Water, Water Nowhere?

May 18, 2015

Weekly Market Outlook

By Keith Schneider



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Stocks had another decent week as the S&P 500 (SPY) eked out new all- time highs, while smaller caps stocks such as those in the Russell 2000 (IWM) are lagging.  This might have masked some interesting developments in soft commodities (DBA), precious metals (GLD and SLV) and water (PHO). The latest Mad Max movie is a take on a post-apocalyptic view of what the world might look like next year (ok, maybe 5 years from now) as water and food become scarce. The filmmakers might have had near perfect timing, as commodities across the board are bottoming.  Or is this life imitating art? Whatever the reason, commodities are back in our focus.

The news that JPM Chase has been accumulating hoards of Silver, along with its very bullish price action over last few days is very noteworthy. Furthermore, lending support to the bullish outlook on commodities and metals is that the pressure on the US Bond market recently might be abating. Bond (TLT) are now finding long term support at key weekly moving averages. Although the long term downtrend in US rates is still intact, another drop below those key longer term averages would be a game changer across the board. Along with frothy sentiment readings and mediocre market internals, we expect upside action to be muted.

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