Part II – What Commodities and Transportation Are Telling Us

 

 

 

In Part I of this report we talked about and showed you what commodities and transports where doing in relation to each other. Here in Part II, we show you in detail what we expect to take place.

This final chart highlights our Custom Smart Cash Index (in BLUE) as well as the CBOE Commodity Index pricing levels (in RED).  This data goes all the way back to 2012 and highlights a number of key pricing rotations.  First, we can see that Commodities have been decreasing in total value from 2012 till mid-2017.  We can also identify a key support level that was established in the Commodities Index near the beginning of 2016 – coinciding just a month or so before the bottom in the Smart Cash Index.

We believe this Key Bottom in both the Commodities Index and the Smart Cash Index reflect a dramatic pricing shift that took place at that point in time.  Although Commodities have yet to rally beyond upper high ranges, we can see the Smart Cash Index rallied to incredible new all-time highs.  The rally that started near the end of 2016 in the Smart Cash Index was likely the result of a “Capital Shift” that we have discussed extensively in the past.  With commodity prices staying historically low and an increase in economic optimism, capital shifted away from “commodity-based sectors” and into “technology and biotech sectors”.  Now, it appears this rally has run its course and a new capital shift is taking place.

Until Commodities begin to break out of the downward price channels we’ve highlighted on this last chart, global capital will be searching for two primary objectives; safety and hedged returns.  By this, we mean to say that global capital and investment will be seeking out strong Blue Chip and Mid-Cap performers that can produce safety in growth, dividends and hedge against currency swings or further eroding commodity price levels.  Think of this as a move to “key elements supporting the global economies”.

Heavy equipment, support services, and retailers, tool suppliers, and mid-level equipment suppliers, transportation services for these items and the repair parts and services to keep these tools running efficiently.  Human services, labor, labor services, medical services, and entertainment services are likely to do well over the next 12~24 months.  In an economy where commodity prices are relatively low and Transportation and Capital is flowing quite well, one could easily identify that Capital will seek out and identify the strongest opportunity for safety and growth as sectors continue to shift.  After a massive rally in Technology and Bio-Tech, we believe a continued shift towards Blue Chips and Mid-Caps is taking place right now.  Technology and Bio-Tech will likely find some support in the near future and become “opportunistic investments” eventually.  But right now, we believe global investors are focusing on different targets to hedge the risks that are associated with certain technology stocks.

In closing, our research highlights that Commodities are not increasing as one would expect in an expanding global market/economy.  We believe this is one core factor that will continue to drive a “capital shift” toward opportunity and performance in the Blue Chips and Mid-Caps.  Global investors will re-enter the Technology and Biotech sectors when pricing levels become more opportunistic – at some point in the future.  This means we have a very strong likelihood of the US and global Blue Chips, Banks, Industrial Supply, Basic Materials and Human Services (Entertainment, basic human essentials, regional human services, and utilities) will continue to perform well.

The US and the global economy is growing, just not as one would expect in a “total growth” environment.  We believe the global economy has shifted to support “fundamental growth elements” that are related more closely to the types of industry and market sectors that support the fundamental growth components.  We’ve discussed our theory that the global economies operate in a “growth or protection mode” many times before.  We believe the current global economic stance is more in tune with  “moderate growth while still being overly protective”.  Watch Commodities and the Transportation Index for signs of when the global economy enters a larger growth phase and when more opportunity for a broader capital shift will take place.

This concludes this two-part series and how we identify market opportunities for us to trade. Analysis like this has allowed us to generate substantial profits in the past 30 days with UGAZ 30%, NIO 21.6%, ROKU 18%, GDXJ 10.5%.

If you want to learn how we can help you find success throughout this shifting market and throughout 2019 and beyond, then visit www.TheTechnicalTraders.com

Chris Vermeulen
Technical Traders Ltd.

Part II – What Commodities and Transportation Are Telling Us

 

 

 

 

In Part I of this report we talked about and showed you what commodities and transports where doing in relation to each other. Here in Part II, we show you in detail what we expect to take place.

This final chart highlights our Custom Smart Cash Index (in BLUE) as well as the CBOE Commodity Index pricing levels (in RED).  This data goes all the way back to 2012 and highlights a number of key pricing rotations.  First, we can see that Commodities have been decreasing in total value from 2012 till mid-2017.  We can also identify a key support level that was established in the Commodities Index near the beginning of 2016 – coinciding just a month or so before the bottom in the Smart Cash Index.

