From the Desk of Ian Culley @IanCulley

I’m not concerned with last year’s winners heading into 2024.

Winners have a miraculous way of taking care of themselves (i.e. cattle, sugar, cocoa.) 

Instead, my focus centers on those markets that failed to launch. Markets like this…

No, I’m not talking about Gold. But it certainly fits the bill.

I’m referring to wheat.

Wheat never produced an explosive rally this year – at least nothing like we saw in 2022. But that could all change in the coming six months.

Check out Chicago wheat futures carving out a potential double-bottom pattern:

Wheat futures are taking the shape of a classic Adam and Eve formation – a sharp sell-off followed by a longer accumulation period.

In addition, the...

From the Desk of Ian Culley @IanCulley

Metals are dominating the commodity space.

The rotation between energy and base & industrial metals colors the commodity markets as we near 2024.

Crude oil has slipped through buyers' hands since interest rates peaked in October. That much is obvious… 

But don’t short crude oil and its distillates just because copper and gold are catching a bid…

Check out the commodity subgroup performance since the US 10-year yield $TNX peaked in the fall:

Energy has clearly cooled, while precious and base metals have led the pack.

This makes sense as rates fall. But markets don’t move in a straight line.

Notice the equal-weight energy index stopped falling mid-month around the same time it ran into a logical area of support relative to the equal-weight base and industrial metals index.

...

From the Desk of Ian Culley @IanCulley

Metals are beginning to shine.

Gold’s new all-time high has captivated the masses. But all that glitters isn’t gold.

In fact, base and industrial metals are also providing ample trading opportunities.

Check out ol’ Dr. Copper challenging near-term resistance:

A decisive close above 3.91 set the path of least resistance toward the year-to-date highs at approximately 4.25.

It’s difficult to imagine a more bullish scenario for global equities aside from a continued expansion in the new highs list.

As much as I enjoy trading futures, I can’t ignore the money flowing into stocks.

If the expansion in new highs isn’t enough, stocks outperforming commodities should grab your attention.

With that in...

From the desk of Louis Sykes @haumicharts

Whenever we want to gauge animal spirits in the precious metals space, we resort to our trusty intermarket ratios.

Two weeks ago in our Gold report, we covered the notable bounce we were witnessing in the Silver/Gold ratio, pointing to brewing risk appetite within this space. And this week, we outlined a bullish trade in the iShares Silver ETF off the back of this recent momentum.

But when we take this relationship one step further, we see a similar situation in the relationship between Silver and Gold mining stocks.

Here's a long-term weekly chart of this ratio:

Silver mining stocks are at their lowest levels since the inception of the fund relative to their less-volatile and lower beta Gold mining counterparts. This would be a very logical place to see a bounce in this ratio. Especially with momentum diverging on these most recent lows, if there were ever a place for Silver miners to see some relief on a relative basis, this would be it.

Now, to be clear, the primary trend...

From the Desk of Ian Culley @IanCulley

Commodities are losing ground as money flows back into stocks and bonds in hopes of a Santa Claus rally.

Yet fresh strength in equities isn’t completely leaving commodities in the dust. In fact, numerous bullish developments are underway for raw materials.

Dr. Copper is working its way higher. Crude oil is refusing to throw in the towel despite increased selling pressure. And softs such as orange juice, cocoa, and sugar are flying toward fresh decade highs.

That doesn’t sound bearish to me, especially when considering new buying opportunities in the grain markets…

First, check out the stock-to-commodity ratio:

The S&P 500 $SPY is violating a multi-year downtrend line relative to the CRB Index, signaling a potential trend reversal underway. 

It’s undoubtedly...

From the Desk of Ian Culley @IanCulley

The tide is turning for commodities now that the dollar and rates are falling.

Crude oil is relinquishing its leadership role. Gold and silver are catching a bid. And copper is digging in at former support.

But it’s not only base and precious metals bouncing off critical levels…

Check out our Equal-weight Commodity Index refusing to roll over:

Our commodity index, comprised of an equally weighted basket of 33 commodities, is finding support at a shelf of former highs. This is the principle of polarity at its finest – former resistance turning into support.

While it’s still too early to get behind the next broad-based rally in commodities, copper-related mining stocks are following Dr. Copper’s lead...

From the Desk of Ian Culley @IanCulley

Everywhere you look, commodities argue a strong case for the next supercycle.  

