A number of commodities are breaking out
If you've been browsing the charts, you'll have noticed that a number of commodities are currently breaking out. This is not entirely unexpected, as we first spotted it a week ago on the Bloomberg Commodity Index futures. Of course, we notified you about this development on our Twitter.
Later in the week, the first breakouts in individual commodities began to manifest. Most notably, there's a pending breakout on crude oil, both Brent and WTI.
An even better looking setup has emerged in sugar. The price broke out and then retested the breakout line in a textbook fashion.
Another exceptionally clean breakout occurred in cotton. The price broke out from a long-established base this Friday.
We recommend checking the new signals in the SpreadCharts app this week, especially the interdelivery spreads. Some of these look particularly promising and could benefit from these pending breakouts, assuming they are confirmed.
Now, let's be clear: not all commodities are showing strength. Grains remain weak, precious metals are turning lower, and let's not even get started on the sluggish performance of natural gas.
Is there an underlying trend at play here? We believe so. It all seems to be tied to the bond market. Specifically, the 10-year Bond futures have reversed off the falling trendline and are likely gearing up to challenge the support level once more. This time, it will likely break through. That would help explain the price action we're currently seeing across the commodity markets.
We described the relationship between bonds and commodities in a research video three weeks ago. The recent price action would defer the market rotation we described there. However, this could ultimately make the opportunity we discussed in the video even better.
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Disclaimer
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