Commodities Uptrend Incoming? | CRB Commodity Index ($TRJEFFCRB)
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Commodities have rallied into resistance. We are currently looking for a pullback to the last support range. To chart this we are looking at the Thomson Reuters/CoreCommodity CRB Commodity Index (TRJEFFCRB), which is an index comprised of 19 commodities: aluminum, cocoa, coffee, copper, corn, cotton, crude oil, gold, heating oil, Lean Hogs, live cattle, natural gas, nickel, orange juice, silver, soybeans, sugar, unleaded gas, and wheat.
For those who want to trade the price action, one could take a position with Commodities ETFs like Invesco DB Commodity Tracking (DBC) and First Trust Global Tactical Commodity Strat ETF (FTGC). With that said, we aren't trading this one, we are just looking at levels.
Although the trend is still bearish overall, it is interesting to see commodities trending up to resistance as money is being created by central banks. It is a longstanding economic theory that inflation should cause an increase in the price of commoidites, and that commodity price increases are a leading indicator of inflation.
While the correlation between commodities and money printing hasn't been noticeable in recent years, COVID-19 has changed things up a bit and it'll be interesting to see if old trends repeat or new trends emerge (consider things like recent meat processing issues increasing the cost of meat, and the recent temporary drop in the price of oil to zero).
Although the trend is currently bearish, we are only looking levels of interest. We see two relevant support levels, S1 and S2. S1 would be of particular interest if commodities were going to officially start trending up. If we do get more upside, R1 and R2 are both levels to watch. R2 specifically represents the bottom of the previous range before COVID, and seems like a logical target in an uptrend.
To sum it all up, tracking commodities can help us to make profitable trades, either on specific commodities or baskets of commodities via ETFs like the ones noted above, but it is also academically interesting.
Could a spike in commodities prices now signal coming inflation from an increase of the money supply? Should we be filling our freezer with OJ and beef to avoid higher prices in the near future? Or, should we just be looking for bullish continuation or bearish consolidation to help us find a nice setup on oil, coffee, and gold?
Resource: mises.org/library/commodity-prices-and-inflation-whats-connection + investopedia.com/articles/investing/020816/importance-commodity-pricing-understanding-inflation.asp
Like, Comment & Follow to help the community grow 🎉🎉
---
Commodities have rallied into resistance. We are currently looking for a pullback to the last support range. To chart this we are looking at the Thomson Reuters/CoreCommodity CRB Commodity Index (TRJEFFCRB), which is an index comprised of 19 commodities: aluminum, cocoa, coffee, copper, corn, cotton, crude oil, gold, heating oil, Lean Hogs, live cattle, natural gas, nickel, orange juice, silver, soybeans, sugar, unleaded gas, and wheat.
For those who want to trade the price action, one could take a position with Commodities ETFs like Invesco DB Commodity Tracking (DBC) and First Trust Global Tactical Commodity Strat ETF (FTGC). With that said, we aren't trading this one, we are just looking at levels.
Although the trend is still bearish overall, it is interesting to see commodities trending up to resistance as money is being created by central banks. It is a longstanding economic theory that inflation should cause an increase in the price of commoidites, and that commodity price increases are a leading indicator of inflation.
While the correlation between commodities and money printing hasn't been noticeable in recent years, COVID-19 has changed things up a bit and it'll be interesting to see if old trends repeat or new trends emerge (consider things like recent meat processing issues increasing the cost of meat, and the recent temporary drop in the price of oil to zero).
Although the trend is currently bearish, we are only looking levels of interest. We see two relevant support levels, S1 and S2. S1 would be of particular interest if commodities were going to officially start trending up. If we do get more upside, R1 and R2 are both levels to watch. R2 specifically represents the bottom of the previous range before COVID, and seems like a logical target in an uptrend.
To sum it all up, tracking commodities can help us to make profitable trades, either on specific commodities or baskets of commodities via ETFs like the ones noted above, but it is also academically interesting.
Could a spike in commodities prices now signal coming inflation from an increase of the money supply? Should we be filling our freezer with OJ and beef to avoid higher prices in the near future? Or, should we just be looking for bullish continuation or bearish consolidation to help us find a nice setup on oil, coffee, and gold?
Resource: mises.org/library/commodity-prices-and-inflation-whats-connection + investopedia.com/articles/investing/020816/importance-commodity-pricing-understanding-inflation.asp
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