Members Only

Mean Reversion Season

Early-year rotations are opening opportunities in soft commodities.

By Sam Gatlin, Jason Perz

January 2, 2026

We’ve officially closed the books on 2025, and the scoreboard tells a very clear story.

If you were long precious metals last year, it was a feast. Silver, Platinum, Palladium, and Gold dominated the commodity complex, and it wasn’t even close.

These markets rewarded investors who stayed aligned with the primary trend, bought breakouts, and resisted the urge to fade strength. The leadership was persistent, relentless, and unmistakable.

On the other end of the spectrum, the laggards were brutal.

Soft commodities, agricultural products, and the energy complex spent most of 2025 under pressure.

By the end of the year, several of these markets had been cut in half.

Orange Juice and Cocoa were the poster children for that pain.

But as we turn the calendar to 2026, that extreme dispersion is exactly what has our attention.

Every year, the early weeks of January bring a familiar phenomenon: extended trends begin to unwind.

Leadership cools off, and laggards start to matter again.

And markets that spent the previous year crushing latecomers suddenly flip the script. Around here, we call this whipsaw hunting season.

That doesn’t mean abandoning the primary trend framework. It means recognizing when exhaustion is setting in and when mean-reversion setups offer asymmetric opportunities.

Right now, precious metals are very extended. They’ve pulled back sharply off their highs, and momentum has cooled meaningfully after an extraordinary run.

At the same time, the most hated corners of the commodity market are starting to show something new: constructive setups.

Orange Juice futures are a great example.

After collapsing throughout 2025, prices spent the back half of the year carving out a reversal pattern beneath a key former support level that has now turned into resistance.

That level has been tested multiple times, rejected, and absorbed. We think a breakout is coming.

We want to buy Orange Juice futures on strength above 213, with a target of 263 over the coming 1-3 months. Over longer timeframes, we're looking at a secondary objective of 344.

Cocoa futures have a very similar setup.

After one of the most punishing declines in the entire commodity complex, Cocoa futures have spent months forming a textbook bearish-to-bullish reversal pattern.

The market has stopped making lower lows.

Momentum has stabilized.

And the price is now pressing against a well-defined resistance zone that coincides with a key Fibonacci retracement level.

A breakout from here would shift the path of least resistance higher for the foreseeable future.

We want to buy Cocoa futures on strength above 6,413, with a target of 7,333 over the coming 1-3 months. Over longer timeframes, we're looking at a secondary objective of 8,823.

This is how early-year rotations tend to unfold.

The strongest trends from the prior year pause, consolidate, or mean-revert.

Meanwhile, the weakest markets, the ones everyone gave up on, start to surprise.

This isn't because fundamentals changed overnight; rather, positioning, sentiment, and price structure reached extremes.

That’s where we are right now.

We’re not chasing last year’s winners here. We’re hunting whipsaws.

We’re looking for markets that punished trend followers for months, flushed out weak hands, and are now coiled for sharp reversals.

As we move into 2026, soft commodities sit at the top of our shopping list.

What are you seeing in commodities? Let us know what you think. We love hearing from you!