Live cattle, feeder cattle, sugar, cocoa, and orange juice are all amid historic rallies. Even gold’s resilience in an environment where it should struggle speaks to an underlying demand for raw materials.     

Well, perhaps not everywhere…

While orange juice busts loose on a parabolic advance and cocoa rips toward all-time highs, copper futures barely exceed their year-to-date lows.

On the bright side, it stopped falling.

Check out copper digging in at key pivot lows from earlier this spring:

I see a potential double-bottom taking shape.

Yes, it’s still trading below a multi-month downtrend line. Yes, momentum...

From the Desk of Ian Culley @IanCulley

Survey says… 

Buy commodities!

The multi-year secular uptrend in commodities remains intact on absolute and relative terms. Commodities are outperforming the S&P 500 and US Treasury bonds. And cattle, sugar, cocoa, and orange juice are all ripping.

While some of these explosive rallies pause, other areas of the commodity space are forming tactical reversal patterns.

Let’s check out one of my favorites,…

Corn.

Here’s the December corn contract carving out a ten-week base:

I bought yesterday’s close above 500’0. That’s our risk level. As long as corn trades above that level, I like it long toward the July high at approximately 570’0.

However, during today's session, I was abruptly stopped out of my position.

I’ll give December corn another shot in the coming weeks. But only if it’s trading above our risk level.

Commodities are working. I imagine corn futures and...

From the Desk of Ian Culley @IanCulley

Price must hold above key support levels when defining a range or uptrend.

It might sound simple. Yet investors often sideline these crucial levels in favor of the latest headline.

I read the news daily and support journalists fighting the good fight. However, I don’t incorporate what I read in the papers into my market analysis. 

Instead, I focus on price and the critical areas seared into the collective memory bank – support and resistance.

Perhaps you can guess my response when a reader recently asked, “What will it take for crude oil to break down?”

Price must undercut support!

Check out the daily crude oil chart:

The principle of polarity unfolds as former resistance turns support at approximately 83.25. That’s the level.

It’s difficult to...

From the Desk of Ian Culley @IanCulley

Each commodity market has unique supply and demand dynamics.

The result is a diverse set of assets offering a steady flow of trading opportunities.

Today, I’ll outline two promising trade setups – one long, one short.

Let’s start with a fan favorite…

Natty Gas!

Natural gas futures gained over 6% on Thursday, taking out a key pivot high.

Here’s the continuation chart posting its highest level since March:

Notice natty gas is finding support above a former resistance zone at roughly 2.835. 

On Wednesday’s "What the FICC?" I mentioned trading against Tuesday’s low based on this near-term support.

Price has ripped higher since, taking out a shelf of pivot highs and filling a downside gap from early September.

I’m now long the November contract with an initial...

From the Desk of Ian Culley @IanCulley

I need to set the record straight.

Earlier in spring, I wrote a note highlighting wheat’s tendency to lead crude oil at key inflection points.  

While this statement is mostly true, it needs clarification.

Chicago wheat does have a tendency to lead crude oil at significant market tops. But crude leads at critical troughs.

Check out the crude oil overlaid with Chicago wheat futures:

Notice crude bottomed in Q1 of  2009, 2016, and earlier this year. Chicago wheat followed roughly six to nine months later, marking critical turning points in late Q3 of 2009 and 2016.

Will wheat do the same in 2023? 

I don’t know. But strong seasonal trends are clearly at work in both markets. 

And if crude oil’s rally provides any indication, I have to lean toward "yes." 

Here are crude oil futures breaking out of a multi-month base...

From the Desk of Ian Culley @IanCulley

Markets are adjusting to rising rates as investors weigh the possibility of “higher for longer.”

Bonds are breaking down to fresh lows. The major US stock market indexes are chopping within a range (perfectly normal from a seasonal and cyclical perspective). And commodities are kicking back into gear. 

All of these intermarket pieces fall neatly into a dynamic puzzle. Nothing appears out of place.

But the best information comes from markets presenting atypical behavior or defying expectations.

One commodity is doing just that as we head into the weekend...

Silver!

Did silver not get a copy of the FOMC press release? Or perhaps silver ignored it altogether… 

Silver should sell off as the 10-year yield hits a new sixteen-year high and the US dollar heads toward its...