Will The Inflation Pressure Be Strong Enough To Push Commodities And Commodity Stocks Higher?

The US Dollar is gaining strength while the other currencies remain weak. This is the scenario that existed for most of 2014-2015 when all commodities and commodity-related stocks underperformed the market.

2017 is different than 2015 because the concern then was deflation whereas the focus now is inflation. So we can't expect the same sector rotation. For instance, in 2015 the banks were laggards from downward pressure on rates, whereas, in 2017, banks are likely to be leaders with upward pressure on rates.

One potential glitch, though, is that everyone is already expecting the banks stocks to be leaders which means everyone is already positioned that way.

Commodities and commodity-related stocks are also a question mark. Will the inflation pressure be strong enough to push them higher, or will a stronger dollar push them lower? I really don't know the answer, so I will rely on these relative strength scores to be the guide.
 

The gold miners will help us determine if we should be focusing on the inflation-sensitive group.

This resistance level is a showdown with inter-market forces. Will inflation drive the miners higher, or will a rising dollar push the miners lower?

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Here is a look at the dollar. The longer-term signal from 2016 is bullish, but the short-term trend is still down with price under the 50-day.

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Sectors

We lost Materials today as XLB fell below SPY. So we are left with 5 out-performers.

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