We expected a latter stage market rotation to include commodities, and now it is here.
From NFTRH 827 (Sept. 15) after we noted that a commodity/resources speculative guide, the Canadian TSX-V, was spiking upward to potentially break its pattern:
And a bullish TSX-V would of course imply a nice underpinning for the commodity complex, which has been beaten down like a rented mule. “Commodity Super Cycle” promoters could finally get a chance to ramp up the promos once again but in essence, if the sector rallies, it would really just be a lagging segment of the wider broad market bull. It would be nothing unique and in my opinion would have a shelf-life if we are right about a coming bear market in equities.
So far, so very good. I hold some commodity related equities, and the profits are building. But as I’ve been saying about the gold miners (profits building, big time), it is not a unique situation. It is a market broadening out to include the laggards, where commodities are concerned (precious metals have been among the leaders of this broad up phase). A precariously bearish USD aids the process, as has Chinese economic stimulus.
But the US Semiconductor sector is attempting to reassert leadership, busting upward on Thursday to the effect of one measly ‘like’ on X [edit: a second one showed up later] and a bunch of crickets. It is similar when I post about other bullish goings on in the area of non-precious metals or commodity related stocks. In other words, equities in general.
While I never get massive amounts of social media glad-handing, if I were to put a bullish post up about gold or gold stocks, it would be way more than this one little reaction. Okay, an example from September 12:
The point is that an anecdotal majority (within my sphere on X) has been pro-precious metals and anti (or at least dismissive of) stocks, despite stocks being right there along with the precious metals in the broad rally. Now come the Commodity Super Cyclers for a kick at the bullish can, as anticipated. They may cheer that the “super cycle” has finally arrived. But it likely has not, although the rally within the complex could be a strong one and fan out to laggards in Energy and Agriculture before it’s all said and done.
Also of note have been the pure bottom feeders. Recently I had a fantastic short-term bottom feed buy in a PGM producer, a couple REE producers, the Uranium sector (after a hard correction), Copper miners (profits taken), Energy (moderately ‘paper’ profitable, but still waiting on this one to kick in) and most recently, a couple Agricultural commodities that sport low risk profiles from price, seasonal and sentiment profiles alike, per an NFTRH+ subscriber update on Wednesday.
I write more often about the precious metals and gold mining stocks because my fundamental engagement there is based on more than just the “bombed out” bottom feeding that it is with commodities. Stocks? That is and has been a play only. But as a TA and a macro watcher able to put narratives together based on the macro signals I get (rather than bias), I have no problem playing there as well. Our objective for stocks has been and still is “to or through the election”, after all. When the stock market rally terminates I would expect so too will the commodity rally terminate and the precious metals bull to take a hard correction, at least.
Meanwhile, aside from the macro fundamental view expressed above, and by way of example about the technical reasons I would not take on commodities and the “super cycle” theme, hook, line and sinker just yet, is the daily chart of Rare Earth Materials producer MP Materials (MP), which is bouncing hard within an intact downtrend. This is not even to speak of commodities as a complex, also trending down as measured by GNX/CRB/DBC are still trending down. Back on MP, I own it currently and do have fundamental reasons to be bullish about it on the big picture. But those reasons were intact into the August tank job, as well.
Technically, MP is getting overbought on the daily chart and I for one have a decision to make about whether or not to take a (currently) 32% profit. The only reasons I even hesitate are that the position is in a taxable account, in which I am careful about taking profits willy-nilly, and said big picture fundamental view.
But a pure technician would want to see a takeout of the May high of 19.23 that holds, after perhaps some volatile breakout testing. Not having done that, MP is still considered in a major downtrend.
NFTRH has pretty much nailed the general macro, in broader macro terms, since inception at the dawn of the 2008 crash. But for our purposes now, let’s just use the initial projections of a Goldilocks phase (Feb. 2, 2023) to today, where we anticipated an end to rising yields and interim decline, a fade in economic and inflation signals, a Fed rolling over dovish and as of the start of 2024, a projection of “to or through the election” for the broad rally, which includes stocks, the not yet unique gold sector and maybe as a final act, more commodity plays as well. I suppose I am biased, but if I were in search of a macro market manager that gets it right consistently, you probably guess who I’d go with.
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