Over the last year, the commodity sector took home the gold metal (err, medal) in the financial marketplace's great race higher. This January, the flagship Continuous Commodity Index (CCI) of 17 leading meat, metals, energy, grain, and soft markets rocketed to its loftiest level in seven months.
Since then, the commodity "bull run" has stalled, while commodity bullishness has soared. And soared, and soared. Right now, it stands at a level I like to call "MYOPTIMISM" -- a near-sighted viewpoint in which markets involved can do no wrong.
Here, the following news items from recent days shed light on the "What Me, Worry" attitude surrounding the sector:
- A rising dollar: "Commodity gains continue despite appreciation in the dollar."
- AND -- "Once the dollar's secular bear market retreat resumes and the mainstreamers catch on, the entire commodity realm will again see massive inflows."
Don't they mean, "IF" the dollar's retreat resumes?
- Slacking demand: "Experts say the commodity bull can run for many more years, even if demand remains lackluster in the West." (Montreal Gazette)
- AND -- "As demand [in emerging economies] snaps back -- and we're seeing it now -- then the commodity boom roars on." (Wall Street Journal)
Translation: The commodity bull is safe and sound SO LONG AS you completely ignore the possibility for a sustained uptrend in the U.S. dollar and/or ongoing weakness in emerging markets. I think we can all agree that this kind of thinking is dangerous at best.
(CCI: WOW! The March 8, 2010 Daily Futures Junctures includes three labeled price charts, and live video analysis of the near-term trend underway in the Continuous Commodity Index. Get the full story, absolutely risk-free.)
As for analysis that is based NOT on the elimination of certain details, but rather the inclusion of all objective factors -- See the March 8, 2010 Daily Futures Junctures, online now.
In that publication, EWI's chief commodity analyst Jeffrey Kennedy takes into account the whole CCI picture, including: Fibonacci time relationships, Elliott wave personality, critical support and resistance levels, and so on. And in the end, the message is nothing short of "exciting." In Jeffrey's own words:
"If correct, the Continuous Commodity Index stage is set for a sizable [move], which is right in line with our longer-term expectations in many commodity markets. Odds favor the upcoming move will be a third wave (the most powerful pattern of all)."