Tuesday, August 26, 2014

Technical Analysis on Commodities As Stocks Set New Records

This is not an offer to sell nor a solicitation of an offer to buy any commodity.
Please contact your personal farmer or miner for further insight.
From Barron's Getting Technical column:

Commodities Attractive As Stocks Smash Highs
As equities continue to climb, commodities may present a valuable buying opportunity.

Most financial advisors suggest that their clients diversify across asset classes, with only the percentages of stocks, bonds, gold and other assets as a matter for debate. I won't wade into the latter discussion, but the charts suggest that commodities as an asset class may be ready to play a greater role. 

The Thomson Reuters CRB index, also known as the CCI index, may have found a bottom (see Chart 1). As the Standard & Poor's 500 reached the 2000 milestone Monday, investors should consider that commodities could be the next opportunity.
Chart 1 
Thomson Reuters CRB index
To be sure, advisors usually recommend a single-digit percentage weighting for gold with even less for other commodities. I must emphasize that I am not suggesting dumping stocks at new highs to buy commodities. However, an upside reversal for the latter can add a kicker to an otherwise stock-heavy portfolio.
Commodities trade in the futures markets, which makes them inaccessible for most individual investors. But exchange-traded notes and exchange-traded funds offer access to commodities via a normal stock account, so let's focus there. 

The Greenhaven Continuous Commodities index fund (ticker: GCC ) is one way to gain exposure to a broad array of commodities. It is designed to track the CCI index of 17 equal-weighted futures markets. As with the CCI itself, the Greenhaven fund is also approaching major support but price action has not yet reached it. However, the rate of descent has slowed according to several technical momentum indicators, such as the relative strength index (RSI). 

Livestock is the most interesting commodity sub-group group right now and the iPath Dow Jones-UBS livestock ETN (ticker: COW ) scored a bullish reversal last week (see Chart 2)....MORE
Jeez, I don't know. Anyone who can write about a bullish reversal in COW....

More seriously, we don't do anything with the ETN's, prefering to lose money the old fashioned way, in the futures.

Furthermore the August USDA Cattle on Feed report came out yesterday, bullish but already old news.
Anyhoo...that's what's mooving.
Most active October feeder cattle:  212.350 +0.600
Most active October live cattle:       148.550 +0.400