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Commodities Paper over the Fed’s Taper Talk
Now, a new Monthly Futures Junctures presents the big, moving picture in commodities

By Nico Isaac
Mon, 26 Aug 2013 18:15:00 ET
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According to the mainstream experts, there is one factor that continues to stand in the way of a full-blown, commodities sector comeback; namely, a rumored end to the Fed's stimulus program. The following news items go on the record:  

  • "Commodities Slide on Fed Stimulus Bets" – Bloomberg, Aug. 8
  • "Commodities under Pressure as Markets Mull Fed QE 'Taper Possibilities.'" -- Daily FX, Aug. 20
  • "Commodity markets have been generally weak in 2013. Expectations that the US will start to exit stimulus measures have prompted investors to dump the asset class." -- The Telegraph, Aug. 25
There's just one problem with this logic. In April 2011, Thomson Reuters/Jefferies CRB Commodity Index turned down from a two-year high. It went on to experience a two-year-long, 20% sell-off before catching its breath in late June 2013.
 
Yet -- during that entire decline, the Fed was not only NOT "tapering" its stimulus incentives; it was actually enforcing them full speed ahead. See:
  • Sept. 21, 2011: Federal Reserve launches "Operation Twist." The central bank swaps $400 billion of short-term bonds for the same dollar amount in longer-dated securities. Deadline for program is slated for June 2012.
  • Nov. 2011: The Federal Reserve pledges to "leave the door open for further action" and to keep interest rates at record lows "at least through mid-2013."
  • Jan. 2012: Federal Reserve pledges to "keep interest rates near zero until at least late 2014."
  • June 2012: Federal Reserve extends "Operation Twist" to the end of the year, swapping an additional $267 billion of shorter-term securities for 6-to-30-year Treasury's.
  • September 2012: Federal Reserve pulls the trigger on a third round of quantitative easing, QE 3. The new, $40 billion per month bond-purchasing program of mortgage-backed securities has no time limit. The Fed also vows to "maintain the Federal Funds rate near zero until at least through 2015." The Huffington Post coins the two-sided bailout "a double-barreled blast of stimulus."
But here’s the real twist in Operation Twist: Since the past two years of the Fed's ultra-loose lending spigot didn't boost commodities, what difference will it make to end that policy?  It hardly makes sense to worry about an outcome that has already happened.
 
What does make sense, then?
 
Simple, says EWI's senior commodities analyst Jeffrey Kennedy. The long-term trends both under way and up ahead in the world's key commodity markets are not driven by external events, such as central bank policy. They are driven by the collective psychology of investors, which unfolds in clear and observable Elliott wave patterns on price charts.
 
In his brand new Monthly Futures Junctures, Jeffrey's big commodity picture is actually a big moving picture. First, a 14-minute long video in which he walks viewers through the Elliott wave structures and supporting technical evidence for major moves in cocoa, wheat and live cattle.
 
The middle portion of Monthly Futures Junctures includes downloadable, PDF charts of 10 key commodities. Each one shows you support and resistance price levels, as well as bold arrows pointing in the next likely direction of the trend.
 
And, last, a nine-minute Traders Classroom video in which Jeffrey explains how to use -- and mis-use -- the traditional Moving Average Convergence Divergence, or MACD, for identifying high-confidence trade setups.
 
Don't wait another (Fed) minute. Get instant access to the brand-new Monthly Futures Junctures today. A risk-free subscription is just a click away.
 
 
 

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