Trading Places
For those not of a certain age, “Trading Places” was an early 80s movie that starred Eddie Murphy (saw him in concert at the Meadowlands for “Raw”), Dan Aykroyd, Jamie Lee Curtis, Don Ameche and Ralph Bellamy. Murphy as Billy Ray Valentine, a street hustler, and Aykroyd as Louis Winthorpe III, a stiff upper-lip commodities broker, change career paths unwittingly when Winthorpe’s employers, the Duke Brothers (Ameche and Bellamy), construct an elaborate bet to see how both Valentine and Winthorpe adjust their behaviors and temperaments when their career arcs are swapped. Murphy, as he always was at that time, was a quasar with the best lines in the movie. For example, when the Duke Brothers explain their commodities business to Billy Ray he replies, “Sounds to me like you guys are a coupla bookies.”
The commodity complex we monitor, via the table below, will show 19 /23 (83%) are up on a year-to-date basis with the same percentage sporting strong Technical Scores. Please also notice that there is not one commodity with a weak Technical Score.
We don’t think it’s a stretch to say that year-to-date figures for the Bloomberg Commodity Spot Index (BCOMSP, +28%) and the TR / CC CRB Excess Return Index (CRY, 40%) are both unheralded and in line or ahead of those for major equity indexes like the S&P (+28%), NASDAQ (+23%) and Russell 2000 (+14%). The chart below shows the Bloomberg Commodity Spot Index Relative to the Russell 2000 and if you squint you can see that this relative ratio bottomed in March of 2021, and it is up – in favor of the Bloomberg Commodity Spot Index – by 1700 basis points since then.
We’re choosing this relative relationship – and not showing the BCOMSP Relative to the S&P or NASDAQ because (a) the S&P is a Tech Index and (b) Tech always beats everything. However, we’ll keep monitoring these relationships and if commodities start to beat the S&P and NASDAQ consistently, we’ll be shouting it from the highest technical parapets.
Commodity Indexes for Ag, Energy, and Industrial Metals are strong while a similar index for Precious Metals has been, in a word, dreadful. Not only, however, has gold’s performance been poor (-4% year to date) but silver’s has been downright putrid (-12% year to date). Gold takes it on the chin regularly (we heard yesterday that it is lags returns for classic LEGO play sets), but silver’s performance is hard to reconcile given the way the rest of the Industrial Metal Sector has advanced (+30% ytd).
Right here we’re looking for natural gas (generic contract) to bounce / rally after falling 44% in 55 days. We also believe oil – WTI and Brent – are consolidating and we also believe gold is in a good spot to do some buying. Gold is not spectacular here – not by any means – but it was up this morning – in work-a-day fashion – for the fifth day in a row and is supported by upward-sloping 50 and 200-day moving averages. The metal has a lot of wood to chop (mixed metaphor…. lumber has rallied hugely, +106%, in the last 28 days), but we like that gold is improving slowly and hasn’t had to take a selfie, so far, to announce it. It still has to get above its November 2021 high of 1877 to be Tik-Tok worthy. Until then…
