.
Below is a monthly CRB chart. Note the precise move down in 2020 as predicted by the cycle chart. Note how accurate the cycle chart has been so far regarding the cyclical commodity bull market.
I started off this blog presenting the mini-charts of the SPX major sectors to give you an idea of how deep the current bear market is looking. There’s really been nowhere left to hide in the equity space. However, evidence suggests that the commodity bull, which I began pounding the table on in late 2020, is well entrenched. Sure, there will be pullbacks in this mega-cycle, but its clear that commodities are still the place to be. In fact, they are even more so than they were when I first began pounding the table on them in 2020.
The mini-charts of the commodity sectors offer us the ability to spot the best bets within the broader index. Energy, precious metals, livestock and possibly industrial metals (assuming support from late 2021 holds) offer the best technical profiles right now.
Who says there’s no place to hide in a bear market outside of cash? I don’t.