CRB is coming into major resistance area and likely to reverse in the near future. Implications beyond the obvious commodities are
Stronger dollar Lower 10 Year Yield
A Solid breakout from the long term downward channel, would require a high base reversal Bull flag of sorts. Build some kind of pressure followed by a breakout.
FYI I am not in the inflation camp.
Comment
⋅
We are seeing the resistance at this key area. How fast rates rise will be key in the days and weeks ahead.
Comment
⋅
Commodities still struggling at long-term resisitacnce. 10-year rates have started to break down.
@RealMacro any updates on today's movement? great analysis
RealMacro
⋅
@jerryz73001, Hello! Thx for the question. Well, rates will rise without FED QE. Clearly, as rates rise this will have a negative impact on stocks and commodities.
As rates rise and earnings yields fall relative to stock prices, it creates compression. Do you want to own a bond that will pay you 1.75% risk-free for ten years or
buy stocks that are currently earning 2.5% assume the risk and hope earnings yields rise in the next 18 months faster than bond yields? Do you want to own a commodity
that earns you no yield? I know it might sound complicated but it really isn't in some respects. Just think "money chases yields" and you will have a better understanding
of where money will likely flow. then pay attention to see how it's going. Find the right risk-reward if it's going as your thesis and pull the trigger.
I know this might sound crazy in this day and age, but markets have a way of self-correcting if left on their own. The Free market setting rates is a good thing.
eventually, higher rates will suppress rising commodity prices and strengthen the dollar or at least keep it from falling. Today we saw Oil tank. Why?
2 reasons, 1 Rising rates = less private money creation via loans (Despite the best lending condition in history for banks see chart below)
2. Lack of demand for oil relative to Jan 2020.
Now if CRB breakout here well it could get real ugly. But I believe the FED in that case will likely step in or risk a currency crisis in emerging markets as investment
fleas schitty economies and runs to US Bonds at favorable yields.
I hope I did not get too technical for what you were looking for. :D
jerryz73001
⋅
@RealMacro, that's great! Thanks a lot for your insight