Commodities look to have one more leg lower before any bottom is formed.
While the multi-day pullback in the US Dollar has resulted in a bounce in many commodities prices, the space still looks too early to buy as a whole.
The Commodities Index Fund ETF (DBC) is a tradable gauge of Commodities. This key ETF broke down a few weeks ago and has not put together a sufficient rally in shape or structure to argue that a move back to new highs should occur.
Precious metals typically show weakness during April and the Softs all look vulnerable near-term to additional pullbacks in the month of April into May before any sort of bottom. The US Dollar rally should persist until at least late April and a snapback in the Dollar should result in DBC likely selling off to the 38.2% Fibonacci retracement area of its former advance. Given that it broke its uptrend and still is churning, this should result in another pullback before it will be time to overweight this group again.
The key area of interest for me to overweight is 15.60 in DBC but can’t rule out $15 which would be a very attractive area to buy dips. Overall a back half of 2021 rally in the group looks likely, but for now, it’s advisable to hold off a bit more.
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Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
