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Commodities: The Kite of Opportunity is Flying High

So long as you know who's holding the string! One example: Sugar

by Nico Isaac
Updated: May 10, 2017

Take a second and imagine the commodity market -- or any other markets you follow -- as a kite getting ready to take flight. Got it?

Okay. Now -- who do you see on the other end holding the string?

Well, if you subscribe to mainstream economic wisdom, the answer is -- all the news and data swirling around in the market's fundamental backdrop. Everything from weather patterns, supply-interrupting events like worker strikes, demand changes, plant-eating fungi, the rise and fall of other markets, and so on.

We don't disagree. Not completely. See, commodities are made, grown, shipped, eaten, burned for fuel, et al. Their supply is finite. Events that hamper supply can (although, not always do) cause volatile price swings.

But in our experience, those swings are temporary, at best. In the long term, fundamental events don't lead the "kite." They get dragged behind it.

Take, for instance the recent performance of sugar. At the start of 2017, sugar bulls were getting high off memories of the 2015-6 bonanza when prices skyrocketed 137% in just 13 months.

A humbling sell-off in late 2016 was a major bullish buzz kill. But then came January 2017, with sugar prices came soaring back above the 20 cents per pound level to a one-year high.

And, according to the "news-moves-the-markets" pundits, the fundamental wind was firmly at sugar's back, as these early 2017 news items explain:

  • "Sugar futures jumped as concern mounted that a global supply deficit will increase partly because of adverse weather in Brazil, the world's top producer and exporter." (Jan. 3 Economic Times)
  • "Sugar off to the races in early 2017. It is possible that more gains are on the horizon. Sugar is entering its second year of a fundamental deficit." (Jan. 9 Seeking Alpha)
  • "Sugar stocks sweeten further as demand rises." (Jan. 9 The Statesman)

But, instead of reclaiming the upside, sugar prices turned down, come February, in a precipitous nosedive to a one-year low. Bullish fundamentals didn't matter.

Now, let's consider a different scenario. Instead of news pulling the market's string, we believe the real "hand" at the helm is investor psychology, which unfolds as Elliott wave patterns directly on a market's price chart.

Back at the beginning of 2017, in fact, our senior commodities analyst Jeffrey Kennedy published his broad-scale Commodity Outlook 2017 video forecast. There, Jeffery provided a unique perspective on sugar; unique, because it went directly against the bullish fundamental picture and called for a powerful sell-off. In Jeffrey's words:

"I think it's safe to say moving forward my focus will be to the downside.

"Even though the recent advance we've seen in January has been quite strong, I still see no reason to change or alter this interpretation."

The next chart shows what followed: The bullish "wind" came to an abrupt stop and sugar prices plummeted 24% year to date to 15.3 cents per pound.

Big calls like these are what Jeffery Kennedy's subscribers have come to expect, and that is why we want to share it with you -- for FREE, right now!

Now in progress: On May 10-17, Jeffrey's Commodity Junctures Service is open to everyone, free. Daily forecast videos, "Weekly Wrap Up," interviews, and the still-available Commodity Outlook 2017 video from Jeffrey's Monthly Commodity Junctures -- you can have instant, free access to all of it right now.

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