From the Desk of Ian Culley @IanCulley

Gold is up for the sixth day in a row – and it looks like this week’s breakout might be the real deal.

If it is — and gold continues to rip — it’s only a matter of time before copper breaks out too.

Check out the overlay chart of gold and copper futures:

Where gold goes, copper follows. Or perhaps they simply enjoy similar paths.

The rhyme or reason makes no difference. During a commodity bull run, precious and industrial metals will enter a broad markup phase. Gold will not take off on a rip-roaring rally without copper by its side.

I placed a question mark above copper’s former resistance level, marked by the 2011 and 2022 highs. To be clear, the annotation poses the question of when — not if – copper will resolve higher.

But before Dr. Copper can break the psychological...

From the Desk of Ian Culley @IanCulley

What happened to those everyday commodity contracts the average investor follows?

I’m talking about crude oil, gold, and copper.

These days, it’s all about cattle futures, orange juice, or cocoa hitting an all-time high. 

I’m sure everyone down at the NYMEX or the folks over at the CBOT in Chicago are having a ball. But what about the stock traders trying to get a piece of the action?

Sure, the energy trade is starting to work again. But gold has been a range-bound mess since the summer of 2020. And gold mining stocks have been an absolute dumpster fire.

It just doesn’t make sense amid a commodity bull run…

No, the absence of gold and copper...

From the Desk of Ian Culley @IanCulley

Commodities are making moves.

Cotton is forming a bull flag following last week’s breakout. Coffee futures are coiling below a critical polarity zone. Cattle and hogs are running wild. Even Dr.Copper is perking up, posting positive returns over the trailing five days.

And don’t forget about cocoa futures as they continue to print fresh all-time highs. 

With all this action heating up, let’s turn our attention to one of 2021’s most explosive markets…

Lumber.

Remember all the lumber memes on Twitter?

Dudes were posting their W’s sitting atop stacks of 2x4s and plywood. I’ll never forget it. 

As a trader, I prefer to avoid lumber futures. It’s a thin market. But I can’t ignore the yearlong base forming on the daily chart:

...

From the Desk of Ian Culley @IanCulley

Naming a newborn is tough.

Who is this tiny person? And who will they aspire to be?

These are impossible questions to answer.

As you can imagine, the wifey and I were stumped upon meeting our baby girl earlier this week. 

Every time I looked into her eyes, I could hear her plead, “Give me a name, boy!” A situation ten-year-old Ian never fathomed – even while watching The NeverEnding Story. 

After a few days of deliberation, hours of snuggles, and the casual piercing gaze, I could only discern one thing: she smelled good. 

So I offered up “Coco.” 

It was on our shortlist. Plus, will we ever forget this year’s epic rally in cocoa futures? I certainly won’t.

Well, we ultimately landed on Cora, which suits her in some indescribable way.

But if I hadn’t cut technology this week so I could focus on my girls, I might have thrown "Cotton" into the ring.

I mean – it’s the “fabric of our lives!”

Check...

From the Desk of Ian Culley @IanCulley

It’s time to turn our attention to the energy space.

The same market conditions that favored energy in Q3 of last year are brewing. 

Interest rates are rising. King Dollar is refusing to step aside.

And energy contracts – especially crude oil – are entering a historically strong period of the year.

Check out crude oil’s seasonality since 1984: 

February kicks off the strongest four-month period of the year.

Meanwhile, energy contracts are forming potential bullish reversals.

Perhaps last month’s crude oil breakout has been sloppy. But buyers reclaimed our risk level yesterday – right around when crude tends to bottom. 

Here’s crude’s seasonality for the next two months...

From the Desk of Ian Culley @IanCulley

Holy reversals, Batman!

The tactical direction flipped for the dollar and rates this morning on the heels of stronger-than-expected job growth. 

Whipsaws are dotting the charts, erasing weeks of progress.

How should we react?

Today, I want to show you a trade we can take to sidestep the market chop.

Live cattle futures are posting modest gains today (up roughly 0.50%) as they mosey toward last year’s high. 

Most importantly, they’re shrugging off the broad intraday volatility.

Plus, the structural uptrend remains intact. And I can’t help but wonder if and when lean hogs will catch up to cattle. 

Check out live cattle overlaid with lean hog futures:

These two markets tend to peak and trough together, often trending in the same...

