The Market’s Next Show Stopper

While the U.S. economy continues to hold up relatively well, investors remain fearful about China and other international economies. So, one of the markets they’re watching for clues as to what might be ahead is copper futures. 🕵️‍♂️

We spoke about copper in May when investors viewed its selloff as a bearish economic diagnosis. And now, it’s back in the news for a similar reason. 📰

The chart below shows copper futures testing its one-year lows near 3.55 for the fourth time, coming within the context of lower highs in price each time it attempts to rally. Technical analysts say this is a sign that sellers are becoming more aggressive in the market and that a breakdown is likely ahead, targeting at least its July lows near ~3.14. 📉

As for what it could mean for the economy, that remains to be seen. But the general theory is that if the global economy is doing well and/or improving, then demand (and prices) of base metals like copper should trend higher, not lower. Since base metals as a group have lagged behind the broader commodity complex, fears are it’s a signal of further economic weakness ahead. 

Combine this with stocks and bonds also falling, and you’ve got a lot of investor anxiety. 😬

Here’s a refresh of the S&P 500 roadmap we’ve been referencing over the last three months or so. As we’ve outlined since August, technical analysts are eying a confluence of potential “support” levels between 410 and 420 in $SPY. With the index closing below its 200-day moving average today for the first time since March, all eyes will be on its ability to stabilize at current levels. 👀

Grains Lose Their Gains

Grain commodities were the talk of the town for a bit during the pandemic, as soaring prices pushed up producer and consumer inflation. They’ve not gotten a lot of headlines lately, as a slow and steady decline is less interesting than a sharp increase. 😴

However, they were back in the news today after making a swift move lower. The USDA quarterly grain stocks report showed higher stocks and production than initially anticipated. Wheat was hit the hardest, though soybeans and corn were both down too. 📉

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Breakfast Is Getting More Expensive

Some say breakfast is the most important meal of the day. But unfortunately, the commodity markets are saying that prices to fill your bowls and cups each morning could be heading higher. 🥣

If we look at Finviz’s year-to-date performance chart for the major assets tracked by the futures markets, four of the top five gainers are agricultural commodities. Orange juice leads the pack, rising 84.53%, followed by sugar (+44.2%), Cocoa (+39.68%), and Oats (+30.10%). They’re only separated by the Nasdaq 100, which is up 36.91%.

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Crude Tops 90 As Inflation Ticks Up

Before we get into U.S. data, we need to discuss the European Central Bank’s (ECB) rate decision. The central bank surprised markets by raising rates another 25 bps to 4.00%, marking its tenth consecutive hike. 🔺

Unlike the U.S., Europe has not made as much progress in bringing down inflation, and its economy has not been as resilient. The region started raising rates later than the U.S. and experienced more direct impacts of the war in Ukraine, so it’s understandable that they’d be a bit behind the curve in making progress.

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Sugar Hits Sweet Spot As Gold Shines

It was a slow day out there, but several commodities caught traders’ eyes. Let’s see which ones. 👀

First up is sugar futures, which have experienced a nearly 30% decline since the beginning of November. While its major decline is one reason to be on people’s radars, technical traders say prices have reached the 20-20.50 area that served as an inflection point over the last two years.

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