We believe this Key Bottom in both the Commodities Index and the Smart Cash Index reflect a dramatic pricing shift that took place at that point in time.  Although Commodities have yet to rally beyond upper high ranges, we can see the Smart Cash Index rallied to incredible new all-time highs.  The rally that started near the end of 2016 in the Smart Cash Index was likely the result of a “Capital Shift” that we have discussed extensively in the past.  With commodity prices staying historically low and an increase in economic optimism, capital shifted away from “commodity-based sectors” and into “technology and biotech sectors”.  Now, it appears this rally has run its course and a new capital shift is taking place.

Until Commodities begin to break out of the downward price channels we’ve highlighted on this last chart, global capital will be searching for two primary objectives; safety and hedged returns.  By this, we mean to say that global capital and investment will be seeking out strong Blue Chip and Mid-Cap performers that can produce safety in growth, dividends and hedge against currency swings or further eroding commodity price levels.  Think of this as a move to “key elements supporting the global economies”.

Heavy equipment, support services, and retailers, tool suppliers, and mid-level equipment suppliers, transportation services for these items and the repair parts and services to keep these tools running efficiently.  Human services, labor, labor services, medical services, and entertainment services are likely to do well over the next 12~24 months.  In an economy where commodity prices are relatively low and Transportation and Capital is flowing quite well, one could easily identify that Capital will seek out and identify the strongest opportunity for safety and growth as sectors continue to shift.  After a massive rally in Technology and Bio-Tech, we believe a continued shift towards Blue Chips and Mid-Caps is taking place right now.  Technology and Bio-Tech will likely find some support in the near future and become “opportunistic investments” eventually.  But right now, we believe global investors are focusing on different targets to hedge the risks that are associated with certain technology stocks.

In closing, our research highlights that Commodities are not increasing as one would expect in an expanding global market/economy.  We believe this is one core factor that will continue to drive a “capital shift” toward opportunity and performance in the Blue Chips and Mid-Caps.  Global investors will re-enter the Technology and Biotech sectors when pricing levels become more opportunistic – at some point in the future.  This means we have a very strong likelihood of the US and global Blue Chips, Banks, Industrial Supply, Basic Materials and Human Services (Entertainment, basic human essentials, regional human services, and utilities) will continue to perform well.

The US and the global economy is growing, just not as one would expect in a “total growth” environment.  We believe the global economy has shifted to support “fundamental growth elements” that are related more closely to the types of industry and market sectors that support the fundamental growth components.  We’ve discussed our theory that the global economies operate in a “growth or protection mode” many times before.  We believe the current global economic stance is more in tune with  “moderate growth while still being overly protective”.  Watch Commodities and the Transportation Index for signs of when the global economy enters a larger growth phase and when more opportunity for a broader capital shift will take place.

This concludes this two-part series and how we identify market opportunities for us to trade. Analysis like this has allowed us to generate substantial profits in the past 30 days with UGAZ 30%, NIO 21.6%, ROKU 18%, GDXJ 10.5%.

If you want to learn how we can help you find success throughout this shifting market and throughout 2019 and beyond, then visit www.TheTechnicalTraders.com

Chris Vermeulen
Technical Traders Ltd.

What Commodities and Transportation Are Telling Us – Part I

Our ongoing efforts to dissect these markets and to help educated and inform traders has led us on an exploration path into the general market activities of two leading market indicators; Commodity prices and Transportation Prices.  These two core elements of any regional or global economy are usually about 3~6 months ahead of the general markets.  When viewing the Transportation Index, remember that transportation is key to any growing economy and a healthy economy.  When an economy is doing well, the transportation sector will be busy shipping and delivering consumer product and staples as well as manufacturing equipment and supplies.  When viewing the Commodity Index, remember the Supply and Demand equation where greater demand for commodities needed to manufacture, create, deliver or sell a product will drive prices higher as supply remains relatively constant, prices will increase.

Therefore, the theory of today’s research post is “are Transportation and Commodity prices telling us anything important about the future stock market valuations?”.  Let’s get into the research.

First, the NASDAQ Transportation Index is painting a very clear picture that the upside price move starting near the end of 2016 drove prices well above historical normal ranges.  Even today, we are well above historical ranges originating from the lows in 1998 and including the range expansion from the highs of 2007 to the lows of 2009.  Given the premise that the Transportation Index would be highlighting increased economic activities across the planet and particularly those of more mature economies, one should expect that global trade/economic activity should be near all-time highs.

