Jerry Welch, Commodity Insite!
Call me at 406 -682 -5010
Ennis, Montana 59729
Below is my first newspaper column for 2019. Hope you find something of interest in my ramblings.
January 4, 2019
Commodities Will Rule and Stocks Drool in 2019
The first column I posted in 2018 was entitled, Bubble of Historic Proportions regarding the bond market and the bearish impact higher interest rates could have on the Big Four: stocks, bonds, currencies and commodities in the New Year. As it turned out, higher interest rates in 2018 were indeed one of the primary reasons stocks and commodities did so poorly.
As the Fed kept ratcheting rates upward, commodities per se as measured by the CRB Index peaked in mid-June and stocks as measured by the Dow Jones topped out in early October. In the final week of the year, both the CRB Index and the Dow Jones slumped to a 20 month low and did so on the same day!
Rising interest rates, a trade war with China amid Trump tariffs and concern that global and US economic growth was slowing were the primary reasons stocks and commodities were slapped so hard in the year that just ended. But here is the rub. According to MarketWatch.com in 2018, there was nowhere to hide as asset classes across the board came under pressure. Simply put, in 2018, if you long, you were wrong!
Here are equally unsettling facts about the year that just ended. The Bloomberg Commodity Index, which measures the return on 22 raw commodity futures fell 12 percent in 2018. It was the seventh annual fall in 11 years. And though the Dow and S&P fell about 6% in 2018 commodities per se did twice as bad.
But as you well know, I dubbed 2018, as, Annus Horribilis, Latin for horrible year, months ago. You also know that I am on record as predicting that 2019 will be far better because I already dubbed the New Year as, Annus Mirabilis, Latin for, wonderful year. However, I need to touch on a few events that unfolded after I made those statements about last year and the year ahead.
First, understand that stocks and commodities did relatively well the first 3 quarters of 2018. But when the final quarter of the year arrived, both markets dropped sharply. In fact, never in history have stocks posted positive gains in the first 3 quarters of any year only to give the gains back in the last quarter and lose ground year over year. The same can be said about the commodity markets.
The weakness for stocks and commodities in the final quarter of 2018, has me squirming about what could unfold in the first quarter of 2019. Consider the following events that took place the day before and the day after Christmas Eve. And keep in mind that the week of Christmas is historically a quiet time for the Big Four. Seldom does any market experience anything that can be called volatile or history making trade.
On the trading day before Christmas Eve, 2018, the Dow Jones dropped more than 700 points while commodities as measured by the CRB Index was down more than 400 points. Both losses were the largest in history and the weakness shoved stocks and commodities to a new, 20 month low. It was a history making day!
But on the trading day after Christmas Eve, the Dow Jones rallied nearly 1200 points while commodities as measure by the CRB Index was up nearly 400 points. The gains were the largest ever for stocks and one of the largest ever for commodities. It too, was a history making day!
I view the manic-depressive trading surfacing the day before and after Christmas Eve 2018 as a red flag or warning for early 2019. Such back-to-back trading sessions have never happened before in history. And since history tends to repeat itself, I am guessing that in the New Year, there will be intense bouts of volatility that surface from time to time that are inexplicable, baffling, mysterious and confusing. And likely, back to back sessions no less.
Do I still believe that 2019 will be a wonderful year and in particular for commodities? Yes, I do. But the ride in the first quarter of 2019 may be similar to what unfolded in the final quarter of 2018 when all markets suddenly fell on exceptionally hard times. Thus, more manic-depressive trading may lie ahead. Only time will tell.
The New Year should present aggressive investors and traders with some low risk, high probability opportunities with a host of commodity markets. I also predict that in 2019, commodities will rule while stocks drool. Annus Mirabilis looms ahead!
This morning, there is widespread strength with a host of commodity markets due in large part, I believe, because of the weakness being seen with the US dollar. The dollar index is in the red by a meager 21 points but that also places the market near a two month low. History shows there is a near perfect inverse relationship between the dollar and commodities per se. As one market goes north, the other south. And, vice versa.
To know more about the history of the futures market I suggest you take a look at my book, Haunted By Markets. It is 750 pages long and touches on the years, 1990 to 2015. And with each purchase, a 1 month free subscription to my twice a day newsletter, Commodity Insite can be had. Simply go to www.commodityinsite.com and check it out.
I am quite bullish commodities for 2019. Dont be left behind!
The tme is 7:06 a.m. Chicago
This material has been prepared by a sales or trading employee or agent of Midwest Market Solutions and is, or is in the nature of, a solicitation. This material is not a research report prepared by Midwest Market Solutions Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.
DISTRIBUTION IN SOME JURISDICTIONS MAY BE PROHIBITED OR RESTRICTED BY LAW. PERSONS IN POSSESSION OF THIS COMMUNICATION INDIRECTLY SHOULD INFORM THEMSELVES ABOUT AND OBSERVE ANY SUCH PROHIBITION OR RESTRICTIONS. TO THE EXTENT THAT YOU HAVE RECEIVED THIS COMMUNICATION INDIRECTLY AND SOLICITATIONS ARE PROHIBITED IN YOUR JURISDICTION WITHOUT REGISTRATION, THE MARKET COMMENTARY IN THIS COMMUNICATION SHOULD NOT BE CONSIDERED A SOLICITATION.
The risk of loss in trading futures and/or options is substantial and each investor and/or trader must consider whether this is a suitable investment. Past performance, whether actual or indicated by simulated historical tests of strategies, is not indicative of future results. Trading advice is based on information taken from trades and statistical services and other sources that Midwest Market Solutions believes are reliable. We do not guarantee that such information is accurate or complete and it should not be relied upon as such. Trading advice reflects our good faith judgment at a specific time and is subject to change without notice.There is no guarantee that the advice we give will result in profitable trades.