World Commodity Market

20 November 2016

Dear Fellow Investor,

In times of extreme uncertainty, confusion, volatility and fear  

when it is impossible to get a clear reading of economic trends we revisit our price charts. 

Below is the CRB index which represents a basket of world commodity markets including crude oil, base and precious metals, grains, soft commodities and meats.

In my opinion it would be impossible for the powers that be to manipulate all these commodities. They represent the supply and demand fundamentals of the world economy.

Weekly chart of the CRB Index with a 50 day simple moving average.

 

 

What is this chart telling us ?

 

On March 2016 the 5 year commodity cycle low was confirmed by a strong upward wide range price bar breaking out of an 8 week congestion

Price after 14 weeks of upward progress challenged the 50 week moving average. 

After 25 weeks and 5 major tests of the 50 week moving average price has held above the average.  

Volume has increased on the rallies and declined on the corrections (Not shown)

When studying a chart, I look for confirmation. A one day penetration of a moving average has little significance. 25 weeks is significant. It means commercial traders of commodities are accumulating. 

These are truly the smart money. For example, Cargill grain, a major commercial trader, has weather satellites  circulating the globe checking crop conditions and filtering via their super computers.  A retail trader watching Jim Cramer on CNBC has no access to such valuable information. 

We do however have one advantage. It is knowledge of how to read a price chart. A chart does not lie. It shows via price and volume what the players are doing. It cuts through the opinion, hype, manipulation, fear and helps us to align ourselves to the market reality of trend. 

The CRB Index chart tells me that President Trump will  grow the US economy via infrastructure spending. He will cut over 90 % of bureaucratic, socialist regulations that have depressed  and  hurt business. Jobs will be created. Demand for commodities will increase especially those used in construction.  

Inflation will pick up as growth and jobs are created.  He will do as Ronald Reagan did to pull the US out of slow growth and recession in the 1980s. 

The CRB chart also tells me he will not pass high tariffs on China/ Japan or Asia as he as an astute businessman and has no intention to damage the world economy. Taxes will be cut. He knows as a businessman that governments never create much of value. Governments destroy value while only business creates value.

He knows a good business man allocates capital better than a government bureaucrat. That is why he is passing massive tax cuts . 

He is a business builder and not  business destroyers as the soon to be history  Obama regime.    

Focus on stocks that can raise their prices with inflation, avoid bonds. Well run commodity producers will perform. Singapore banks are recovering as higher interest rates go right to their bottom line.  Also focus on companies such as rubber glove companies that earn their revenues in USD.

The Malaysian stock market   will recover . I looked at the weekly chart of the KLSE. It is holding up quite well with 26 weeks of congestion.  Because of the volatility of the Ringgit  some quality Malaysia shares are trading at attractive value levels.  In spite of the fear mongering media, there are opportunities. 

  

Invest well and grow your wealth,

Bill

The Obama Legacy.

 

 

Capetown Penguin