The ACD Method

Discussion in 'Technical Analysis' started by sbrowne126, Jul 16, 2009.

  1. themickey

    themickey

    Lithium, copper, nickel, coal (believe it or not), Uranium, Dairy products - milk, cheese.
     
    #13811     Jan 24, 2018
  2. Maverick74

    Maverick74

    The long commodity and short dollar trade might be the easiest money trade we have seen in years. Guys, I would highly recommend you watch this stuff and get involved.
     
    #13812     Jan 24, 2018
    themickey likes this.
  3. themickey

    themickey

    Caterpillar would also be something to consider, drilling companies, equipment hire.
     
    #13813     Jan 24, 2018
  4. Maverick74

    Maverick74

    [​IMG]

    For those of you who don't want to follow all of them separately you can just buy this ETF.
     
    #13814     Jan 24, 2018
  5. koolaid

    koolaid

    You have a preference for shares or calls?
     
    #13815     Jan 25, 2018
  6. Mav - any chance you could give us a walk through of how you came up with that? Been a long time since we got a Mav Teaching Moment. Thanks!
     
    #13816     Jan 25, 2018
    koolaid likes this.
  7. Maverick74

    Maverick74

    If you are asking about the commodity trade, there is a very clear pattern that late in the bull market as growth starts to peak you get very strong runs in commodities. This makes sense if you think about it from a production standpoint. At some point in the growth cycle you get pricing pressure from your inputs. This coincides with the last leg up in stocks and GDP growth. Firms still have pricing power to raise prices and wages follow. This forces the FED to respond by raising short term rates. At some point the rise in rates and the rise in commodity prices put pressures on margins which eventually caps growth and ends the credit cycle expansion. But commodity prices stay strong even going into the recession. This is purely from the standpoint of supply. So the first leg up in commodities is demand driven from strong economic growth, the 2nd leg up is supply driven. This is why they keep going up even as demand wanes. This is pretty much the theory Jeffrey Gundlach makes. Even if we are still 2 years out from a recession, the commodity bull has begun. It's a win win trade.

    This means you want to be long oil, copper, steel, aluminum and short the dollar. Also short bonds. I see no reason why the dixy can't trade back to a 7 handle which could put the Euro north of 1.40 and the Pound back above 1.75 and the Aussie near parity. Oil is probably on it's way to 100 (at least Brent) and Copper back above 4.00.
     
    #13817     Jan 28, 2018
    kinggyppo likes this.
  8. eurusdzn

    eurusdzn

    I am remembering the amazing bull run in commodities 2007ish. I will look in some niches and companies that worked back then. I haven't paid any attention to this ths far.
    That was really a great post Mav to make these connections . The flight from dollars is surprising in the context of growth and interest rates n the US. There seems other overwhelming factors to toss these dollars in the gutter for stocks and commodities.
    Seems a global desire to price commodities in back deals and other currencies carries no weight here.
    Ps... Look at emerging market, commodity producing countries to outperform US here as well, I suppose.
    Remember the hissy fit these markets had with 2013 taper and now... the insignificance of the fed raising rates at this very slow pace.
    This is a great theme to follow....hope you have more to say here to bring this thread back to life and shine a light on a corner of the markets that may be flying under the radar for most.
     
    #13818     Jan 28, 2018
  9. Maverick74

    Maverick74

    Higher future expected inflation means dollars have to go down in price. The bid in commodities will raise forward expectations in inflation, which will lower dollar prices and raise interest rates.
     
    #13819     Jan 28, 2018
    kinggyppo likes this.
  10. eurusdzn

    eurusdzn

    Yeah, it almost seems that has to happen to run a normal full course cycle before any crisis, recession, or bear market. The ten year price fell through support recently and the 30 year price is drifting down here so they are pointing at least to whiff of inflation.
    There is no way I can tell ( and I dont have to be able to) if this is primarily a demand/ supply
    issue driving commodities or more of a "trade" where one has to swap dollars for stocks and commodities or lose out big.
    Anyway, nothing is ever the same, but things would get really frothy if the dollar/inflation/stock and commodity directional trade continued and a 'behind the curve' fed had to raise rates more rapidly. Ray Dalio is saying this currently meets a goldilocks scenario
    and , as you have experienced, that is more of a stable,moderate, burn like we have seen before . Even so, commodities can burn very hot on their own and outperform stocks.

    Thanks for the heads up on this idea. It is not too late for me to begin to see this develop. There is more than SP500 out there.

    Lastly, Euro at 140 ! It would have to be wouldnt it. Crazy.
     
    Last edited: Jan 28, 2018
    #13820     Jan 28, 2018