We would like to point out a defined upward price slope, highlighted by the RED LINE on this chart.  We believe any potential downside price swing will find clear support near the $5025 level (the first upper range level from historic deviation ranges) or near $4690 (the RED LINE support channel).

 

In order to further our research, we’ll take a look at our “Custom Smart Cash Index” which highlights a broad range of global market indexes and weights them in a US Dollar basis.  Obviously, the results of this Smart Cash Index is designed to highlight the total global valuation levels of a variety of mature economies/markets.  We can easily see the volatility range established by the concerns prior to the 2016 US Presidential Elections created a very deep volatility range.  We believe this is important because it establishes a “relative high point” and a “relative low point” that reflects human psychology and expectations.  In other words, we believe the high point in early 2015 reflects an optimistic investor sentiment and the low point in early 2016 reflects a pessimistic investor sentiment.

This range can help us determine if current Smart Cash valuations are reflecting optimistic or pessimistic expectations by determining if the current price is near the lower areas of this range or the upper areas of this range.

Currently, the Smart Cash Index is moving higher after reaching an ultimate low point near December 24, 2018. This would indicate that optimism is increasing in the global markets.  Additionally, The Smart Cash Index has breached a downward sloping price channel, drawn in BLACK.  We believe continued optimism will drive global market valuations higher over time.  Yet, we believe numerous 4~7%+ price rotations will occur in the US Stock Market as the total valuations continue to rise over the next 12~24 months.

What we would expect to find to help confirm our analysis is the price levels of general commodities would be increased to match the renewed optimism we believe is growing in the global markets.  Obviously, if the global economies are doing well and trade/sales are increasing, then we would expect core commodity levels to increase as demand stays strong which we have seen this happen time and time again during economic cycles.

This concludes PART I and how we identify market opportunities for us to trade. Analysis like this has allowed us to generate substantial profits in the past 30 days with UGAZ 30%, NIO 21.6%, ROKU 18%, GDXJ 10.5%. IF you want to know our conclusion on what commodities and transports are telling us then visit our website to read PART II in the next 24 hours.

If you want to learn how we can help you find success throughout this shifting market and throughout 2019 and beyond, then visit www.TheTechnicalTraders.com to learn how we help our members create success.

Chris Vermeulen
Technical Traders Ltd.

Chris Vermeulen – The Technical Traders – Tue 22 Jan, 2019

Oil and Commodities Considering Money Flows

Chris Vermeulen, Founder of The Technical Traders shares his thoughts on the oil market and general commodities. We consider the USD chart and a time frame for when the dollar could top and metals finally start an uptrend.

Click here to visit The Technical Traders website.

Chris Temple from The National Investor – Fri 14 Dec, 2018

Wrapping Up This Week – The US Markets, VIX, and Commodities

Chris Temple joins me to wrap up this week in the markets. We start with the US equity markets which in the S&P’s case is very close to breaking the lows from early in this year. There is a lot of air under that support if broken. We also look at the move higher in the VIX but no where near an explosion higher. Finally comment on a couple commodity sectors that got hit on the back on weak data out of China and Europe.

Download audio file (2018-12-14-Chris-Temple.mp3)

Click here to visit Chris’s site for more information on his newsletter.

Chris Temple from The National Investor – Wed 12 Dec, 2018

A Look At The Other Side – What If All This Bearish Is Wrong?

It seems like the only articles and reports you can find right now are solidly in the bearish camp. Chris Temple joins me today to look at the other side. What if something positive happens on the trade front, or what if the markets rally into year end? It is important to not always follow the crowd and ask what if everyone is wrong…

Download audio file (2018-12-12-Chris-Temple.mp3)

Click here to visit Chris’s site for more market and stock commentary.

Commodities and the Dollar

October 10, 2018 A unique setup has occurred in the UUP (Invesco DB US Dollar Index) that resembles an Engulfing Bearish type of pattern (even though it is not technically an Engulfing Bearish pattern).  Technically, an Engulfing Bearish pattern should consist of a green candle followed by a larger red candle whereas the red candle’s body (the open to close range) completely engulfs the previous candle’s body.  In the instance we are highlighting in this article, a unique variation of what we’ll call a “Completely Filled Engulfing Bearish” pattern is setting up. This is when two red candles setup in an Engulfing Bearish type of formation – omitting the requirement that the first candle be green.  Japanese Candlesticks help us to identify the psychology of the market price in relation to our other specialized tools.  We believe this formation is important because both of the red candlesticks that make up … Continue reading