The commodities market for awhile has been concerning to me. There are too many confident new bulls. I did the post about markets at extremes on Dec. 12th. Copper was one of those markets, and along with crude oil, they are worrisome. For example, the futures speculators are very long these markets, along with silver. And there is a large consensus continuing regarding the confidence in Mr. Trump’s policies bringing good times back for the US economy. I don’t share those views. Commodities are still very bullish long term, but it’s the nearer term which is the problem. And now that commodities have been in a secular bull market for over a year, the esteemed WSJ is just now recognizing it. That’s also quite concerning.
“The three-month correlation between commodities and stocks recently fell to the lowest level since September 2008..”
And they claim that this is “reinvigorating” the “long-beleaguered” commodity market. Have they lost their minds? Have they not noticed that oil has more than doubled from its low, and base metals have soared, etc? So they are claiming since this useless correlation is low, then it’s somehow bullish? Where do people come up with this stuff? And their brilliant analysis about this correlation, claiming it’s bullish, was a superb timing method in September 2008. This popular commodity index, DBC, fell almost 50% over the next 6 months into the big low in March 2009 after their great discovery of this correlation. Not only that, but the stock market also cratered into its’ March 2009 low after their “bullish” correlation low levels. So they both cratered together and then stocks and commodities bottomed on almost the same exact day. What kind of a useless correlation is that? It sounds like it’s more bearish than bullish to have the correlation breakdown. And it certainly is not bullish, that they just came up with this conclusion. Just remember, this is the same esteemed WSJ who, 3 days from the secular bottom in December 2015, came out with an article claiming the Fed raising interest rates was bearish for gold. So you see why their brilliant analysis is concerning.
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