Why Are Commodity Stocks Predicted to Rise Now?

TL;DR

The DBC commodity index has broken its long-term downtrend, indicating a potential upward shift in commodity stocks. Corn and soybeans have shown significant gains, while the S&P 500's dividend yield of 1.5% lags behind the 5.4% yield on U.S. Treasury notes, suggesting a shift in investor preference. This historic yield spread could influence investment strategies moving forward.

Transcript

[Applause] the other thing though I am seeing is that if you look at uh DBC and if a DBC is the commodity index and the I mean you can look at it daily you can look at a weekly but that's actually if you draw a downtrend line from from its top back in June of last year it has broken that and I I'm just saying that that's a change that I've you know... Read More

Key Insights

• 🫥 The DBC commodity index breaking its downtrend line could indicate a potential shift in market dynamics.
• 🦄 Upward movements in corn and soybean prices may have implications for the agricultural industry and consumer prices.
• 🛢️ The breakout of Uso's downtrend could suggest a changing sentiment towards oil and energy markets.
• ✋ The yield on US treasury notes reaching historical highs compared to the S&P 500 dividend yield highlights changing investor preferences.
• ✋ The spread between the yields on US treasury notes and the S&P 500 is currently the highest in history, potentially impacting investment decisions.
• 🥳 Monitoring the performance of TBT is crucial, as it appeared poised for a breakout but has retraced back above the 200-day moving average.
• 💰 The current market conditions emphasize the importance of evaluating where investment dollars are best treated.

Questions & Answers

Q: Why could commodity stocks become the next big winners, according to David Ryan on IBD Live?

David Ryan points to changes in commodity trends rather than declaring that a new group of winners is certain. DBC and USO broke long-term downtrend lines, corn moved up dramatically, and soybeans reached new highs, making these developments worth monitoring.

Q: What changed in the DBC commodity index?

DBC broke a downtrend line drawn from its top in June of the previous year. Ryan describes the break as a meaningful change because he is continually looking for shifts in market behavior.

Q: How has DBC performed over its recent two-week period?

Ryan counts about 10 up days and two down days during the period he examines. Volume also increased on a few of those days, giving him another reason to note the move.

Q: How much of DBC is tied to oil?

Ryan says about half of DBC is oil. That concentration means oil's performance is important when evaluating the commodity index's broader move.

Q: Which agricultural commodities are showing strength?

Corn moved up fairly dramatically, while the soybean fund SOYB reached new highs. The wheat fund WEAT had not yet turned, so the agricultural commodities were not moving uniformly.

Q: What does David Ryan observe about USO?

USO broke its long-term downtrend line. Ryan treats that breakout as another change worth noting alongside the move in DBC and agricultural commodities.

Q: What is David Ryan watching in TBT?

TBT appeared ready to break out but then pulled back. At the time discussed, it was sitting just above its 200-day moving average line, which Ryan says he watches daily.

Q: How do Treasury yields compare with the S&P 500 dividend yield?

The S&P 500 dividend yield is cited as 1.5%, compared with 5.4% on a U.S. Treasury note and 4.87% on the two-year. Ryan says he read that the spread was the highest in history and suggests that rising yields could lead some investors to shift money toward Treasury bills.

Summary & Key Takeaways

• The DBC commodity index has broken a downtrend line and has shown signs of positive movement in the last 10 days.

• Corn and soybeans have experienced significant upward movements, while wheat is yet to turn.

• Uso has broken a long-term downtrend, potentially indicating a shift in market sentiment.

• The dividend yield on the S&P 500 is 1.5%, while the yield on US treasury notes is 5.4%, highlighting the highest spread between the two in history.