Data-Driven Commodity Research, The Commodity Report

The Commodity Report

Data-Driven Commodity Research

A unique newsletter about commodities and macro analysis in a weekly format.

Commodities

<ul><li>The war premium for energy components disappears</li><li>High prices combined with slowing economic growth lead indeed to now visible demand destruction (see analysis by Pro Vision Macro below)</li><li>Lots of speculative positioning is getting washed out of the market </li></ul>

The war premium for energy components disappearsHigh prices combined with slowing economic growth lead indeed to now visible demand destruction (see analysis by Pro Vision Macro below)Lots of speculative positioning is getting washed out of the market 

Founder, Market Thinker

Mark Tinker

Founder

Market Thinker

Mark Tinker has over 35 years experience as an investor, market strategist and economist. Having spent more than 20 years as a sell side strategist and being top rated on numerous occasions and surveys he moved to investment management in 2006 to run global equity portfolios in London and subsequently moved to Hong Kong in 2013 to help establish an Investment Management business for a top 20 international asset manager. He first started writing investment weeklies for his employers in 1989, developing a style characterised under the title Market Thinking and has been a regular commentator and presenter on CNBC, Bloomberg and other business channels, where his approach of rationalising market behaviour rather than making short term predictions on high frequency market data provides a welcome balance to his client audience.

Making Sense of the Narrative

Macroeconomics

<ul><li>The rally in the 10 year bond and the selloff in Commodity prices have been taken by many pundits as ‘Predictions’ of future economic activity, i.e a collapse in demand, a recession and a reduction in the threat of inflation. </li><li>There is the usual talk of ‘Dr Copper, the metal with a PhD in Economics and the (tedious) refrain that equity markets are full of economic naïfs, while bond markets are full of wise old economists</li><li>Except of course, markets don’t actually work like that and, while the market is usually a much better indicator of the real world than any of the models employed by experts, we need to understand <em>what</em> it is telling us at any given time</li></ul>

The rally in the 10 year bond and the selloff in Commodity prices have been taken by many pundits as ‘Predictions’ of future economic activity, i.e a collapse in demand, a recession and a reduction in the threat of inflation. There is the usual talk of ‘Dr Copper, the metal with a PhD in Economics and the (tedious) refrain that equity markets are full of economic naïfs, while bond markets are full of wise old economistsExcept of course, markets don’t actually work like that and, while the market is usually a much better indicator of the real world than any of the models employed by experts, we need to understand what it is telling us at any given time

<ul>
<li>The benchmark, CRB Commodity Index, ended the week 1,4% lower.</li>
<li>What bottoms usually first? Bonds! While we may be some weeks off the low in the treasury markets, I think it’s important to remember the typical cycle of asset classes.</li>
<li>Usually, treasuries bottom first, then follow stocks and at the end commodities. We saw the same cycle peaking in 2020 with bonds peaking first, followed by stocks and now commodities.</li>
</ul>


The benchmark, CRB Commodity Index, ended the week 1,4% lower.
What bottoms usually first? Bonds! While we may be some weeks off the low in the treasury markets, I think it’s important to remember the typical cycle of asset classes.
Usually, treasuries bottom first, then follow stocks and at the end commodities. We saw the same cycle peaking in 2020 with bonds peaking first, followed by stocks and now commodities.


<ul>
<li>The benchmark, CRB Commodity Index, ended the week 1,2% lower </li>
<li>The news of the week was probably that the Atlanta FED changed its GDP now forecast drastically and signaled that a recession as soon as January 2023 is likely.</li>
<li>Commodities plunged after that news because demand destruction could become worse over time. Nevertheless, we need to differentiate.</li>
</ul>


The benchmark, CRB Commodity Index, ended the week 1,2% lower 
The news of the week was probably that the Atlanta FED changed its GDP now forecast drastically and signaled that a recession as soon as January 2023 is likely.
Commodities plunged after that news because demand destruction could become worse over time. Nevertheless, we need to differentiate.


Technical Analyst, Vermilion Research

Joe Jasper

Technical Analyst

Technical and Quantitative Research

Vermilion Research

Vermilion’s objective is to deliver timely, actionable, and unique technical research to professional investors through the application of our various technical indicators.

Our research strategists seek to highlight securities which we believe are at major inflection points, based on our various technical and quantitative indicators, and offer asymmetric risk/return profiles. Our unique research methodology, centered on relative strength, enables our strategists to deliver superior investment recommendations.

Our process begins by organizing the universe of actively traded stocks into discrete sectors, then into industry groups. We then apply our technical and quantitative tools to identify developing price trends. Once attractive trends are identified within a selected sector or group, we screen for individual stocks which we believe offer the best risk/reward profile. We provide a historical perspective that often reveals, through our long-term charts, how price patterns often repeat themselves over time.

Technical Analysis

<ul>
<li>A bear market bounce is underway after the S&amp;P 500, Nasdaq 100 (QQQ), and Russell 2000 (IWM) found support at their respective downtrend channels, a possibility we discussed last week.</li>
<li>Still, until the S&amp;P 500, QQQ, and IWM can break above their various downtrends, we remain bearish, and believe investors should be using rallies to reduce overall exposure.</li>
<li>This 1-week rally has the NDX(QQQ) testing resistance at its falling wedge pattern; a break above $297 would likely mean this bear market bounce has another 2-4 weeks of upside.</li>
</ul>


A bear market bounce is underway after the S&amp;P 500, Nasdaq 100 (QQQ), and Russell 2000 (IWM) found support at their respective downtrend channels, a possibility we discussed last week.
Still, until the S&amp;P 500, QQQ, and IWM can break above their various downtrends, we remain bearish, and believe investors should be using rallies to reduce overall exposure.
This 1-week rally has the NDX(QQQ) testing resistance at its falling wedge pattern; a break above $297 would likely mean this bear market bounce has another 2-4 weeks of upside.


Signs of Disinflation?; Commodities Deteriorating; Another Bear Market Bounce; Pharma/Biotech Buys

United States

Copper is a chemical element with symbol Cu (from Latin: cuprum) and atomic number 29. It is a soft, malleable and ductile metal with very high thermal and electrical conductivity. A freshly exposed surface of pure copper has a reddish-orange color. It is used as a conductor of heat and electricity, as a building material and as a constituent of various metal alloys, such as Sterling silver used in jewelry, cupronickel used to make marine hardware and coins and constantan used in strain gauges and thermocouples for temperature measurement.

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Copper (COPPER COMDTY)

The Commodity Report #61

But that’s IMO only a short-term development. My takeaway is don’t trust trends in the commodity world that emerge over the summer months!

The Commodity Report

Prices, Probabilities and Predictions

The rally in the 10 year bond and the selloff in Commodity prices have been taken by many pundits as ‘Predictions’ of future economic activity

Mark Tinker

The Commodity Report #59

The benchmark, CRB Commodity Index, ended the week 1,4% lower. What bottoms usually first? Bonds! While we may be some weeks off the low in the...

The Commodity Report

The Commodity Report #58

The benchmark, CRB Commodity Index, ended the week 1,2% lower. The news of the week was probably that the Atlanta FED changed its GDP now forecast...

The Commodity Report

Signs of Disinflation?; Commodities Deteriorating; Another Bear Market Bounce; Pharma/Biotech Buys

A bear market bounce is underway after the SPX, QQQ, and IWM found support at their respective downtrend channels. Until these indexes can break...

Vermilion Research

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