From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

The bull market for commodities is alive and well. They were the top-performing asset class last year, and they’re kicking off the new year with a lead once again. 

The energy-heavy CRB Index is printing new seven-year highs, and our ASC Equal-Weight Commodity Index just resolved from a nine-month base to its highest level since 2013.

To take advantage of this area of leadership, we’ve been highlighting strength and outlining long ideas in a variety of commodity markets.

We know not everyone has access to the futures markets, and that’s OK, because there are plenty of opportunities to express a bullish thesis on commodities through the equity market.

To make this easier, we’ve put together a universe of stocks that offer investors exposure to a wide array of different commodities.

Let’s dive in and talk about some of them.

Here’s our Natural Resource Stocks table:

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Commodities are making a fresh leg higher, and energy is leading the way.

Crude oil is back above our risk level around 76. And the energy-heavy CRB Index is at its highest level in more than seven years.

But it’s not just energy contracts that are working right now. We’re seeing strength across all areas of the commodity complex.

This broadening participation is evident in our equal-weight commodity index, which just hit new highs after consolidating for the past two quarters.

This chart shows the CRB Index and our equal-weight index side by side:

Both are printing new highs after some consolidation and corrective action last year. You can see the bullish continuation pattern very clearly in the equal-weight index.

Also, notice how both of these charts are sporting strong...

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Crude oil bulls are back in town!

They kicked the year off by pushing price back above 76 and reclaiming the upper bounds of a multi-year base. Oil is the most important commodity in the world, so it’s hard to overstate just how bullish fresh seven-year highs would be. 

But we’re not quite there yet. We still need to take out the fall highs. 

The 76 level marks the former 2018 highs and the breakout from a massive reversal pattern. Buyers ran into an overwhelming amount of supply here during the back half of 2021. When they did manage to reclaim those former highs, it was short-lived, and the move quickly failed. 

But the move was more of a false start than a failed breakout. We’re back above this level again today.

Now that the bulls are back in the driver’s seat, can we expect to finally see crude oil at 100 in the coming weeks or months?

It’s very possible -- especially given one key development in recent weeks…  

Energy stocks are on fire! This is the best...

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

In recent weeks, we’ve been diving into individual commodity groups to size up the structural trend and to get a better idea of where we’re likely headed in the new year.

Last week, we highlighted energy contracts and the fact that many are still grappling with overhead supply. And earlier in the month we covered the worst-performing area of the commodity markets - precious metals.

Today, we’re going to turn our attention back to metals and review the base metals group.

Even with the S&P 500 printing record highs, trading ranges and overhead supply stole the show in 2021 and those dominant themes are evident when we look at base metals.

Notice the strong relationship between our equal-weight base metals index and blue-chip international equities in the Global Dow Index $DGT.

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley    

As we approach year-end, we're diving into the individual commodity groups to gauge the status of the primary trends and to get a better idea of where we’re likely headed in 2022. 

Last week, we highlighted precious metals -- by far the worst performers of 2021 with a -10.59% return thus far. We think there's a good chance they'll turn things around next year and start participating.

Today, we’re going to review the other end of the spectrum in terms of performance -- energy! 

While base metals and ags have posted strong gains over the trailing 12-months -- 25.96% and 28.22% respectively -- energy has been the real leader, quietly printing a 46.33% gain despite recent selling pressure.

After crude oil collapsed below zero last year, the entire group had its work cut out. But they’ve covered an amazing amount of ground in a short period of time, and we think they have further to go.

Let’s take a look at what’s happening in this leadership group and how we want to position ourselves as we...

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Not unlike the major US equity indexes, the commodity space is still range-bound as we head into year-end.

When we compare the trailing 12-month returns of individual groups, we get a sense of how bifurcated the commodity market has been. Another thing that stands out is just how weak precious metals have been relative to their peers.

While the rest of the asset class has posted solid gains on the year, gold and silver continue to trend lower. If this is truly a commodities supercycle, we’d expect to see some participation from this group. And, considering they’ve been in a downtrend for almost 18-months now as the rest of the space has been working, we’d expect it to happen soon. 

Let’s take a closer look at what’s going on with these shiny rocks.

First, here’s a chart with the trailing 12-month returns of our four major commodity indexes - energy, precious metals, base metals, and ags:

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From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Despite taking a hit in recent weeks, commodities have remained resilient.

