Whenever I write about agriculture, it doesn’t get a lot of interest. I don’t know why. Commodities were in a brutal bear market basically since the massive buying climax in crude oil at $147 in July, 2008. I believed the bear market would be ending in the March(ish) 2016 time frame and it is still my belief – but also, there would be re-testing of those lows later in the year. And some commodities would go to new lows, but as a group the re-tests would be at higher lows. Early in 2016, most people had trend extrapolated the bear market in commodities to last basically forever (basically). There were stories about the digital economy, technology, endless supplies of crude oil, electric cars, endless supplies of agriculture, China collapsing, etc. In other words, we in 2016 are so smart and advanced, that commodity shortages were something which we have conquered. It’s the same thought process which occurs at every major secular low. I heard all kinds of stupid stuff into the massive selling climaxes in the stock market in late 2008 – March 2009. And as many of the old timers can attest to – I don’t believe I’m in that category (yet) – the brutal 19 and 1/2 year bear market in gold into the July 1999 lows (with re-tests in 2001) had even goofier “predictions”. So sentiment towards commodities is very favorable generally. Although the latest rally in base metals, like copper,and crude has me concerned at the moment. But when things get as bearish as they were, sentiment resets very quickly and bullishly. So as far as crude oil, I still believe there will be a re-test of the $26 lows early next year, but at much higher lows. But the crude oil bottoming process/accumulation will generally be slow and deliberate. I’m much more bullish on agriculture, some of the reasons are discussed here. There are several ways to invest in agriculture – this is one way – RJA. And of course, there are numerous ways to invest in metals and in energy – and as always, only by buying into weakness.
There are many theories about the different relationships which supposedly exist between markets. But like everything in markets, those theories are true until they’re not. And even if there is a good deal of truth to some of these relationships, they can be the exact opposite for significant periods of time. But the most dangerous problem with these relationships is they are often wildly “wrong” at the big turning points. Meaning, if you rigidly believe in these relationships, you may completely miss the truly wonderful entry points into markets. To show why it’s very dangerous to assume these relationships are written in stone, please view the following charts. First is a gold chart and second is an S&P chart. From March 2003 until October 2007, gold and the S&P generally rose significantly together. And from March 2009 until May 2011, they also generally rose significantly together. The gold permabulls keep telling me that gold only soars when stocks crash. And this one is my favorite relationship – gold vs. the US$. The $ is at the highest level since March 2003, yet gold has more than tripled during the same time. How many times have we heard gold is just the mirror image of the US$? And my personal favorite, the price of gold isn’t really down, it’s just that the $ is up. But believing this nonsense has cost people a lot of money. And there is a certain financial celebrity Debbie Downer who has made millions (I assume) off of his books, who keeps claiming that horse manure. I’m in this business to generate profits, not to come up with theories. And as such, I am aware of when the market is believing the “theories”, but I’m attempting to anticipate when those theories will break down. Because the relationships can become completely unglued at important turning points. And one of the two markets can bottom (or top) well in advance of the other having its’ own top (or bottom). And currently, I expect to see some big changes coming up in the relationships between gold and the Dollar, gold and Government Bonds, and commodities and the Dollar.
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day.Scott returned to markets over fifteen years ago where he continues as an independent trader.