This is a Goldilocks rally, not an ‘inflation trades’ (or cyclical) rally
Today is an ‘FOMC comment-free’ day for me, as there is nothing surprising or new going on there and frankly, the FOMC obsession game has been played out. There are too many other things to see to, like finishing up the bear market rally, hopefully on the right side and planning for its end and then being on the right side of that.
Meanwhile, to be on the right side of the 2023 segment of the Q4-Q1 rally the theme has meant to respect Goldilocks, an interim pleasantry of not too hot and not (yet) too cold inflation. From NFTRH 749 last weekend…
Commodities Bottom Line
Why, they are inflation trades! You expected anything different? Well, I am sure that inflation rooters are still out there trying to keep the troops rallied, and indeed they’ll probably get a bounce at some point. But if our view is for inflation signals to drop (it has been for a majority of the last year) then our view should be negative on commodities in alignment with that macro.
Here we find those lumping gold, silver, copper, tin, hogs and soybeans all at once (the ‘protect yourself, buy real assets, buy resources!’ autopilot thinkers) to be exposed as, well, wrong.
Anyway, here is the CRB index tracker DBC painting a nice little bear flag as it bounces toward resistance. If it takes out that resistance and keeps rallying through the now downtrending daily chart’s intermediate and long-term moving averages, I’ll admit I was wrong. But so far the analysis has not been, well, wrong.
And yes I understand the supply/demand situation in copper, for example. I also see a scenario where Asia and EM can rally if the USD takes a hit. That would benfit the good Doctor and maybe a few other commodities. Longer-term, copper along with some critical materials could benefit when war torn regions need to be rebuilt. But for now, commodities as a whole have turned bearish and the forward macro does not look supportive. But by all means, listen to the ‘protect yourself, buy commodities and resources and real things!’ touts if you wish.
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