News Details – Smallcapnetwork
The Commodity Rally Isn't as Random as You Think
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February 2, 2024

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PDT

Good Monday afternoon everybody, or for some of you, good Tuesday morning. Whenever it is you open our newsletter in your e-mail inbox, we hope you had a restful weekend and are ready for a great rest-of-the-week. And for those of you who are also subscribers to the Elite Opportunity Pro newsletter, you're starting the new week out on a great foot. That's because you guys and gals locked in a 38% gain on the Direxion Daily Small Cap Bull 3X ETF (TNA) or an 84% gain in the Direxion Daily S&P Biotech Bull 3X ETF (LABU). Oh yeah... those folks also booked those gains in less than a week and a half. You read that right. The EO Pro people banked anywhere from a 38% gain to an 84% gain (if not both) in just a little over a week. The follow-up question: How? The only answer I can give is, because John Monroe and his team are good. But short-term trades aren't your thing? I hear that, and can respect that. Let me ask you this question though... how have your long-term trades performed since this point in the year in 2014? The S&P 500 is up less than 6% since the middle of November of 2014. Long-term strategies are fine, but calling a spade a spade, they've been a bust for too long now. The only game in town for a long while has been picking up the nickels and dimes everyone else is overlooking while hunting for dollar bills that just haven't shown up. Don't miss out on the next big trade the Elite Opportunity Pro newsletter dishes out. It could end up being the one that saves your portfolio from another go-nowhere year. Here's how you can get it. There's even a no-risk test drive. On other fronts, take a look at the updated chart of bonds, yields and the greenback. The market's betting on higher rates, but that's driving the U.S. dollar to levels we know are downright debilitating for U.S. multinationals. What's interesting is that while the dollar is going higher, not all commodities are moving lower even though they theoretically should be. Gold was down quite a bit, but oil was up. A lot of metals were up, in fact.... enough to spend a little time on the matter today. In most cases, the recent bullishness looks like a major long-term uptrend is forming. Here's aluminum... ...and here's copper. Both are going up, with a vengeance. What gives? I think there are a couple of things going on here. In at least a small way (and perhaps a big way - I haven't decided yet) this is the market's way of saying it doesn't believe the U.S. dollar is going to continue to rise, even though interest rates certainly will. This aligns with my "great disconnect" theory from a few weeks back. At least as big a part of this sudden jolt in copper and aluminum prices is that inventory (the amount stored in warehouses) has been falling, and has finally reached a tipping point. LME aluminum stock levels are at levels not seen since 2009. For copper, its inventory levels aren't at critically low levels, but they aren't sky high either. More than anything though, I have to wonder if this is the market's way of saying there are better days ahead, economically speaking. I'm far more inclined to trust the market's subtle clues than the financial media's headlines. Whatever the case, although I have doubts about copper and aluminum being able to sustain their current uptrends without a break, after a breather I have a feeling we'll see these rebounds turnaround. Why's that? It's not an idea randomly pulled out of a hat. The chart below shows the United States' important and exports of aluminum and copper since 2007. If you look closely, you'll see the decline of all these measures has stabilized to a mostly-flat trend. We'd be a heck of a lot more impressed when at least three of the four lines in question were rising, but "not falling anymore" is a decent start. That's only through September's data too, so there's a possibility the tide has already turned favorably. We'll just have to wait and see if my read on the whole shebang is right or wrong. Finally, the market's still not sure what it wants to do. It's quite the switch from the post-election rally we saw last Wednesday. Today was the third day of stagnation, with the S&P 500 trapped squarely in between a rock and a hard place. The rock is a support level around 2147, and the hard place is the upper band line at 2183...though we can't help but wonder if the actual ceiling is a bit lower than that. Just relax here. Somebody's waiting on something, but it's not clear what each side of the table is waiting on. Tuesday morning's retail sales report might force one side or the other to play its hand. Talk to you tomorrow.