Our Monthly Publication “Commodities relative to DBC” was recently published.
We maintain an overall Positive stance to the Commodities space.
The PowerShares Commodities ETF (DBC) is now trading above previous 2017 year highs and focusing on the 16.50, (23.6%) Fibonacci retracement of the 2011-2016 fall. As the rally from the 11.70 year low of January 2016 gains traction, and momentum studies continue to strengthen, we anticipate still further gains in the coming months.
Our proprietary Tension Indicator is also strengthening and poised to break into positive territory for the first time since March 2013.
However, whilst the broad index continues to strengthen, the underlying commodities sectors remain predominantly weak.
For example, the Precious Metals (DBP) sector is extending the pullback from the May highs, and is expected to Underperform the broad commodities space into the coming months. This is also being seen in both the Agriculture (DBA) and Base Metals (DBB) spaces.
The star of the commodities class, however, remains the Energy (DBE) sector.
We have Upgraded Energy to Outperform, as the bounce from the February 2016 year low gathers momentum. In fact, critical resistance at the December 2016 high is currently being tested. A close above here would further improve investor sentiment and prompt a significant rally in the coming months.
In the coming months, we believe investors will continue to increase their exposure in the commodities sector. Initial interest will remain within the Energy sector. However, investors will be closely watching Agriculture, Base Metals and Precious Metals for basing patterns and entry levels.
To access our full suite of reports, covering Commodities, Equity Indexes and Forex, please visit our website.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.