This will be a short post outlining an opportunity in a most distressed asset class; the commodity complex and its related stocks.
Firstly; I likely do not need to express to many how low the sentiment is on commodities. To summarize, they are hated, feared and despised as an asset class, from Oil to Corn to Gold and Copper.
All have very high levels of negative public opinion, high levels of speculative shorts, and opposite high levels of smart money hedgers with net long positions. This is very bullish for at least a countertrend rally.
Next, a partial cause of this persistent pain, besides of course China restructuring to a domestic economy and a sluggish world, is the incredibly strong US dollar -- Until the last 2 days that is. The Dollar may have put in an intermediate top here -- and the Fed as expressed in their minutes today, would be fine with that. It is abundantly clear the Fed will overtly fight a strong US Dollar:
A significant lasting break; above 23 would likely invalidate this top.
I like to buy assets in times of panic, and I have a few charts to show you. One is Crude oil, (USO) and the small producer EXXI, which after a breathtaking selloff on oil prices and production concerns, staged a massive reversal from the lows on titanic volume: (5 day chart) Many other energy names staged similar reversals.
EXXI Price data by YCharts
One catalyst for energy achieving at least a decent oversold bounce, simply is the pending onset of winter, which according to Farmers Almanac, is expected to be cold as last winter was. This is catalyst for both oil and Natural gas names, which I bought aggressively yesterday and this morning.
The other commodity of interest to me are the grains, which over the last 3 days have sharply rallied out of multi-month downtrends, and are attempting to change their major trend to the upside. This is without any help, until today from the Dollar. I am most interested in Corn and Soybeans for my long positions: (here are the ETF's for both) Again, the bullish sentiment is rock bottom for both of these:
Always remember -- the Fed is looking to raise inflation expectations. They may fail -- but not likely quit trying. Recent developments have convinced me -- that Fed rate hikes are likely "off the table" -- for all of 2015!
To summarize to Followers, as I have posted on the "land of Milk and Honey" Instablog where I sometimes write, I completely covered my short positions in (IWM) and most momentum / social media stocks over the last day and a half, as we have sharply sold off.
I began buying yesterday afternoon, energy and materials stocks in Oil, Natural Gas, and a couple of Coal names. Some names to follow of interest would be (ECA) BTU) and (OTCPK:BIREF)
Bring on the cold Winter and a weak dollar!
Best wishes to all investors.