Commodities vs. SPY

I focus a lot on gold and that is because it is the constant ‘asset’ that sits in a weighty fashion doing nothing while all the other stuff orbits – bullish and bearish – around it. To me, gold’s price is simply assigned by what’s going on elsewhere. This assignment also tends to be the first asset mover to new inflationary phases, both mini and maxi.

Commodities on the other hand are more inflation sensitive and cyclical. So aside from watching yield spreads and measures like the Silver/Gold ratio, a simple view of commodities (DBC) vs. the S&P 500 (SPY) is helpful as well.

The Commodity tracker is attempting to take out the down trending SMA 200. If it does so it’s pattern would target around 17.

More importantly, it’s ratio to SPY is still firmly trending down.

Now, we have barely got a lift in long-term Treasury yields, inflation expectations (ref. TIP/TLT & TIP/IEF) and the yield curve so… patience. But at some point if the signaling continues on to a global inflationary backdrop, this ratio should break upward.

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