Can Commodity Prices Rise?

The market did exactly what we thought it would do given the blog from February 25th when I observed a “Nasty Potential Topping Pattern in the Four Indices”.

From there, we examined Transportation IYT, which failed the 50-week moving average after two weeks trading above it.

We compared IYT to the Russell 2000 IWM, which after two weeks above its 50-WMA, failed it this week thus following IYT’s lead.

Last night, I queried on whether RIP is the new ETF?

Which brings us today.

Draghi and the U.S. Federal Reserve announced indefinite low interest rates with the possibility of more Quantitative Easing.

While rates fell, the U.S Dollar got stronger. The flight to the U.S. Dollar as a safety play makes sense when one compares the US economy to the global economy.

The U.S. is better off. For now.

But I wonder, considering the market fell regardless of Draghi and the Fed, how long can the dollar hold up?

I thought now a good time to look again at what commodities might do from here.

(Click on image to enlarge)

On the left is the U.S. Commodity Index and on the right the Invesco DB Agricultural Fund.

Remember that historical low ratio between equities and commodities?

Clearly, it’s narrowed. But only because equities are down from their all-time highs.

Commodities are still so cheap.

USCI represents a basket of metals, oil, gas, and softs.

DBA sticks to corn, wheat, beans, sugar, coffee, and cotton.

USCI is holding the 50-DMA thus far. As I featured this ETF a while back, the risk to the 50-DMA has decreased significantly.

I’m not recommending buying against the 50-DMA today. But, I do believe that a move back over 39.00 would indicate perkiness.

On the other hand, DBA looks abysmal right now.

Today’s low was 16.18. In fact, a new all-time low. A lot has to do with the lack of a trade deal.

For a technical signal that the bottom is in, I’d wait for a close over 16.72, or the low from the week of 12/28/18.

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