Commodities had a strong week and copper is now testing a key area of resistance.
Remember, these are technical comments only. Just as you must be aware of fundamental data for the stocks we recommend based on technical criteria in the report, so too must you be aware of important data regarding delivery, market moving government releases, and other factors that may influence commodity pricing. We try to limit our technical comments to the most actively traded contracts in advance of delivery, but some contracts trade actively right up to delivery while others taper off well in advance. Be sure you check your dates before trading these contracts. For questions regarding this section or additional coverage of commodities email will.gibson@nasdaq.com.
Data represented in the table below is through 7/25/2023:
Broad Market Commodities Report
Portfolio View - Commodity Indices
| Symbol | Name | Price | PnF Trend | RS Signal | RS Col. | 200 Day MA | Weekly Mom |
|---|---|---|---|---|---|---|---|
| CL/ | Crude Oil Continuous | 79.63 | Positive | Buy | O | 77.15 | +7W |
| DBLCIX | Deutsche Bank Liquid Commodities Index | 507.93 | Positive | Sell | O | 502.81 | +7W |
| DWACOMMOD | DWA Continuous Commodity Index | 839.42 | Positive | Buy | O | 789.65 | +8W |
| GC/ | Gold Continuous | 1963.70 | Negative | Sell | X | 1874.89 | +2W |
| HG/ | Copper Continuous | 3.91 | Negative | Sell | X | 3.86 | +7W |
| ZG/ | Corn (Electronic Day Session) Continuous | 557.50 | Negative | Sell | O | 637.89 | -4W |
As discussed in yesterday’s featured article and today's (7/26) Major Index & DALI piece, commodities (especially agricultural) have recently enjoyed a nice tailwind due to various supply constraints – whether it be OPEC+ talk, the dissolution of the Black Sea Grain deal, or India’s cutback on rice exports. Consequently, we have seen material developments on a few Point & Figure charts.
First, consider the iShares S&P GSCI Commodity-Indexed Trust (GSG). The fund currently sits on two consecutive buy signals near the top of its trading band, distancing itself from a (now apparent) key support level at $18.75 (March – May 2023 lows). Note the last time we saw a second consecutive buy signal here was January 2022. WisdomTree Continuous Commodity Index Fund (GCC) also recently returned to a buy signal and reentered a positive trend.
One outlier in the broad commodity fund landscape is the Invesco DB Commodity Index Tracking Fund (DBC). Unlike GSG and GCC, DBC has not returned to a Point & Figure buy signal and now faces a substantial test at $24.50, resistance from April 2023 and prior support from March - June 2022. A breakout at $25 would be noteworthy and further evidence of broad commodity strength.
To some extent, rising commodity prices are a good thing to see because if commodity prices continued to decline indefinitely it would indicate a slowing economy (demand and/or growth). However, if commodity prices rise too quickly or too high, then inflation catches a second wind, and the Federal Reserve could interpret that as a signal to maintain their pace of interest rate hikes (a headwind for traditional equity and fixed income investments). It is most certainly a delicate balance.
Although, one commodity in particular we like to see moving higher is copper (HG/). The base metal has traded beneath its bearish resistance (i.e., negative trend) line for most of this year, but recently put in a series of higher lows to test resistance at around $3.96. Due to copper’s widespread application, investors will sometimes use this as a proxy for economic activity/health. In addition to a potential breakout at $4, investors should watch copper’s relative performance to gold (GC/). HG/ remains on a relative strength sell signal against GC/ at this time, but recently reversed up into Xs which is a good sign.
