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 Rabobank issued a research note last week where they forecasted that prices for agricultural commodities like coffee, feed grains and oilseeds could dip next year as many major economies enter recession, but also stated that they will remain high in historical terms.</li><li>We think the general call is correct, but the timing isn’t. We already see this dip move playing out at the moment.</li><li>Just take a look at coffee, cotton, oil, or copper. We believe this dip in the long-term cyclical bull market will end towards Q2 of 2022 before the rally in many commodity markets resumes again as demand strikes back.</li></ul>

The Rabobank issued a research note last week where they forecasted that prices for agricultural commodities like coffee, feed grains and oilseeds could dip next year as many major economies enter recession, but also stated that they will remain high in historical terms.We think the general call is correct, but the timing isn’t. We already see this dip move playing out at the moment.Just take a look at coffee, cotton, oil, or copper. We believe this dip in the long-term cyclical bull market will end towards Q2 of 2022 before the rally in many commodity markets resumes again as demand strikes back.

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>Our Russell 2000 (IWM) and S&amp;P 500 targets for this rally have been the 200-day MAs, coinciding with YTD downtrends.</li>
<li>The Russell already hit this target while the S&amp;P is closing in, less than 1% away.</li>
<li>Still, the vast majority of signals point to further upside ahead for the market indexes, and a possible end to the bear market.</li>
</ul>


Our Russell 2000 (IWM) and S&amp;P 500 targets for this rally have been the 200-day MAs, coinciding with YTD downtrends.
The Russell already hit this target while the S&amp;P is closing in, less than 1% away.
Still, the vast majority of signals point to further upside ahead for the market indexes, and a possible end to the bear market.


Rally Continues Following Breaks in USD & 10-Yr Yield; Buy Ideas in Energy & Consumer Discretionary

<ul><li>Fundamentally speaking, it was nearly a perfect week for commodities as much major news aligned during the week after China eased some Covid restrictions, raising hopes of a demand recovery in the world’s second-biggest economy. </li><li>Almost all major commodities traded higher following China’s move to reduce the time that travelers and close contacts of infected people must spend in quarantine, a significant amendment to the Covid Zero policy.</li><li>China’s loosening of restrictions strengthened a rally that began on Wall Street, with risk assets rising after US inflation slowed.</li></ul>

Fundamentally speaking, it was nearly a perfect week for commodities as much major news aligned during the week after China eased some Covid restrictions, raising hopes of a demand recovery in the world’s second-biggest economy. Almost all major commodities traded higher following China’s move to reduce the time that travelers and close contacts of infected people must spend in quarantine, a significant amendment to the Covid Zero policy.China’s loosening of restrictions strengthened a rally that began on Wall Street, with risk assets rising after US inflation slowed.

<ul><li>Manufacturing Sentiment in the US continues to decline. US manufacturing neared stagnation in October as orders contracted for the fourth time in five months, while an index of prices paid fell to a more than two-year low.</li><li>As most commodity groups are heavily correlated with the ISM data, this will provide significant headwinds over the next six months or so, according to our leading indicators.</li><li>By now, there is quite a divergence in industrial production in general. We expect industrial production to crash over the next few months, which will continue to be a nasty factor for commodity demand.</li></ul>

Manufacturing Sentiment in the US continues to decline. US manufacturing neared stagnation in October as orders contracted for the fourth time in five months, while an index of prices paid fell to a more than two-year low.As most commodity groups are heavily correlated with the ISM data, this will provide significant headwinds over the next six months or so, according to our leading indicators.By now, there is quite a divergence in industrial production in general. We expect industrial production to crash over the next few months, which will continue to be a nasty factor for commodity demand.

<ul>
<li>With the beginning of this week’s newsletter, I probably won’t make any new friends in my home country.</li>
<li>What makes me sad is that literally nobody is speaking about the untapped natural gas reserves we have underground in Germany that are indeed accessible.</li>
<li>A short calculation: In 2021 Russia delivered 55 billion cubic meters to Germany or 55% of the total German gas consumption.</li>
</ul>


With the beginning of this week’s newsletter, I probably won’t make any new friends in my home country.
What makes me sad is that literally nobody is speaking about the untapped natural gas reserves we have underground in Germany that are indeed accessible.
A short calculation: In 2021 Russia delivered 55 billion cubic meters to Germany or 55% of the total German gas consumption.


United States

Crude oil is a naturally occurring, unrefined petroleum product composed of hydrocarbon deposits and other organic materials. Crude oil can be refined to produce usable products such as gasoline, diesel and various forms of petrochemicals. It is a nonrenewable resource, also known as a fossil fuel, which means that it can't be replaced naturally at the rate we consume it and is therefore a limited resource.

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Crude Oil (CL1 COM COMDTY)

The Commodity Report #78

The Rabobank issued a research note last week where they forecasted that prices for agricultural commodities like coffee, feed grains and oilseeds...

The Commodity Report

Rally Continues Following Breaks in USD & 10-Yr Yield; Buy Ideas in Energy & Consumer Discretionary

Our $IWM target (its 200-day MA) has been hit and our $SPX target is less than 1% away. Still, the rally is poised to continue following breaks in...

Vermilion Research

The Commodity Report #77

Fundamentally speaking, it was nearly a perfect week for commodities as much major news aligned during the week after China eased some Covid...

The Commodity Report

The Commodity Report #76

As most commodity groups are heavily correlated with the ISM data, this will provide significant headwinds over the next six months or so,...

The Commodity Report

The Commodity Report #75

A short calculation: In 2021 Russia delivered 55 billion cubic meters to Germany or 55% of the total German gas consumption.

The Commodity Report

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