Buyers are working to absorb overhead supply at some key levels. We’re seeing this kind of action in commodities across the board -- from industrial and precious metals to energy and even agriculture. We’re seeing prolonged consolidations in some of the most important contracts, such as crude oil, copper, gold, and soybean oil. 

The point is simply that most commodities are correcting through either price or time. Some are digesting gains around former areas of resistance, and others have failed to sustain their breakouts. 

Regardless of where they came from, most commodities are stuck in a range right now. That’s critical information supporting our messy outlook for risk assets.

Despite the recent bout of selling pressure, the primary uptrend is intact. Even the weakest commodities (like thermal coal) are finding support. Lumber is bouncing back above its former 2018 highs and has actually been a leader...

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Risk assets are under pressure.

Failed breakouts and significant retracements have materialized across cyclical areas of the market, including the Russell 2000, the energy and financial sectors, and, of course, commodities.

The energy complex has endured the most severe damage in the commodities realm, with crude oil leading the pack lower. Last Friday’s session was a bruiser, with crude dropping $10 to close out the week.

This kind of volatility can be alarming for any investor.

But when we zoom out--as we like to to at the end of each month--and focus on commodities as a whole, two key takeaways come to the forefront: 

1. The underlying uptrend is still intact.
2.  A period of digestion within the ongoing trend is well deserved. 

Let’s take a look at a couple commodity indexes and try to put the recent action into perspective.

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From the desk of Steve Strazza @Sstrazza and Ian Culley @Ianculley

Earlier this month, we discussed our outlook for a post-harvest rally, highlighting corn and soybean oil contracts. 

Here’s what we had to say: 

Cotton and coffee continue to rip. Crude oil and the energy space are grinding higher. Live cattle are breaking out. Even precious metals are starting to catch a bid.

Fast forward to today, and Ags have emerged as the clear leaders over the near term. They’ve been ripping higher while the majority of the commodity space retests critical levels of former resistance and continues to consolidate.

The fact that grains, softs, and livestock are marching higher while their peers are under pressure, tells us this is an area we should focus on for long opportunities. It’s where the relative strength is right now.

When we drill into the ag space, cattle futures continue to stand out. Not only are these some of the stronger contracts in the subgroup -- they are also...

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

We’ve pounded the table on the weakness in energy these past few days, so why stop now? When we find ourselves hammering the same topic time and again, there’s usually a very good reason.

As far as energy goes, there’s been a lot of damage done to the space this week.

Breadth fell off a cliff and was not supporting the new highs for energy stocks.

The relative trends have gotten clobbered, as energy has been among the worst-performing sectors over the near term.

And, just today, we’re seeing failed breakouts in energy sector ETFs across the board.

Since we’ve already written about these themes, let’s dive in and see what energy futures themselves have to say about the situation.

Are futures resilient despite these bearish developments? 

Or are there cautionary signs in the commodities market that are confirming the weakness in the stock market?

Let’s find out.

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From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

Commodities are streaking higher, providing plenty of alpha across the entire space to anyone who can pry their eyes away from their altcoin charts.

Cotton and coffee continue to rip. Crude oil and the energy space are grinding higher. Live cattle are breaking out. Even precious metals are starting to catch a bid.

But what about the grain market? Last week, we pointed out that our Minneapolis Wheat position had hit our target and that it was time to feed the ducks.

Today, we’re going to highlight a couple of grain contracts we want to keep on our radar for buying opportunities in the coming weeks and months.

Let’s dive in!

First up is the March 2022 corn contract:

Like many other cyclical assets, corn futures peaked in May and have since been chopping sideways in a broad range. As the consolidation continues to develop, price has repeatedly found...

From the desk of Steven Strazza @Sstrazza and Ian Culley @Ianculley

The best opportunities are the ones with the most clearly defined risk characteristics and most favorable risk/rewards.  

This summer, Minneapolis Spring Wheat was offering us a trade set-up with both these qualities. Price had just resolved higher from a near decade-long base and was trading at its highest level in 8 years. We were buying the breakout.

Fast forward to today and our initial profit target has been met and we’re locking in gains.

In today’s post, we’ll take a step back, review our trade, pinpoint current levels of interest, and discuss how we’re managing the position moving forward.

First, let’s look at the weekly chart of Minneapolis Wheat futures:

Back in July, we were buying the breakout above a...