#$dba

The CRB Index is testing potentially key resistance.

The stock market is not the only market bouncing back this year after bottoming in December. Commodities are also up handsomely this year as well. Although, as you may know, our view is that until proven otherwise, commodity bounces are likely selling opportunities. It is simply a matter of when and where. One potential selling opportunity may be upon us now.

That is at least according to the chart of the benchmark Thomson Reuters/CoreCommodity CRB Commodity Index (CRB), which is running into the long-term Down trendline from its 2008 top and connecting the 2014 and October 2018 tops.

Now, typically with charts of this duration we'd prefer the use of log scales. However, this trendline was compelling enough to garner our attention. Will it hold again? Time will tell.

In a Premium Post at The Lyons Share, we'll take a deeper dive into the technicals on the CRB chart -- and how to take advantage of the potential opportunity.

Want to get a head’s up on our next move in commodities? We invite you to check out The Lyons Share, a daily “all-access” pass to our research and investment moves. Given what may be a treacherous emerging market climate, there has never been a better time to reap the benefits of our risk-managed approach. Thanks for reading!

_____________

After a decade-long “drought”, grain prices may finally be showing signs of sustaining a rally.

Since the commodity blow-off about 10 years ago, hard assets have basically been dead money. Although, there have been fits and starts along the way, that market has struggled mightily to maintain any semblance of a rally. And experiencing as much adversity as any group in the commodity complex has been the grains.

The grain market (as represented by the S&P GSCI Grain Index) actually challenged its 2008 highs back in 2012. However, it was promptly rejected, sending prices all the way down to its decade lows by 2014. Over the past 4 years, the drought in grains has been especially harsh with prices unable to budge much at all off of the lows. Yes, there have been rally attempts during that time. However, every bounce has been immediately and swiftly beaten down like a game of agricultural whack-a-mole. Until now…maybe.

Looking at a chart of the GSCI Grain Index, one can draw a trendline connecting the tops of all of the failed rallies over the past 4 years. In our #TrendlineWednesday feature today on Twitter and StockTwits, we highlighted that trendline because, for the first time in 4 years, prices are attempting to break above it.

Note how the index has already made 3 stabs at the underside of the trendline this year, with the latest attempt seeing prices inch above the line. This is in contrast to all of the failed attempts of the past 4 years when prices immediately retreated, usually giving back the entirety of their preceding gains. This is a positive sign, even if prices do not immediately follow through significantly to the upside.

Now there are reasons to be concerned about sentiment and seasonality when it comes to some of the individual grain markets. However, recent action has signaled a change in character in the grain market and may finally result in good news for long-suffering agriculture bulls.

TLS members, stay tuned to our Daily Strategy videos for more information involving grain sentiment and seasonality, as well as our strategy for taking advantage of a potential budding grain rally.

If you’re interested in the “all-access” version of our charts and research, please check out our new site, The Lyons Share. You can follow our investment process and posture every day — including insights into what we’re looking to buy and sell and when. Thanks for reading!

_____________

After sprouting past key resistance earlier in the month, grain prices are testing their breakout levels -- is this the buying opportunity bulls have been waiting for?

Grain prices have been in a drought (figuratively speaking) for the better part of a decade. In early July, we noted a seemingly key breakout in the beleaguered complex. Specifically, the S&P GSCI Grain Index had broken out above its post-2014 Down trendline, potentially opening up more considerable upside for the index, finally. That said, as we noted in a Premium Post at The Lyons Share, “on a short-term basis, it has probably gotten a little ahead of itself and we’d wait for a bit of a pullback before pulling the trigger.” Now may be time for investors to pull that trigger.

That is because, following a pullback over the past few weeks, the Grain Index is back testing the top side of that broken trendline.

On the theory that former resistance *should* become support, this may be a nice entry point for grain bulls, from a risk/reward standpoint. Yes, this is mere isolated data point in a market with a complicated set of price influences. However, as we noted in that Premium Post, there may be other factors going for grains here as well.

In a new Premium Post at The Lyons Share, we review those other factors, revisit our favorite of the individual grain markets and lay out how to play this potential opportunity.

