The re-birth of commodities – a bullish forecast

In March, I was fortunate to nail recent long-term lows in several commodities, such as Soybeans, Corn, Wheat, Cotton, Coffee, Sugar, Cocoa – and Crude Oil.  These are all tradable via the US futures markets on UK-based spread betting platforms.

Importantly, these are off the radar of the vast majority of traders/investors – and the current strong bull trends have been missed by many.  But not us. And what a great lesson in trading/investing!  Commodities get nary a mention in the MSM except the occasional crude oil piece when it spikes up or down usually in response to some disruption to supplies.  Farm products are total no-go areas.  When was the last time you read an article on Soybeans or Corn in the MSM?

So it was easy for the average trader/investor to keep eyes firmly on stocks especially in March at the depths of the Corona Crash when equity headlines were being made almost exclusively.

So out of left field came this magnificent opportunity in commodities which have risen sharply off the March lows.  That is when I alerted VIP Traders Club members to this opportunity.

So today I want to demonstrate how significant these moves are – and the potential for multi-month/year gains.

  This is a 50-year chart of the Bloomberg Commodities Index and clearly shows the long bear market that made a new low in March at the Corona Crash low.

There is a very strong downtrend line (resistance) on this log plot so that any surge above it would turn it into a line of support – and herald a multi-year advance.

And another revealing 50-year chart shows the relative value in commodities compared with equities which have become the universal focus for bullish enthusiasm for speculation.

In fact compared with the value in equities, that in commodities is at an all-time record low, despite the strong commodity rally off the March lows.  Of course, the S&P has risen faster than commodities this year.  So how much more can this trend continue?  When will investors start to switch out of equities and into commodities at scale?

Crude Oil is major component of the Bloomberg

Crude has a very heavy weighting in the Index and the Cottons and Coffees of this world have little. But all are in bull trends.  Here is the long term picture in US Crude

This is a pretty chart!  The March Corona Crash spike low was a clear ‘overshoot’ as it quickly reversed back up above the lower blue trendline.  That should ensure a rapid move up to at least test the upper trendline around the $55 area with my main target around the $80 area.

Of course, many are bearish crude as they see a rapid take-up of EVs to displace the fossil fueled fleet.  Not to mention the pariah status of the crude complex that has been so effectively whipped up by the combined forces of the MSM (including radio and TV). 

But has the extreme bearish sentiment produced an excellent contrarian opportunity?  Major lows are not made when sentiment is bullish, just as major highs are not put in when sentiment is bearish.

Commodity exploration efforts have fallen off a cliff

With the low prices that have prevailed for some time, the incentive to spend vast suns to find new deposits of minerals and new wells for oil and gas just hasn’t been there.  But with prices now advancing, we shall see an expansion in exploration certainly in the Gold sector as mining companies are now cash rich with the Gold price trading up to over $2,000 highs.

Of course, one factor behind Gold’s rally is the paucity of fresh supplies and the belief that the weak dollar can only be good for Gold.  In addition, inflation expectations as  revealed in the TIPS interest rate market are in a strong rally phase – a complete turn-around from earlier when everyone believed the Fed had a handle on inflation (consumer prices).

But what we are seeing now is a considerable inflation in commodities – and this will eventually feed through to producer prices and then consumer prices.  A stagflationary phase ahead now seems on the cards.

And food prices are not escaping this upward trend.  Here is Soybeans – a legume that is crushed into oil (inexpensive cooking oil) and meal (a farm animal food).  It is grown in the USA and South America primarily.  It is a wonder crop.

Note the very quiet period from 2015 until March when it made a low – and then exploded rocket-like in a move I am sure Richard Branson and Elon Musk would both appreciate.  And at current levels, we are getting close to the famous cry “Beans in the Teens!” that floor traders in the bean pit would shout when the price rose above £13 in pre-electronic trading days.  Of course, such cries would now only heard from the work-at-home traders from our bedrooms!

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If you wish to join us in this very exciting opportunity, take a two-week Free Trial to my VIP Traders Club.  We trade not only commodities but stock indexes, currencies and T-bonds.  Apply for your Free Trial  here.

And kick off 2021 in a new direction!

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And Copper is riding another rocket

Copper is one of the basic construction materials and its price has escalated by 75% since the March lows

The major feature is the Double Bottom around 2 cents/lb and the resultant rally is the strongest for many years.  This is a major signal that China is expanding rapidly.  Will this expansion be fueled mainly by electrons or from hydrocarbons?