From the Desk of Ian Culley @IanCulley

Stocks aren’t the only assets catching a bid.

Commodities are, too. 

Despite their current rallies, the average investor isn’t concerned with cocoa, cotton, and lean hog futures. 

I get it… What do lean hog futures have to do with Tesla $TSLA?

But Dr. Copper – with its Ph.D. in economics – is ripping higher this week. 

And crude oil is trading above our risk level outlined last month.

Check out crude oil futures slicing through the 75 level:

Kudos to those who took the signal, as it’s over a third of the way to our target of 83. 

Crude is up 0.75% today alone, heading into the close with an intra-day high of 78.21. I like seeing strength heading into Friday’s close, as it often spills into the following week.

I imagine crude will hit our target within the next few weeks.

From the Desk of Ian Culley @IanCulley

Houthi rebels are rampaging in the Red Sea.

The result: Many carriers are taking the scenic route around the Cape of Good Hope in South Africa instead of the Suez Canal. 

The longer route brings weeks-long delays and increased costs as the price to ship a 40-foot-long container has nearly doubled since late November.

It won’t be long before those additional charges trickle down to us, the consumer.

What are you going to do?

Buy marine shipping stocks!

Check out our custom equal-weight marine shipping index posting fresh eight-year highs:

I like buying base breakouts, especially when they reclaim critical shelves of former lows (notice the polarity zone marked by the ‘12 and ‘14 troughs and early ‘23 peak).

These often overlooked stocks (seriously, when's the last time you bought a shipping stock?) are also on the verge of breaking out versus the...

From the Desk of Ian Culley @IanCulley

Danger Will Robinson, Danger!

Cocoa futures have violated a parabolic trendline. 

And it may not be safe for bulls to hold their long positions…

Cocoa fell -2.50% on Monday, cementing last week’s trendline break.

Commodity markets tend to experience steep selloffs following dramatic rallies. Escalator up, elevator down.  

But buyers are refusing to throw in the towel here. In fact, Monday’s potential top is yielding a fresh 46-year high today – not bearish.

I will not short those new highs. Nevertheless, I want to prepare for Cocoa’s eventual decline.

Check out the March contract:

For now, 4094 marks the line in the sand. A break below that level flashes a sell signal. But only if today's run-up in price fails to hold.

My bias remains higher toward...

From the Desk of Ian Culley @IanCulley

What goes up must come down.

It’s an old commodity market maxim that never fails to deliver. The cattle, sugar, and OJ markets embodied this truth last year. 

But as the calendar flips to 2024, it’s time to track those markets that failed to launch in 2023.

Here are three of my favorites…

Coffee

Unlike other softs such as cocoa and sugar, coffee failed to produce monster gains last year. 

But it’s now attempting to carve out a multi-year double bottom:

Notice the resistance level at approximately 197 coincides with a key retracement level and a shelf of former lows. That’s our breakout level.

Also, note that the 168 level proved an excellent area to define our risk and get long well before our current line in the sand. A similar early...

From the Desk of Ian Culley @IanCulley

I’m not concerned with last year’s winners heading into 2024.

Winners have a miraculous way of taking care of themselves (i.e. cattle, sugar, cocoa.) 

Instead, my focus centers on those markets that failed to launch. Markets like this…

No, I’m not talking about Gold. But it certainly fits the bill.

I’m referring to wheat.

Wheat never produced an explosive rally this year – at least nothing like we saw in 2022. But that could all change in the coming six months.

Check out Chicago wheat futures carving out a potential double-bottom pattern:

Wheat futures are taking the shape of a classic Adam and Eve formation – a sharp sell-off followed by a longer accumulation period.

In addition, the...

From the Desk of Ian Culley @IanCulley

Metals are dominating the commodity space.

The rotation between energy and base & industrial metals colors the commodity markets as we near 2024.

Crude oil has slipped through buyers' hands since interest rates peaked in October. That much is obvious… 

But don’t short crude oil and its distillates just because copper and gold are catching a bid…

Check out the commodity subgroup performance since the US 10-year yield $TNX peaked in the fall:

Energy has clearly cooled, while precious and base metals have led the pack.

This makes sense as rates fall. But markets don’t move in a straight line.

Notice the equal-weight energy index stopped falling mid-month around the same time it ran into a logical area of support relative to the equal-weight base and industrial metals index.

...