Retracement has begun this week in Commodities

February 3 2023

Weekly Column with The Contrarian

Hello Community,

This week we saw significant follow through in prices on risk assets. The markets ignored the .25% rate hike. Risk assets rallied days before the fed meeting and continued to close at a new year high. NASDAX is up 10%, and the Dow Transport up 14%.

As was stated earlier in my reports, the first week of the new year is a good predictor of the new trend. Markets closed higher. We have rallied for four weeks so far. Commodities like the metals attempted to break through resistance last Thursday around 11:00 a.m. CST., but failed and quickly reversed lower.

On our last steam I mentioned that the metals looked toppy and we were at strong resistance. As of the close today the weekly charts now show these markets will correct to the 50% retracement level. Time is the most important element even before price. Metals markets have been on a one by three trend angle (very steep advance) since October 31,2022. We can retrace 50% from this month's highs and still be in a bullish trend. If investors got long expect a pull back for a period of weeks. We share the technical points on our subscription service.

If you want to get a better read on inflation follow the Bloomberg Commodity Index chart at https://www.marketwatch.com/investing/index/bcom/charts?countrycode=xx.

This chart broke the weekly 45% trend-line. This is the Golden angle. Short term not good for commodities, however good for risk assets.

Non-Farm payroll increased by 517,000, and job openings increased to 11 million. The unemployment rate remained at 3.4%. Fed Chairman Powell gave a measured response after their rate hike. Markets are anticipating one maybe two more 1/4 point rate hikes later this spring. This New Year's rally could continue through April. The rate of change in pay raises for employees is slowing which is what the Fed wants to see. The March S&P's have rallied up to the 4180.00 level I was looking for. The actual high this week was 4208.50.

As we are at major resistance in the S&P's, investors are looking at locking in equity gains and rolling funds into government debt markets (CD's, T-Bills, short term Bonds) with guaranteed returns that compete with yields in equities.

Price Discovery - All asset classes are searching for the new price valuation based on higher cost of funds, (Interest Rates). Until this process is complete expect the volatility to continue.

We have had nice moves in Cryptocurrencies as well. I like what I see, but like everything else until price discovery is complete I expect a retracement in this asset class too. The next few years will offer great opportunities in various markets. The Meta stock call last year at $88.00 shows you how fast a market dog can turn into a market darling. The market is showing a similar attitude towards the Vix index. It traded down below 19 this week. This is a leading indicator that is due for a rally.

MY VISION Continued

Two worlds. Capitalism vs. Communism.

Good vs. Evil. - This is easy to understand. Everything that Capitalism stands for is good. Everything that Communism stands for is evil in the eyes of Capitalism and vice versa.

Capitalism inspires free enterprise and entrepreneurship through limited regulation and profit driven. Freedom, Free speech, uncensored media.

Communism demands that the Communist party policies come first. Communist demand that their population and businesses serve the party at all times. Total control over individual rights and media.

Post COVID world has become a world of Anti-Globalization or Counter Globalization. This movement calls for owning and producing for the best of a single group or country. The control and possession of natural resources on a global scale will be the new global power. Resources will also include a young labor force.

Stay Tuned!

Any views expressed in the below are the personal views of the author and should not form the basis for making investment decisions, nor be construed as a recommendation or advice to engage in investment transactions.