In monitoring the commodities universe, much has been made in recent weeks about the sharp declines seen across the board in the hard assets sector. The price of grains (corn, soybeans, wheat) and precious metals (gold, silver, platinum) have seen some of the largest declines. Regardless of the reason (most are chalking it up to a sharply higher US Dollar Strength), holding onto these assets over the course of the past month has been quite painful.
However, in looking at the commodities complex in more detail there have been some pockets of out-performance. Our relative strength-based approach to investing allows us to sort through the various asset classes around the globe and then break each one down by sector to gain exposure to the strongest trending markets. Our discussion today will be a brief technical update on the Live Cattle market. For those of you who are not avid followers of these markets, the price of live cattle has surged to record highs this year. This has also had an influence on the price of beef at grocery stores so it might be affecting your pocketbook more then you realize!
Point & Figure Chart: Live Cattle (LC/)
The traditional point and figure chart of the continuous live cattle contract achieved a double top break out on Friday (9/26). Note we chose the continuous chart instead of the front month Oct 14 contract in order to display more price historical price data. The measured move target for double top break out pattern is $174.50. Of course, as with any pattern nothing is guaranteed and time will tell whether or not the target is achieved. However, in a sector that has been largely beaten up over the past month, owning Live Cattle proved to be much more beneficial then most other commodities.
Live Cattle RS Chart (vs UV/Y –Continuous Commodities Index)
In taking our analysis a step further, we have also posted a relative strength chart below which compares live cattle to the continuous commodities index. The chart paints a very clear picture of the out-performance live cattle has had compared to other areas such as energy, grains, and precious metals.
This brief update on the live cattle market was just to point out that although commodities in general have had a rough go of it lately, there have been pockets of strength such as the live cattle market. An investor’s ability to be tactical and gain exposure to markets other than just the traditional asset classes of stocks and bonds can be very beneficial. Furthermore, gaining access to these markets has never been easier as product development continues to evolve.
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