Commodities are trying to form a nice breakoutCommodities look to be forming a start of a nice breakout against the S&P. Commodities are undervalued versus history and are a good diversifier for stagflationary environments. it is interesting that commodities haven't seen a stagflationary bid yet. we might see one in the near future.
DBC trade ideas
Invest in Invesco DB Commodity IndexWhy invest in Invesco DB Commodity Index Tracking Fund (DBC)?
The Invesco DB Commodity Index Tracking Fund (DBC) is one of the most popular exchange-traded funds (ETFs) that offer an easy and efficient way to gain exposure to commodities. This fund is designed to track the movement of a broad-based index of major commodities, making it an excellent choice for portfolio diversification.
Main advantages of DBC:
1. Risk diversification
DBC provides access to a basket of 14 different commodities, including oil, natural gas, gold, silver, corn and wheat. This means that investors are not entirely dependent on the performance of one commodity, but can benefit from a balanced spread of risk.
2. Protection against inflation
Historically, commodities have proven to maintain or increase in value during times of inflation. Investing in DBC allows investors to protect themselves against a loss of purchasing power, as commodity prices tend to rise when inflation rises.
3. Convenience and liquidity
As an exchange-traded fund, DBC offers high liquidity and easy access through a simple brokerage account. Investors can buy and sell DBC shares on the exchange at any time, without the complexity and expense of buying commodities directly.
4. Potential for growth in a global economic recovery
Raw materials are often directly related to economic activity. With increasing demand for energy resources, metals and agricultural products, DBC provides an opportunity to profit from these global trends.
5. Minimal management costs
DBC has relatively low annual management fees (around 0.85%), making it an economical vehicle for long-term exposure to commodities.
Conclusion
The Invesco DB Commodity Index Tracking Fund (DBC) is an excellent choice for investors looking for stability, inflation protection and diversified access to the commodity market. With the convenience of an exchange-traded fund and the potential for profit in the face of changing global economic factors, DBC can be a key part of a well-structured investment portfolio.
Inflation Forgotten & Reloading?In the midst of rate cuts, commodities are bouncing off the 200 month moving average. If this wedge resolves to the upside then the cheers of cuts might be short lived. High commodity prices and weak economy would present a serious challenge for the central bankers worldwide.
EU faces pressure to defuse mounting anger as farmers protest aGiven the mounting anger and protests by farmers across Europe, there appears to be a significant challenge stemming from contradictory and potentially detrimental agricultural policies. The grievances include increased costs for agricultural diesel, additional fees for water consumption, complex regulations, and objections to bans on pesticides and herbicides mandated by the EU's Green Deal. The farmers are also concerned about the import of beef from countries like Brazil and Argentina, which they argue have laxer rules on animal welfare, making competition difficult.
This unrest, originating in France but spreading to neighboring countries, signals a broader issue with unpredictable government decisions affecting agriculture. In the Netherlands and Germany, similar protests have arisen over regulations to cut nitrogen emissions and phase out fuel subsidies, respectively. In Germany, there is also resentment over what is perceived as the unfair application of environmental policies.
With protests extending to Poland, Romania, Slovakia, Hungary, and Bulgaria, concerns range from unfair competition from cut-price cereals to high taxes and tight regulations. The impact of droughts, floods, and wildfires, combined with the squeeze from green policies, has fueled discontent.
For investors, this could be a pivotal moment to consider commodities such as cereals, soybeans, and copper. The disruptions in European agriculture may create fluctuations in the market, making these commodities potentially attractive for investment. However, it is crucial to monitor developments closely as tensions continue to grow, and the agricultural sector shapes up to be a major issue in the upcoming European Parliament elections in June.
DB. commodity index idea (27/09/2022)DB. commodity index
We expect the index to continue declining because prices are below the 27.05 resistance point, and wave (2) has already ended and started falling in waves (3). We expect prices to drop to 1.618% at 22.18, but currently, we expect the correction to continue to 61% at 26.06 to end wave 2 before descending again.
DB. commodity index idea (13/09/2022)DB. commodity index
We expect the index to continue declining because prices are below the 27.05 resistance point, and wave (2) has already ended and started falling in waves (3). We expect prices to drop to 1.618% at 22.18, but currently, we expect the correction to continue to 61% at 26.06 to end wave 2 before descending again.
#DBC closed under 200dma and rising channelDBC - Invesco Deutsche Bank Commodity Index has closed and broken below both the rising channel and the 200 day moving average. Technically this is quite damaging and it will be interesting to see if we get follow through to the downside.
Crude oil and gasoline are major weights in this basket accounting for half of the weighting followed by gold at just over 6% and agriculture also having a decent weighting.
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Should the technical targets play out we could see approx $22.50 and $19.30. Two daily closes back above the 200dma and i'll most likely concede that this view is incorrect.
Gasoline and commoditiesHello friends.
Gasoline has come crashing down, and commodities have only fallen about half as much. Because the major price in producing most commodities aside from labor is gasoline, it makes sense that the price of commodities will follow the price of gasoline quite well. However, there is a lag effect. It seems to take quite a few months from the point when gasoline falls down to the point where commodities follow its lead and also fall down. This makes sense because commodity producers are not eager to lower their prices and will only do so if they are forced to by other commodity producers lowering prices. On top of this, commodity producers will have some set reserve of gasoline that may have been purchased at a higher price. They will need to exhaust their current supply of gasoline before they buy more of it at the new market price which is lower. If you look at history, this sort of pattern has played out many many times before. Over time, this ticker of commodities over gasoline is slowly trending down. The reason why should be obvious: Innovation dictates that we use less gasoline per commodity produced. To put it another way, our commodity production is becoming ever more efficient as time goes on. This downtrend is very likely to continue for the next 100 years and beyond, assming you beleive as we do that we are nowhere near "perfect innovation" and that there are many substantially important things that we are yet to discover with regards to producing commodities.
Our prediction through the end of this year is that gasoline will slow or even temporarily reverse its collapse, and commodities will start to speed up and collapse much more rapidly.
The significance of this effect for the broader market would be hard to overstate. Cheaper gasoline is great, but that's only one commodity that consumers regularly use. They are still paying a lot for all the other commodities. Easing prices in commodities following the collapse of gasoline prices would be the point where consumers finally start to feel relief from this inflation and consequently start spending more money on consumption since they are no longer as broke as before. This increased spending on consumption as a result of lower commodity prices will be good for the global risk market since it will bring better earnings for most stocks (aside from most notably commodity production stocks, which may have some more suffering in their near future).
We aren't planning to trade this exact ticker, but we are using this as a guiding idea for our view on commodity and risk markets going forwards.
Thanks for playing.
FED Pivot?This chart suggest a FED pivot arriving much sooner than some may suspect. Compared to 2016 - 2019, the fast & big drop that usually follows a euphoric peak, came much quicker for this year. Given how much money printing went on during the pandemic, it's worth considering that this might be simply the first and second Elliott Waves for commodities, but there will be big corrections along the way, and since inflation is the rate of rising prices, not the price change itself, it would not be surprising for the FED to declare victory sooner than later. As for the fact that recessions often coincided with rates dropping, today is not comparable because the FED only started raising rates recently. It is arguable that the FED actually raised rates roughly around the right time, not "too late" as some would argue.