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2015/11/13

Friday the 13th Spells Doom for Commodities

Rude Awakening
November 13, 2015
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Friday the 13th Spells Doom for Commodities

  • The Great Unraveling continues…
  • Copper, crude and gold turn tail
  • Plus: What's inside the ETF?

Greg Guenthner coming to you from Baltimore, MD...

Greg GuenthnerIt's Friday the 13th. Scared? You should be.

If you've invested in commodities, that is…

We're knee-deep in yet another commodity crisis this month. That means more lows, more bearish headlines – and more ways for you to make money as they fall off the cliff. You'll see what I mean in a just a second...

And no, I'm not just talking about oil. The commodity slump is rippling through the entire market. As I've explained for months, I believe we're seeing the end of the commodity "super cycle" that began about 15 years ago.

Today we're going to take a closer look at some of these busted trends. Avoid these areas of the market at all costs—if you want to keep the shirt on your back.

But before we get to the charts let's take a trip down memory lane to the lost decade and the great commodity boom. It always helps to find a little perspective as the hammer drops…

Take copper. The industrial metal exploded more than 620% from 2001 to 2011, topping out near $4.50. Then it fell through the floor…

"Copper's already below $3, and the breakdown we're seeing now could easily send copper prices to $2 or lower over the next couple of years," I wrote nearly a year ago. "I can already hear the fat lady warming up."

Now the fat lady's getting ready to wrap up her act. Just look at copper today…

Copper-spot price

Clocking in with a spot price of $2.16 last night, copper just posted new 6-year lows. Every rally since 2011 has ended in failure for the base metal…

Copper has some company. In fact, there's an entire parade of metals and energy plays leaping off the side of Commodity Mountain like a herd of lemmings.

Oil is quickly slipping toward its August lows. About six weeks ago I guessed we could see $60 oil by the end of the year. Note to self—give yourself a sharp rap on the knuckles because that ain't happening.

September's crude rally is crushed. See for yourself:

Light crude oil-spot price

This morning, crude is barely back above $42. That ain't gonna cut it. Looks like "lower for longer" continues to be oil's mantra as we march toward 2016…

And let's not forget our good buddy gold. Gold has had a rough road to hoe since sneaking toward $1,200 back in late summer.

"Yes, gold has posted an impressive rally since early August. And recent weakness in the U.S. dollar over the summer has helped add fuel to the fire. But as I mentioned before, we need to look at this rally through a long-term lens," I told you late last month. "And what you'll quickly notice is that what gold is experiencing so far is a bear market rally."

Sure enough, gold turned tail and ran shortly after its October attempt at $1,200…

Gold-spot price

Right now, gold is back near its August lows. Barring an oversold bounce, gold could easily lose support here and sink to prices not seen since late 2009.

Your best course of action right now is to steer clear of these troubled commodities. More pain and suffering could be on the way…

Sincerely,
Greg Guenthner 

[Ed. Note: Send your feedback here: rude@agorafinancial.com - and follow me on Twitter: @GregGuenthner]

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Rude Numbers

When to Buy... When to Sell
254

points dropped from the Dow yesterday. That's good enough for a loss of almost 1.5%...

68%

of all stocks trading on major U.S. exchanges remain below their respective 200-day moving averages...

$41.65

buys a barrel of crude this morning. Oil can't hold green early this morning. It's down about 12 cents as I type...

$1,088

is where you'll find gold futures today. The yellow metal is trying to hang tight here. It's up about $2 in early trading...

2,036

marks the spot for S&P futures before the morning bell. Stocks are set to open in the red again today...


Rude Trends

When to Buy... When to Sell

"When you look at the components of the PureFunds ISE Cybersecurity ETF (AMEX:HACK), you see many IT companies with multiple lines of business. If the trend for IT profits is down, those companies will be down and the index fund will be down, irrespective of the prospects for cybersecurity services per se," a reader explains.

You are correct…

As with most ETFs, the proof is in the holdings. Some ETFs are true to their names; others aren't exactly the pure plays you would expect. For simplicity's sake, I used HACK to highlight the broad sectors performance versus the S&P 500. I wanted to give you an idea of how these companies were doing in a quick chart—instead of a half-dozen zig-zagging lines of the biggest players in the industry.

Of course, PRO readers received a specific cybersecurity recommendation (click here to get access).

Whenever I make a chart, I stick to the KISS rule—keep it simple, stupid. So far, it's worked out just fine.


Ignore At Your Own Peril

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