If you want the “all-access” version of our charts and research, we invite you to check out our new site, The Lyons Share.

_____________

In the midst of a decade-long “drought”, grain prices may finally be perking up..

During the commodities boom 10 years ago, among the darlings among speculators were the grains. However, like any market that becomes the object of such investor exuberance, grain prices soon withered. They have spent the better part of the decade since in a steady decline. There have been a number fits and starts along the way, though. And while each of the prior price spikes has been a head fake, another attempt is underway at the moment.

Obviously there is much work to do in order to reverse the longer-term trend, however, the S&P GSCI Grains Index is seemingly breaking an important line of near-term resistance in the form of the post-2014 Down trendline (on a logarithmic scale).

So will this trend break finally lead to a long-awaited, more durable bounce in grains? Or is it destined to be just another fakeout? In a premium post at The Lyons Share, we address that issue. Additionally, and importantly, we take a look at each of the major grains separately to see if any of them stands out as having a more favorable setup than the others (one does).

If you want the “all-access” version of our charts and research, we invite you to check out our new site, The Lyons Share.

_____________

Reiterating my Call on Agriculture $DBA $WEAT $CORN

I have been talking about the AG’s since the start of the year. You can see they are starting to make the moves alongside the metals here with DBA, WEAT, and CORN, all breaking out.

Reiterating my Agriculture call for 2017.

I had subscribers in these a while back actually and the moves are starting to be made.

WEAT – Wheat Breaking out and bottoming.

CORN – Corn Breaking out and bottoming.

DBA…

"Dow Twenty-MF-Thousand May Be the Top" - The Closing Prints - Weekly #dow20k #gold #dollar

Let’s put this all out on the table here. I am a Bear, obviously, as you see in my Stocktwits and Twitter handles. I have been Bearish since December 8th at 2246. I am heavily short the Nasdaq with an average price around 5130. I have screen shotted that so go find it.

This is the first bit of Euphoria we have seen in 3-4 years, since 2013 anyways. So it is safe to safe I was a little early.

My…

Wheat prices recently dropped to 10-year lows -- but are threatening to pull off a potentially major false breakdown.

Just 12 days ago, our Chart Of The Day looked at an index of grain prices -- the S&P GSCI Grains Index -- noting that it had dropped to its lowest level since its 2007 inception. For a complex that had been badly beaten up for 8 years running, this was a new low in futility. Then again, as we mentioned in the post, it also provided an opportunity for grain bulls. If the index could only recover the breakdown level, it could set up a major false breakdown and spur a significant reversion bounce. And as the new lows in the Grain Index were marginal at best, it was able to reclaim the breakdown level in short order, producing a solid 6% bounce over the past 7 days.

Today, we look at one of the contracts within the Grain Index that is attempting to follow the same template as the broader category. Wheat has served almost a caricature of the Grain Index with exaggerated moves over the past decade. As the Grain Index was rallying just over 100% from 2007-2008, the GSCI Wheat Index was jumping 180%. And when the Grains Index dipped just about a percent below its 2008-2010 lows a few weeks ago, the Wheat Index undershot its lows by 8%. However, as Wheat prices have demonstrated, the more stretched commodity prices get in one direction, the more powerful the reversion move can be in the other. And presently, Wheat is trying to recover its breakdown level and potentially put in its own false breakdown.

As the chart shows, the Wheat Index has now rallied ever so slightly above the breakdown level represented by the 2009-2010 lows. If it can recover that level handily, we may very well be looking at another long-term false breakdown. Such a scenario could potentially produce a substantial rally, and a potential long-term bottom.

That said, a recovery of the breakdown level does not guarantee a false breakdown or any substantial price increases. Wheat prices would still be in a longer-term downtrend with significant layers of resistance above. However, as with the Grain Index, the breakdown level would likely be the key level to focus on, long or short. Above the level and a bounce of some magnitude is likely for the bulls (and the opposite is true for bears below the breakdown level).

