Commodites Wrap Up

It was a horrible year for the Commodity space. I hope that you practiced strict risk management with any Long exposure you might have had, and avoided much of that pain. The only names I had exposure to in 2014 were Corn, Cocoa and Palladium during the first half of 2014. Once I received exits, things got out of hand in the 2nd half of the year almost across the board. Oil and other energy groups crashed hard as well as Copper and the precious metals.

Most of the soft commodities and grains continued a relentless skid and the others remained directionless. The few bright spots were WOOD, NIB, and PALL. Lumber, Cocoa and Palladium still remain in uptrends and are not too far away from being interesting if the Dollar can take a rest in 2015.

Lets take a look at the few Relatively strong groups and then a quick glance at really ugly declines in Oil and Copper.


WOOD

Shares of WOOD have once again been testing the highs from 2008. Yet on this attempt to breakout, price has been able to hold near the highs instead of correcting back significantly. The more times a level is tested the more likely it is to break. Considering how the entire commodity space looks, WOOD has been Relatively strong and is one of the few investable commodities currently.

One way I would look to take advantage of the strength here would be through a fast growing company called Boise Cascade.

BCC- Boise Cascade Company

Since going public in early 2013 the stock is up roughly 50%. On the Weekly chart we have a strong breakout to new highs, following a retest of the prior range high. Based on the increasing profits of BCC and both the long-term and short-term view of the stock, I think this is poised for much higher prices.

Daily

This could be a volatile situation here however and caution is advised when holding the position. Size this one small and give it plenty of room to move around. I like stops below the $34 swing low on a daily closing basis.

I will be entering a position at Monday's open for my aggressive private accounts.


NIB- Cocoa

Cocoa still looks fairly positive to me. There is a confirmed Double Bottom pattern in motion, however price is now revisiting the breakout of that pattern for the second time. The lows at $36 will have to hold for this to be viable for consideration.


PALL- Palladium

Palladium is still in a nicely defined uptrend and is trading near long-term support. PALL will have to resume higher and not break below the lows near $71 for me to have any interest. The most recent correction has the look of a continuation Bear Flag and price is being rejected after rallying to the declining 20 WMA. This is one to watch.


That's it for the good. The majority of the commodity space just looks awful. Lets take a look at the worst of it.

OIL

This is what a crash looks like. I'm going to need to zoom in on the recent breakdown to show the trend:

In terms of reaching a climax of selling, I think OIL is getting close to a reasonable bottom for the foreseeable future. The slope of the decline has begun to accelerate to an unsustainable level. At some point soon this should form a modest to moderate base formation. I think 6 months or more sideways would be expected as price digests the recent plunge.

This doesn't mean I believe OIL is buyable here, because its not. But I would be really surprised if a sideways consolidation didn't take place in the very near future. Ugh, just ugly!


CORN

Corn is getting crushed. While there have been marginally tradeable rallies, this is in a massive downtrend. Stay away or Short.

JO- Coffee

Everyone has been raving about the prospect of rising coffee prices over the past year, but in actuality the recent rally looks like nothing more than a typical counter-trend bounce. The recent breakdown last week could set a new leg lower and should be a tailwind for coffee producers. I like SBUX.


UNG- Nat Gas

While it appeared that a bottom may have been forming, it now looks like this may not be the lows after all. Always be on the lookout for false breakdowns in a space like this, but until something changes this remains a dangerous trade.


JJC- Copper

Copper is in a nasty bear market and it looks to be continuing. There has been a break to lower lows as well as a violation of the 61.8% Fibo retracement. The longer price stays below the $35 level, the likelihood for a retest of the '08 lows increases.

For trend traders, the December monthly bar offers a new Short position opportunity. I would place stops above $35

SLV- Silver

Once again Silver finds itself at lower lows. There is absolutely no reason to be Long the SLV for any reason right here. Silver bullion is continuing to get cheaper, so all those physical buyers can continue to average down for a lifelong investment. But there is absolutely no reason to be trading Silver short-term unless its Short.


I'll spare you the rest of the dilapidated commodity space as there is just nothing to be done with any of them. Focus your money on what is working and avoid what is not. Apart from a couple of Relative leaders, it is a better idea to just avoid the entire commodity space until some trends begin to change.

Who knows, last year it looked like commodities had a chance for a really strong year. Yet those hopes were fizzled out quickly and then the selling took over. With the Dollar being so strong over the second half of this year, it just killed any hope the commodity Bulls may have had. Maybe 2015 is the year they look terrible but then stage a tremendous reversal. We will just have to wait and see.