Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
I went to circle back today to look at what has been among the weakest areas of the market, and chart after chart came up in the commodity space. Here is a chart of the performance of the futures in various markets (mostly commodities) over the past month (via Finviz) and it’s a mess. Ironically, natural gas – the most hated commodity of most of the first quarter, was the standout. Reversion to mean trade. Coal is not listed, but that group looks as bad as solar stocks… ironic since the latter was supposed to supplant the former at some point.
There is an in depth story on the sector in the WSJ today as well.
- Commodities fell to nearly two-year lows last week, measured by a widely used benchmark, prompting investors to ponder whether the massive rally that began in 1999 may be faltering.
- China is cooling down at the same time the U.S. is struggling to heat up, clouding the outlook for the world’s two biggest consumers. And producers of some raw materials have ramped up supplies enough to create at least temporary gluts, particularly if appetites falter.
- For more than a decade, investing in commodities was practically a sure thing. Prices rose in nine of the 12 years starting in 1999. Even down years had explanations, such as the Sept. 11 attacks in 2001 and the global financial crisis in 2008.
- On Friday, the Dow Jones-UBS Commodity Index, which tracks futures contracts for 20 basic goods, fell 1% to the lowest level since September 2010. U.S. crude oil, gold and cotton—all components of the index—helped lead the way down, as each hit fresh lows for 2012. The index is down 4% this year after a 13% drop last year, putting it on track for the first consecutive declines since 1997 and 1998.
Disclosure Notice
Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
