Frost, Floods and Food: Are Commodities Getting Hot?

May 21, 2019

Mish's Daily

By Mish Schneider


Raymond Lo likes plants in this Year of the Brown Earth Pig, water element.

“The industries that will perform well in the year of the Pig will be industries related to Wood element and Earth element.”

One major headline today:

Surging fruit prices set to drive China’s consumer inflation higher

“The average price of a basket of seven fruits surged last Friday to its highest in nearly five years…according to data released by the Ministry of Agriculture and Rural Affairs. Apple prices have climbed for nine consecutive weeks.”

Here is another headline:

Brazil frost worries send arabica coffee beans jumping Agrimoney.com

And another:

U.S. CORN PLANTING IS WAAAAAAAAAAAAAY BEHIND, USDA SAYS LESS THAN HALF OF THE CORN IS IN THE GROUND.

Finally,

Ghana Likely to Delay Some Cocoa Deliveries as Disease Worsens

“Ghana’s cocoa regulator is facing a shortage of beans to meet all its sales commitments as disease is affecting more of the crop than previously estimated.”

Frost, Floods and Food-is it time to buy?

Far left is the weekly chart of DBA or the ETF for Invesco DB Agricultural Fund. Although we have an impressive run off the lows, DBA has yet to clear the major resistance at 16.50.

That is what I am watching for.

In the middle is the coffee ETF-JO.

It must clear 34.00 really. In the meantime, this week’s low of 31.20 should be the low if the frost rumors are true.

Far right is Corn, or the ETF for corn futures.

The weekly chart shows that it has cleared the fastest exponential moving average (dotted line).

However, it has major resistance at around 16.05, or where the 50-week moving average is (blue line).

I’ve been shaking my head for close to a year, every time I read the misinformed who believe that the Fed’s inflation target rate is what we should watch before looking at commodities.

What these folks who did not trade through the 70’s and 80’s like we did do not consider-

Mother Nature can spark a rally. Geo-political tensions can spark a rally. Military coups can spark a rally.

In other words, if the recent action is a harbinger of things to come…

It behooves you to watch what could be a huge face rippping move higher in soft commodities.

If this indeed happens, we can all sleep again when they’re dead.

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S&P 500 (SPY) Tried but ultimately closed below the 50-DMA at 286.70. If gaps above tomorrow, would follow. If not, under 285.50 expect more selling.

Russell 2000 (IWM) 154.50 resistance. 151.40 support to hold

Dow (DIA) 257.60 now the pivotal number to watch with 260.75 the overhead 50-DMA resistance

Nasdaq (QQQ) The 50-DMA is at 183.81 resistance to clear with immediate support at 180.00 to hold

KRE (Regional Banks) 54.20 resistance with 51.31 the 200-WMA

SMH (Semiconductors) This could be considered a reversal. Cleared the 200-DMA and the 50-WMA. Now, those levels must hold

IYT (Transportation) 189.32 cleared improving the phase to caution from Distribution. Now, that level needs to hold a second day.

IBB (Biotechnology) 103.27 the 200 WMA pivotal

XRT (Retail) With Nordstrom down 9% after Kohl’s miss, we wonder how long XRT can hold 42.12. Over 43.50, will be yet another time bad news is shaken out.

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