Commodities bear to continue
Commodities have had a heck of a bear market.
The low cost of oil and natural gas is due to abundant shale gas and shale oil supply making the US an exporter for the first time since the seventies.
This in turn caused energy dependent industries like mining and agriculture to be more cost efficient, creating higher output in the mines and on the fields and pushing prices of their products down.
For this overview I used a basket of Natural gas, Wheat, Corn, Soybeans, Copper and Oil.
I gave Oil and Copper a double weighing because Oil just dwarves all other commodity markets and for copper because I did not find a decent chart for other base metals like Iron or Zinc.
What we see is a descending wedge that is going to go in its final down move, testing the level of the 2004-2005 winter.
After that I think the time will have come to move up again due to production cuts at these incredibly low commodity prices.
The oncoming bull could see prices take us as high as 2014 levels and I would then anticipate that bounce backs in energy stocks would fuel a final blow off in the stock markets prior to the reality of having to pay higher costs for basic commodities sets in and the market comes crashing down again.
The low cost of oil and natural gas is due to abundant shale gas and shale oil supply making the US an exporter for the first time since the seventies.
This in turn caused energy dependent industries like mining and agriculture to be more cost efficient, creating higher output in the mines and on the fields and pushing prices of their products down.
For this overview I used a basket of Natural gas, Wheat, Corn, Soybeans, Copper and Oil.
I gave Oil and Copper a double weighing because Oil just dwarves all other commodity markets and for copper because I did not find a decent chart for other base metals like Iron or Zinc.
What we see is a descending wedge that is going to go in its final down move, testing the level of the 2004-2005 winter.
After that I think the time will have come to move up again due to production cuts at these incredibly low commodity prices.
The oncoming bull could see prices take us as high as 2014 levels and I would then anticipate that bounce backs in energy stocks would fuel a final blow off in the stock markets prior to the reality of having to pay higher costs for basic commodities sets in and the market comes crashing down again.
Comment:
NAILED IT!
So a small retraction is already underway and looking at the big daddy Oil, I would guess it will retract to under 32 dollars. When this happens I will personally buy more of XOM, RDSA, EOG and maybe BP. Expecting to be able to go +200% in 2-3 years and bag some dividends along the way.