June 2, 2019
By Mish Schneider
In spite of everything that went on this past week, I’m feeling rather contented.
For starters, on April 4th, I wrote a blog called Food Porn, that gave investors a head’s up on looking at coffee and sugar futures.
“Now, the agricultural commodities might be awakening along with sugar.” www.marketgauge.com/resources/mishs-daily/food-porn-is-it-time-to-buy-soft-commodities/.
Then, on May 20th, I wrote about corn.
“Interestingly, the agricultural commodity corn, has popped substantially off an all-time low it made on 5/13.” www.marketgauge.com/resources/mishs-daily/the-markets-year-of-the-pig-likes-corn/
I have warned you about using the Federal Reserve’s metric on inflation as anything other than a number.
From May 21st. “I’ve been shaking my head for close to a year, every time I read the misinformed who believe that the Fed’s inflation target rate is what we should watch before looking at commodities.
What these folks who did not trade through the 70’s and 80’s like we did do not consider-
Mother Nature can spark a rally. Geo-political tensions can spark a rally. Military coups can spark a rally.
In other words, if the recent action is a harbinger of things to come…It behooves you to watch what could be a huge face ripping move higher in soft commodities.” www.marketgauge.com/resources/mishs-daily/frost-floods-and-food-are-commodities-getting-hot/
With unrelentless tariffs, crashing yields and a screaming Mother Nature, everything I hope I helped open your eyes to, came to fruition.
Furthermore, the weekly charts I constantly post of the Economic Modern Family to illustrate the weakness in price action, is another avenue I hope you followed, hence avoiding huge losses.
So, where do we go from here?
Here are the weekly charts of the Economic Modern Family.
All of them are under their 50-week moving averages and some of them have been for quite some time.
Semiconductors SMH remains the strongest of the weakest. SMH is below the 50-WMA (blue), but not by that much.
Three, Retail XRT, Regional Banks KRE and Biotechnology IBB, are all below the 200-week moving average (green).
Seems like I have been reporting on these 3 failing sectors for a while.
Put the whole scene together, and you have perhaps a bit oversold conditions, but nonetheless, a substantial breakdown. Unless SMH can close a week back over the 50-WMA at 101.72, selling rallies makes sense.
Nearly a mirror image of equities, here are the commodities we have been watching. We hold positions in some.
As the economic Modern Family is breaking down, these soft commodities are trying to bottom.
This means the 100-year low ratio between equities and commodities is beginning to narrow.
The good news is that besides CORN, which already cleared its 50-WMA, the rest are just getting started.
The coffee ETF JO approaches some resistance at a weekly exponential moving average. The rest though, could go the way of corn in the coming week or so.
With talk of rate cuts, the dollar declines and gold above $1300 an ounce, remember-inflation is not just about metrics. Commodities and thereby inflation indicators, love a BIG BANG!.
Be sure to read this article I am very grateful to Fox Busines for writing, www.foxbusiness.com/business-leaders/from-teacher-to-trader-michele-schneider-one-of-the-first-female-commodities-traders-on-wall-street.
S&P 500 (SPY) 277 turned out the resistance on the gap lower. More importantly, this is the first week in 2019 that this closed under the 50-WMA. Now also in an unconfirmed Distribution phase
Russell 2000 (IWM) Some support around 145. Better at 138. And resistance now at 148.40
Dow (DIA) All four indices are now below their 50-WMA. Let’s call 250 pivotal
Nasdaq (QQQ) In an unconfirmed Distribution phase on the Daily and closed under the 50-WMA as well. Over 174.54 could give it a bounce
KRE (Regional Banks) 49.00 some support with 51.40 the big overhead resistance
SMH (Semiconductors) 101.07 the 200-DMA resistance to clear but better if it clears 101.72 the 50-WMA. Support at 97.61, this past week’s low
IYT (Transportation) 178 resistance with 167.50 the best support
IBB (Biotechnology) 100 has been pivotal so we shall see
XRT (Retail) 40.00 held by the close-perhaps due for a dead cat bounce.
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