THE CASE FOR COMMODITIES

THE BIG PICTURE CASE FOR A GENERATIONAL OPPORTUNITY IN COMMODITIES

On April 21st, 2020, we finally got the broader commodities, generational bear market low. Also, this low in March/April will later be seen as one of the largest inflection points the markets has ever witnessed.

This commodities bull market has arrived thanks to a historical bear market, inflationary pressures building, monetary and fiscal stimulus causing severe currency debasement, in many cases reduced supply etc. Big inflation usually starts with commodities.

The chart below is my ultimate long term roadmap chart for the most widely used broader commodities price index, the CRB. Note that it is trading at the same level it was 48 years ago, which equals a more than spectacular opportunity! And it has what I see as the best possible setup, which is price at an extreme point of “exhaustion”, starting to reverse from a so called false breakout (FBO) and major low.

I have been watching this enormous blue pattern for a long time, expecting a false breakout to the downside, marking the commodities bear market low. And now we finally have it.

 



Above we can see that the whole asset class commodities is at a historical low, and is reversing. The chart below shows this broader commodities index, the CRB, versus general equities in the form of $INDU (Dow Jones). This so called ratio chart is also at a major, historical low. From this chart we can see that the asset class commodities is extremely undervalued versus general equities. Also here, the chart is at an extreme point of “exhaustion”, starting to reverse from a false breakout (FBO) and major low.




Next chart is also a ratio chart, below, and shows the Canadian TSX Venture (CDNX) versus general equities in the form of Standard & Poor's 500 (SPX). CDNX holds mainly smaller commodities companies and we can see here that these are extremely undervalued versus general equities. And it has already broken out above its blue pattern, which is confirmation that it has now reversed the trend to the upside.


 

Finally, we have the precious metals that are leading the commodities complex out of the bear market low in a very decisive way, which is exactly what we want to see at the beginning of a true commodities bull market.

Below we have the ratio for gold versus general equities in the form of Standard & Poor's 500 (SPX). When this ratio is rising, it is yet another sign that the precious metals bull market is healthy. With gold outperforming the general stock market, capital is flowing into the pm sector. Note that this ratio has broken out and is backtesting the purple trend line, ready to rise again.

 


The last chart, below, shows a ratio chart with the gold/silver companies index XAU versus gold. This ratio chart is just about to break out above the massive blue pattern and the chart shows the more than fantastic potential for precious metals companies during this bull market!

 




As I see it, the charts above show that a new bull market in commodities has started. And it will be the greatest one ever seen from what I can see. 

And I will be there, charting and trading this commodities bull market from start to finish.

Not looking at commodities is neglecting the big macroeconomic cycles and also excluding one whole asset class. And as we entered a new, broad commodities bull market back in April 2020, it would seem like misconduct today not having commodities as a decent part of one´s portfolio. This especially since the long term ratio charts with commodities vs general equities now are turning, in favour for commodities.