DBC Inflation HedgeIf you're looking for a hedge against inflation, here you go. Long term play.... or you could buy some USO (oil) to hedge against your gasoline costs.
DBC trade ideas
DBC - VCP Type Action1) Commodities showing volatility contraction type movement with good volume cues (massive dry up)
2) We see price getting rejected at the $28.65 level twice - establishing a pivot entry if price breaks out on higher volume
3) Early entry is spotted at about $28.30, which I have initiated a starting position in. That said, I am mindful of the FOMC meeting today which could induce a bout of volatility. Hence, I have set a very tight stop at $27.75 to get out if necessary.
4) I am aiming for a 3R target price of $31.35 based on the $28.65 Pivot Entry. This is because if the market turns for the awaited countertrend bull rally, there isn't any significant resistance on the left side of the chart.
5) Not financial advice, happy trading!
Commodity IndexOct 20' - Investors unsure of market, COVID concerns, no real fix -
Premise 1 - Investors move into commodities, specifically previous metals.
Premise 2 -Energies + Commodities related to consumer goods
DBC index provides basket catching the best of everything without great risk. At least that was what I read at the time of analysis.
March 22'
Equity Bubble? War Concerns, COVID certainty but no real fix, Inflation, Int Rates, FED.
Premise - SAME AS ABOVE.
These violent delights have violent endsEvery so often, commodity markets create a bubble driven at first by money printing, then supply constraints, and then finally by pure and unadultured speculation of the highest order. When they unwind, investors in the "new pandigram" of the commodity market lose everything. The true "commodity supercycle" is them going to zero. Nice try.
Thanks for playing. Trading is the best game in the world.
A side note, fractals don't work. They are just for fun. Don't assume this to play out in the same way it did in the past, only similar.
Commodity Markets VS the Stock MarketI have long said that commodities always go down over the long term. This chart shows that perfectly, and also adds on another component which is the well-known fact that stocks always go up over the long term. As a result, what we see is an index that only ever is in one of 2 states:
1) Pullback to the upside
2) Trending to the downside
Currently, we are in the first state, which is much rarer and provides far more opportunity. It allows us to actually short this chart! All you need to to is sell/short commodities, and buy stocks. This is the chance of a lifetime to short commodity markets at these bubble prices!
As the fed chokes the life out of risk assets and beats inflation to death, commodity prices will fall. As we discover new and amazing technology at an ever-increasing rate, commodity prices will fall and innovative stock will rise. When we finally reach a superintelligent AI which can help us find ways beyond our knowledge to make commodities, commodity prices will fall and innovative stock will rise. When we gain the ability to harvest the nearly infinite amount of precious metals such as gold from outer space, commodity prices will fall and innovative stock will rise.
Think of it as The Infinity Trade. Oil going to negative was just the start.
DBC , LONGRe entered here based on the positive price action we saw today and yesterday .
Commodities vs SPY and QQQ still showing very low correlation , yesterday was contrary to this though , the whole market was affected by the pulling tides .
Today was a pretty important day for DBC imo though because of its expedient recovery after that gap down ...
Caution should be exercised, however, the next FOMC meeting is May 3rd and 4th, where there will likely be a larger than originally plan rate hike , which will probably affect DBC negatively. Looking at the tape before close, I saw buyers waiting in que far greater than the sellers and we were able to manage a wedge pop so back in I go .
Stop - 26.78
PT - 28.46 De risk
DBC , LONG , wedge pop/bullish gap attack on open today Per my trading rules ,we now have the earliest possible price action to get in to some swing trades with the QQQ and SPY actions we see currently happening. As a result, I took a starter in DBC as planned .
QQQ/ SPY notes:
The SPY etf has put in a higher low and is above the 21 EMA , but still below the 200 sma and we have a valid death cross on daily , so certainly not out of the woods yet but with it being over the 21 ema for now it allows me to increase exposure as per my rules
QQQ is in a similar setup but we are a bit weaker vs SPY , and only have a double bottom so far but also currently living above its 21 ema for now.
DBC notes :
Wedge drop on march 15th confirmed and now we have a wedge pop/gap up on open setup this morning .
Entered with a stop under the 21 ema shortly after open today .
I am planning on selling 33% when we hit 2 R, stop will stay same , and carrying over the balance until we have a close under the 21 ema , hopefully .
If I get stopped out , re entry is an option only if we have SPY / QQQ basic entry condition's being met . It's very early and we could still certainly breakdown more on indices.
Entry @ 25.42
Stop 24.83
2R trade management target 26.70 ( sell 33% )
SPY vs DBC correlation back to long term trend (low correlation)
Question was this : Even though SPY and QQQ are currently in red trading mode meaning no buying stocks for me , can I enter new trades on commodities funds ??
