A New Commodities Bull Market is Emerging / Commodities / Commodities Trading

We’ve all watched in amazement, while theequities markets around the world have risen to new highs.  On Wall Street hardly a week goes by withouta new record.  There comes a time howeverwhen a sector becomes so overbought, that smart money begins to leave andsearch for a sector that has been overlooked.  That moment is now at hand, as can be seen in our first chart – courtesysources listed.

This chart compares equities tocommodities.  In 1970, 2000 and today,equities have become overpriced, while commodities are oversold and cheap by comparison.  In 1973, 1990 and 2008, oil and commoditiesbecame overbought and investors sold commodities and bought stocks.  If history repeats (and it often does), weare about to witness a massive switching from equities into commodities.  This trend may or may not include oil, sinceit is already in a bull market, but because of ongoing demand in Asia it willinclude such items as natural gas, copper, lithium, vanadium, zinc, and cobalt,and the stocks of the companies that mine and produce these commodities will bein great demand.

    
This chart courtesy Zerohedge.com shows theaverage number of days in the USstock market between occasions where the index drops 5% or more is 92 days, allthe way back to 1929.  In the mid-1960s there was a stretch withouta 5% correction for 386 days.  In the mid 1990s the index went 394days without a 5% correction.  And now (as of Thursday Jan 25th)we have gone a record 399 days without a 5% pullback.  So The S&P hasNEVER been this over-valued, NEVER been this overbought, and NEVER gone thislong without even a minor correction.   Oddsare.....

  
This chart courtesy goldchartsrus.com showsUS Money Supply continues to rise, across all measures.  This money needs a destination, and with thestock market in bubble territory, a lot of this money is destined forcommodities.

This chart courtesy sources listed shows aninflation gauge that is used by the NY FED. It is called the Underlying Inflation Gauge, and you can see it here asa light blue line.  It is warning thatprice inflation is underway.  At www.pdegraaf you’ll see that the Model Portfolio (which reflects live transactions) iscurrently ahead by 38% - well above the rate of inflation.  It is very important that our investmentsstay ahead of the rate of inflation. 

    
Featured is GNX the commodity index. Price is breaking out above lateral resistance, after already having broken outfrom beneath the 200WMA.  The target for this breakout is at the greenarrow.  The supporting indicators are positive. 

This chart courtesy Mark J. Lundeen will bea surprise to some.  It compares US bonds, stocks, silver and gold tocurrency in circulation.  The surprise is that since year 2000, gold hasoutperformed equities by 4.60 to 2.27.  Even silver, - in an 18 year span, - has outperformed the stock market.  It was inflation that propelled gold andsilver to rocket higher in the late 1970s. Is history about to repeat? Whenever commodities are in a bull market, gold and silver tend toshine.

Peter Degraaf is NOT responsiblefor your trading decisions.  Please doyour own due diligence. 

By Peter Degraaf

Peter Degraaf is an on-line stock trader with over 50 years of investing experience. He issues a weekend report on the markets for his many subscribers. For a sample issue send him an E-mail at itiswell@cogeco.net , or visit his website at www.pdegraaf.com where you will find many long-term charts, as well as an interesting collection of Worthwhile Quotes that make for fascinating reading.

© 2018 Copyright Peter Degraaf - All Rights Reserved

DISCLAIMER:Please do your own due diligence.  Investing involves taking risks.  I am not responsible for your investmentdecisions.

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