We also mentioned in the Grain post that while, generally speaking, futures positioning (via the Commitment of Traders [COT] report) was somewhat favorable for the complex, it was not as extreme as it had been earlier in the year. Thus, we surmised that should grains attempt a false breakdown and rally, they may not have as favorable a tailwind as they were working with several months ago. If there was one exception, though, it might be Wheat. There, we see the “smart money” commercial dealers holding a sizable net long position, only surpassed by a couple weeks earlier this year. So, if prices do indeed attempt a rebound, this dynamic may provide some added fuel.

Ultimately, again, we would recommend keeping it simple. If Wheat prices can reclaim -- and remain above -- the breakdown level, we could see this “green shoot” lead to prices shooting higher. Then again, if prices are unable to recover their all-time lows, the green shoot may be more weed than wheat.

_____________

More from Dana Lyons, JLFMI and My401kPro.

An index of grain prices just hit the lowest level in its history; is it due for a bounce or is there more pain to come?

One of the main themes since the early 2016 rout in financial markets has been “reflation”. Following the deflationary spiral of the previous 18 months, a sharp rebound in asset prices was certainly overdue. But the question on everyone’s minds is whether the rebound over the past 6 months is sustainable or merely a mean-reversion, dead cat bounce. In reviewing the evidence for that answer, it really depends where you look.

Real estate has been a standout among “reflators”. Meanwhile, in the equity market, the post-February rally has been pretty sticky -- in the U.S. Elsewhere around the world, it is much less convincing. Across commodities, we again find a lack of homogeneity. Precious metals have continued to shine while energy prices have recently begun to lose their luster. Then you have the agricultural commodities. After a brief bounce this spring, the “ag’s”have come undone again. Today’s Chart Of The Day specifically focuses on the grain commodities, which just registered a dubious milestone.

As measured by the S&P GSCI Grains index, grain prices are now trading at an all-time low.

To be fair, the GSCI Grains Index has only been around since 2007. Even so, an all-time low is an all-time low -- and to break the 2008-2009 lows is saying something about the magnitude of the slump in grains. So the reflation read from the grain market would be a resounding “no”. Of course, there are circumstances that are unique to grains that may not carry over in a blanket manner to the other commodities regarding the inflation/deflation issue.

So grains are at their lowest levels of all-time, or at least in a long time. Where do they go from here? Well, we like to stay positioned along with the trend, and it doesn’t take a chart-master to figure out the trend. But will this breakdown to new lows usher in a new leg down in grain prices? Or is it overdue for a bounce?

The thing with major levels like this is that they provide you with an easy road map of how to play it. That is, if prices remain below the breakdown level, it is a clear short, or at least avoid. If prices recover the breakdown level, then longs can be attempted with a stop back below the breakdown point. Which way will this one likely go? We don’t know. But again, we like to stay with the trend so lower would be the safe bet for the time being -- again, if prices remain below the breakdown level.

One thing is likely: a big move. A breakdown to all-time lows means there is no recognizable floor underneath the market. Therefore, crashy or air pocket-type moves are always a risk. On the other hand, if prices can recover the breakdown level, the resultant “false breakdown” could spur a substantial move to the upside. After all, if participants cannot sell down a market that has no technical support levels below it, it must be ready to bounce. We have seen plenty of examples of this in recent years, including the false breakdown to all-time lows in gold miners in January that led to the monster rally still underway.

We will say that one possible tailwind for grain prices that may be missing, or at least is not that strong, is the trader positioning in grain futures. VIa the CFTC Commitment of Traders (COT) report, we find that the “smart money” Commercial Dealers are not in as favorable a spot as they were in the spring before they launched that sharp but short-lived rally. At the time, the Dealers were holding either a near-record net long position, or at least a substantially long position in each of the grain markets. At this time, however, Dealer positions are neutral at best among corn and wheat, and even leaning fairly short in soybeans. Therefore, if a false breakdown does transpire, the potential juice behind it does not appear too strong.

Which way will grain prices go from here? We don’t know, but as a firm that prefers to trade with the trend, we don’t want any piece of an asset dropping to new lows. That’s what grain prices are doing right now, along with making a mockery of the reflation advocates.

_____________

More from Dana Lyons, JLFMI and My401kPro.