Commodities Continue To Strengthen. Energy Remains The Star.

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Contributor Since 2017

XATSUK Ltd provides Cross Asset Technical Strategy research and consultation. I have 25 years' experience in consultancy and Private Banking, providing impartial research and analysis to investment professionals and companies. My research techniques include classical Technical Analysis and my proprietary Tension Indicator. XATSUK Ltd and all affiliated staff do not hold positions in any financial instrument in any financial market.

Summary

  • The commodities space remains broadly positive
  • Energy remains the outperformer
  • Precious Metals is underperforming, but in a broad range

Our Monthly Publication “Commodities relative to DBC” was recently published.

We maintain an overall Positive stance to the Commodities space.

Commodities continue to strengthen

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.

Precious Metals underperforming

The star of the commodities class, however, remains the Energy (DBE) sector.

Energy continues to strengthen

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.

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