I’ve presented the above 200 year commodity chart in the past on this blog and in some of the publications that I write for. This cycle shows us that commodities, as a group, tend to have about a 33 year peak-trough-peak average. We are currently in the downswing part of the commodity cycle. If the cycle plays true to its 200+ year history, we will likely see lower trending commodity markets for about another decade. Counter-trend movements upwards are wonderful for traders, but the bigger trends suggest a long-termed buy and hold approach is not going to be favorable.
Below, I’ve picked out the 4 biggest components of the CRB broad commodity index. I’ve marked the major trends in blue, with counter movements or lesser movements with dotted green lines.
Copper, one of the more dominant industrial metals, is a prime example of a commodity that peaked in 2011. That year was the approximate predicted cyclical peak from our chart above. The downtrend is clear, and trading strategies have been short-lived of late.
Here’s a longer termed WTIC oil chart to show the major peak for this commodity back in 2008 at around $145/barrel. It too has been in a flat to bearish trend since 2011, in sync with the major cycle. Oil presents enough volatility for most technical traders to profit by, especially lately. Look for support and resistance points, followed by hooking momentum indicators for entry and exit points.
Gold and silver (not shown) peaked in 2011 along with the rest of the gang. Great for a trade, but not for the trend. The recent break of the neartermed uptrend (green line) in conjunction with the end of the seasonal cycle may suggest avoiding gold for now.
Agricultures are a big component of the CRB index and of any commodity index. Like energy and precious metals , it’s got about 17% + weighting in the CRB index. Its been trending down since 2011, in sync with the cycle noted above. The trend is notably easy to spot on this sector, with a wide range of volatility suitable for mid-termed trading enthusiasts.
Upcoming events with Keith Richards
BNN MarketCall Tonight: Tuesday September 30, 6:00pm (Phone in with your questions on technical analysis for Keith during the show. CALL TOLL-FREE 1-855-326-6266. Or email your questions ahead of time (specify they are for Keith) to [email protected]
Brantford Public Library: Thursday October 9th, 2014. 7:00PM. Technical analysis concepts from the book Sideways are discussed – come out and join the discussion!
Toronto MoneyShow: Metro Convention Ctr. Thursday October 16, 2014. 5:30PM.
SPIKE IN VIX
DROP IN SPX AND TSX 50 DAY M.A.
DROP IN BULLISH PERCENT
MORE SPX AND TSX STOCKS BREAKING SUPPORT THAN BREAKING RESISTANCE
INDICES FALLING BELOW 20 DAY M.A.
SHORT TERM MOMENTUM INDICATORS TRENDING DOWN
FED. EARLIER WITHDRAWAL?
WOULD YOU UNLOAD YOUR LONG BONDS (TLT) AND MEDIUM TERM BONDS (IEF) RIGHT NOW?
THANKS FOR YOUR UPDATE ON COMMODITIES
Taking a quick look at TLT —-its come back to its trendline established about 10 months ago–I’d give it a couple of days before bailing out as the trenline is officially still holding, although the seasonals are due to end in a month or so – so its getting close. If the trendline breaks, sell.
So far the Canadian economy seems to be OK, no big drop in housing prices etc , but with commodities falling I would expect big trouble ahead especially with our demographics, all these baby boomers retiring, needing medical care, during this long downtrend. I hope you are wrong this time Keith!
I purchased Enerplus on your recommendation. It went up but now it has been caught up with the correction in other energy stocks. I like the yield. Would you recommend that I continue to hold it? Do you think it will have good upside in the favourable season for energy? Thanks.
We sold it a week ago–it broke the trend, and took out the last low. Target is now to $17 or so. If it holds that price ($17-ish) we would re-buy. For now, the sector looks unattractive in the near term.
Having said that, it is a fundamentally strong company, and if you are less worried about fluctuating prices, you can just hold it–we do feel that it will be $22-$24 eventually, and hope to see an entry point again at our $17 entry price target. We originally bought it a year ago at $17.
Hi Keith any thoughts on the GDX in the US and/or the XGD in Can. They look like they broke their short term uptrend this morning. Am I correct on that, and so any idea where their next support area is?
This would be an excellent question for my Sept 30th BNN appearance, would be good to show the chart on air, so send them an email at [email protected] – please specify the question is for me.
Meanwhile, I see support at 10.75, then $10 on XGD
OK I will,Thanks