Commodity Futures … A Look at the Big Picture

Every once in a while it makes sense to step back and take a look at the long term outlook for the commodity futures market. I prefer the Dow Jones UBS Commodity Total Return Index (DJUBSTR) for this purpose, given the equal weightings across all commodity sectors. The 2013 target weightings for the DJUBSTR can be seen in the chart below.

DJUBSTR 2013 Target Weightings, No Border

A summary of the target weightings reveals the intent to equally weight the energy, metals, and ag/softs sectors:

Energy          32.40 %

Metals           31.67 %

Ag/Softs       35.92 %

The key question at this juncture … ‘Is it time for the bull market in commodities to return?’. We take a look at the 20 year price history of the DJUBSTR to help answer the question.

DJUBSTR Chart, 15Jan14

The short answer is ‘not yet, be patient’. Be on guard though, as when the bull market does return, it’s going to be a raging bull!

The long answer is based upon a review of the chart:

  • A 61% retracement from the Jul08 high of 475.365 had occurred by Mar09 – however, price structure since Mar09 appears choppy, indicating continued price correction.
  • Price action since Sep12 has been hugging the long-run downtrend line off the 475.365 high of Jul08 – no clear indication of breakout.
  • Voltility since Jul08 continues to moderate.
  • Slow stochastics suggest a buying opportunity, however the RSI indicator has not yet confirmed the buy signal.

Major support exists at the 243, 203, and 171 price levels. While we expect a near-term bounce from the 243 level, indicators suggest longer-term support at the 203 or 171 levels will require testing prior to resumption of the next major commodity bull run.

Murphy & Co’s Position Models are currently short Crude Oil, Corn, Soybeans, No.11 Sugar, Rough Rice, and Wheat while currently long Copper, S&P500 and Nikkei 225. To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/.

Posted in Ag/Softs, Coffee C, Copper, Corn, Crude Oil, Energy, Equities, Metals, Natural Gas, NY Harbor ULSD, RBOB Gasoline, Renewables, Rice, S&P 500, Silver, Soybean, Sugar No.11, Uncategorized, Wheat Tagged with: , , , , , , , , , , , , , , , , , , , , , , ,

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