George W. Commodity

George WNo, this isn’t a big reveal that George W. Bush had some great commodity trade a la Hilary Clinton’s infamous Hog Trade back in 1978. And it isn’t our official endorsement for a presidential candidate (then or now).

No, we’re still just talking the commodity markets, and that close cousin of the V shaped reversal – the W. reversal.  The “V-shaped Reversal” is when a trend ends quickly, basically coming back up as quickly as it had gone down. Now, that’s not a bad thing, necessarily, if it happens over a few years (see Crude Oil in 2007 and 2008 – actually a reverse V). But, typically, the faster and sharper the reversal in a market trend, the faster and larger the loss for a systematic program tracking that market. We’ve touched on this before (here and here), and have even seen past W-reversals.

The latest W. scare comes from the commodity sector, as seen in our monthly asset class scoreboard post.

Commodities 2015 W Move(Disclaimer: Past performance is not necessarily indicative of future results)
Data Courtesy: Morningstar

Now, of course – this is only a couple months of moves, and putting it on a much longer time scale brings some much needed perspective to things. If we take a step back and look at the past 12 months, we certainly see a different story, with this scary W. just a blip on the proverbial radar down there on the bottom of the screen, and prices still below their longer term moving averages.

Past 12 months Commodities Move(Disclaimer: Past performance is not necessarily indicative of future results)
Data Courtesy:Morningstar

Now, we know where George W. hailed from… and we shouldn’t be surprised that the commodity W. is from the Texas are as well. If looking for a reason for the alternating up down months, look no further than good ‘ol Texas Tea: Crude Oil, where you can see nearly the exact same pattern as the overall commodity index. Now, most of that is due to the fact that most commodity indices are heavily skewed towards the energy markets – so as Oil goes, so goes commodities. But we’ve also seen the US Dollar reverse its strong upward trend (or an upside down W = M), in turn putting pressure on many commodities, not just Oil.

Crude Oil W(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Finviz

USD M Move(Disclaimer: Past performance is not necessarily indicative of future results)
Chart Courtesy: Finviz

No one knows when a big rally in commodities will come, if at all. After all, OPEC just said they expect Oil to be below 100 for the next decade.  And then there was the cheeky, as always, take from Josh Brown:

“It would be both hilarious and par for the course to see a major breakout for commodities right now. With disinflation being the Fear du Jour and the whole world busy hedging against the strengthening dollar, this would literally be the last thing anyone expects.”

It’s the last thing anyone would expect, and just the type of outlier move we would welcome. Thanks W.

 

 

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Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

Disclaimer
The performance data displayed herein is compiled from various sources, including BarclayHedge, and reports directly from the advisors. These performance figures should not be relied on independent of the individual advisor's disclosure document, which has important information regarding the method of calculation used, whether or not the performance includes proprietary results, and other important footnotes on the advisor's track record.

Benchmark index performance is for the constituents of that index only, and does not represent the entire universe of possible investments within that asset class. And further, that there can be limitations and biases to indices such as survivorship, self reporting, and instant history.

Managed futures accounts can subject to substantial charges for management and advisory fees. The numbers within this website include all such fees, but it may be necessary for those accounts that are subject to these charges to make substantial trading profits in the future to avoid depletion or exhaustion of their assets.

Investors interested in investing with a managed futures program (excepting those programs which are offered exclusively to qualified eligible persons as that term is defined by CFTC regulation 4.7) will be required to receive and sign off on a disclosure document in compliance with certain CFT rules The disclosure documents contains a complete description of the principal risk factors and each fee to be charged to your account by the CTA, as well as the composite performance of accounts under the CTA's management over at least the most recent five years. Investor interested in investing in any of the programs on this website are urged to carefully read these disclosure documents, including, but not limited to the performance information, before investing in any such programs.

Those investors who are qualified eligible persons as that term is defined by CFTC regulation 4.7 and interested in investing in a program exempt from having to provide a disclosure document and considered by the regulations to be sophisticated enough to understand the risks and be able to interpret the accuracy and completeness of any performance information on their own.

RCM receives a portion of the commodity brokerage commissions you pay in connection with your futures trading and/or a portion of the interest income (if any) earned on an account's assets. The listed manager may also pay RCM a portion of the fees they receive from accounts introduced to them by RCM.

See the full terms of use and risk disclaimer here.

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