My long term test from 2008 to now determined this
2008 to current date SPY vs DBC
Regression coefficient beta == -7.88
Correlation == 0.28
meaning long term negative/low correlation
2020 Jan 1st to 2021 Dec 21st
Regression coefficient == 17.85
Correlation 0.9
meaning for that period the two instruments were fairly correlated
2021 Dec 21st to April 12 2022
Regression coefficient beta == -4.15
Correlation 0.32
meaning from Dec 21st 2021 to now , for the time being SPY and DBC are back to the long term trend of low correlation
Result : I think it's reasonable to continue to long strong commodities when I see reasonable entries on them as long as this low correlation between SPY and DBC remains . Even though stocks are in " Red trading mode " as a result of being under their 21 ema's for time being ... I am going to possibly experiment with additional longs in commodities .
DBC update - 03/04/2022 remaining higher than 24.28 will reinforce the idea of wave ((v)) of 3 that target higher than 30
DBC , a strong soldier, watching how it preforms for now . First off I am not going to trade this yet because my rules allowing me to take swing trades require the market indexes be above their 10 and 21 ema's, at a minimum ( ideally above 50 sma too) . But that does not mean that I am not "waiting in the bushes", getting ready to pounce when my moment arrives eventually.
DBC is , in my opinion, a good way to gain general exposure in commodities. Although there is what seems to be a short term climatic top that recently occurred , I think that the inflationary pressures will probably be here to stay for 2022 and that the volume shows us what is most likely an earlier move here. Especially the lack of comparative selling volume these last few days .
Today we have a wedge drop and downside gap that puts us below the 10/21 emas and now is a good time to see what happens next . I am leaning towards a wedge pop with a close above the 10/21 emas soon . We might need to form a base before the next push up too but time will tell . Normally I would buy the wedge pop if it occurs but the market is in do not swing trade mode for me so I am only watching this one but it has shown good action lately and I think inflationary pressure is here to stay and that that could result in a longer term uptrend for commodities . Additionally , note how many sessions we respected the 10 period ema , Strength!
I want to add a bit on my process that helps me spot stuff like DBC and something to potentially consider personalizing for yourself:
So, even though I need one of the indexes to be above its daily 10 and 21 ema's to take swing trades . I can and do still keep an active day trading strategy going and one of the prerequisites that help me find day trading candidates is reliant on is 52 week highs. I am still working on the strategy's finer rules but developing a system like this really has helped me to keep the market in check. Even if its not actively trading due to conditions, you will wire into your thought process names and groups doing well so that when a probable market uptrend returns that suits your rules, you will probably already know potential leaders to scout with some confidence.
My day trading strategy is a trend trading system that needs stocks to be making new highs without losing the 200 ema after on 5 min chart AND the market index of your choice needs to be above the 200 ema ( on 5 min chart ) for at least 2 days. There's more too it but that fairly simple logic keeps you on the good side of the market more than not for short term sentiment . So far this year , it has small profit and positive expectancy and has made 65 trades so far in 2022 ( with MANY sit out days).
Anyways , very off topic but that is something that has helped me quite a bit to gain additional confidence in buying/monitoring strength and at the least is a good start to keeping you out when conditions are bad . There's no right or wrong way but something to think about , especially if you are reading this and do not have an existent rules based strategy to keep you out of the market and get you in ect ect .
Waiting in the bushes , the day to pounce will come :)
Is the commodity boom over?Commodities in their epic rallies have recently gotten in large resistance levels. We're at true make or break levels for these. They can either get through the current zones and go into a more impressive uptrend... or they can turn fairly soon and enter into savage bears. The bear scenario currently looks the better trade. Revisions to this if we break the short stop loss area.
One would have to wonder, what sort of state of affairs would we need to be in to see commodities (Including gold) crashing. Crypto crashing. Stocks crashing. And the USD flying? That'd require a deflationary event. The type of which we've not had for close to 100 years.
Long commodities warning, reaching Bearish Cypher- 5 Clear waves to the upside in this last Bullrun, with wave 5 already extended.
- Large order block from 2011 (white box) reaching this point could be a nice exit to those who got stuck in commodities for over 11 years and are now at breakeven.
- Bearish Cypher could activate near this area and short sellers will start building up some positions, 0.786 Fibonacci retracements from points X-C (Harmonic patterns have a success rate of nearly 70%-90%. we must respect them)
This is not short-sell advice, just if you jumped in this run late, be cautious, tight your SL on your commodities.
if somehow this Ukraine thing ends in the following 30 days (which is probably, Russians already occupied 80% of the major cities within 10 days, one of the shortest wars ever), and things don't scale up, commodities could start the corrective wave.
DBC Commodities move 3x; 4x @29.60 is next targetDBC already move 40% due to inflation. The Ukraine invasion has made it parabolic due to Russian sanctions which will affect energy like oil & natural gas & food components like wheat.
The conflict will not end soon. Another 9% is coming to target 4x at 29.60.
Due to oversold RSI, there may be some retracement or consolidation to digest the 40% gain before a continuation of rally.
Not trading advice
Commodity Market OverviewHello and welcome,
in this video, we are going to see our overview on Commodity Market.
The start of a commodities supercycle & the great economic resetThere has never in the history of capitalism been a time where the divergence between the monetary and fiscal policy is this out of synch with the economic circumstances.
Central banks are flooding the markets with money which comes from nowhere as it's being digitally printed and has no productive counterpart whatsoever. The fiat system has totally destroyed the notion of money as a store of value. This reckless increase in money supply not only decreases the purchasing power of everyone through inflation but it also widens the gap between rich and pour, as wealthy people have access to heaps of cheap debt to finance their lifestyle while not paying any taxes on that and on top of that getting tax rebates and meanwhile storaging their wealth on asset classes such as crypto and equities which are taxed with rates far bellow the 50% of income tax.
Official inflation numbers for the US is 7.5% while the true number is probably in the range of 13-16%. When retail gets nervous about inflation what happens is commodities jump 2-3x in prices. In other words commodities is probably the most positively correlated asset class with inflation and as such a great hedge to inflation.
Now when it comes to crypto, no it won't hold up initiall. When the liquidity gets out of the markets, crypto as an asset class has never held it's ground, as it gets extremely positively correlated with stock markets when they show signs of weakness. The last prominent example is march 2020 with btc dumping 70% in a span of 3 weeks, as people getting caught in a stock market dump tend to liquididate other assets to pump margin into losing positions and avoid getting margin calls.
Now inflation isn't old news it was apparent as early as summer of 2020, it's just that it wasn't represented in the cpi then, as trillions where printed and were used to purchase assets globably. Billionaires profited most from this, as they could borrow money at 0% interest rates and buy assets like crypto, real estate and equities which have done more than 100% the last couple of years. Now that's asset inflation, and gradually through stimulus checks we get to see CPI inflation, or in other words inflation in things that we poor people actually buy in, like food, rent and electricity.
I expect 2500-3200 S&P to hit
5000-7000 Nasdaq to hit
18-20k BTC to hit with perhaps a liquidation event to 14k.
Ethereum 1000-1400 to hit.
We might be in for a 2-3 year bear market starting in the comming months which is a typical time frame for super bubbles like 2000,1929. Stock markets haven't corrected since basically 2008.
Stay safe
Market Narratives: Commodity vs. Dollars | Cyclicals vs SPYCommodity vs. Dollar (Bearish Narrative)
The US dollar is 2021 has been blazing its own trail, trending positively even though inflationary pressures should be eating away at its value. It doesn't make much sense for commodities and dollars to go up at the same time. When they move together; they usually move downward together. As the dollar gains value, more commodities can be bought for less dollars.
When the US dollar finds a bottom that will lead to commodities eventually topping. Did Economic Growth top out when the dollar bottomed? Commodity bulls need the dollar to start trending downward and break the previous lows. If the dollar keeps chugging higher it won't be long until commodities lose their luster. When the dollar and yields top; we will have a market bottom.
Cyclicals vs. SPY (Bullish Narrative)
Cyclical stocks provide goods that are higher in demand when the economy is growing. Energy and Financials are two sectors in particular that do well with higher rates. Energy stocks profit when the economy is running on all cylinders and need there is a high demand for energy to sustain high economic growth. Financials in particular love higher interest rates because they receive more money from loaning money.
The chart shows (XLEnergy+XLFinancial)/SPY. As you can see this ratio has not trended upward since 2008 however, now it looks primed for another move higher. This looks like an incredibly bullish chart however, one needs to realize that energy stocks in particular have already had huge moves and are approaching levels of resistance.
DBC bullish breakout and trend continuation Higher high, bullish cloud breakout on daily, bullish momentum indication on weekly and daily.
I highly recommend you to zoom out the weekly time frame, as space is clearly opened to 24-25 target zone.
DBC is going to be the relatively strongest and best performing asset class for months ahead. It is also the best hedge against a cost inflation pressure and for an increasing possibility of a stagflationary period, which the central banks willl hardly be able to fight.
Welcome back to the '70s?
DBC commodity indexDBC commodity index, Commodity prices have stalled but should continue higher as mother nature continues to go haywire interfering with the growth of crops. with a lower yield and ever increasing demand producer prices must raise to accommodate for the hardships therefor that price increase should become reflected on the index price as well.
Commodity Index Bearish Divergence If you believe higher inflation is yet to come, commodities will continue to rally. Looking for an entry at the support lines after the bearish divergence plays out.
Are we entering a commodity super-cycle?Definition of a commodity super-cycle:
Commodity super cycles are decade-long periods in which commodities trade above their long-term price trend.
Technical Analysis:
Using a weekly candlestick to see the bigger picture.
DBC is breaking out of a 10 year long downtrend.
On Balance Volume is supportive, as it is also breaking higher, reaching levels from a decade before.
We are breaking and testing $18.5, which is a very long-term resistance; now potentially turning into support.
This is a long-term setup.
R1, R2 and R3 are potential targets to take some profits.
Fundamental factors:
Weakening dollar
Supportive central banks
Fiscal stimulus geared for infrastructure spending
Pent-up demand once as global economies re-open.
Government and private companies increasingly pledging carbon reduction measures.
Inflation ticking higher, as the Fed is taking a new approach of waiting, rather than anticipating, as it has done in the past.
