Cross Asset and Relative Monthly Commodities – out of Energy into Agriculture (May ’17)
We have updated our monthly Commodities Relative to DBC Publication. It is a short report which looks at how the Agriculture, Base Metals, Energy and Precious Metals sectors are performing relative to the benchmark Commodities ETF DBC.
As WTI Oil (CL) prices continue to fall, the obvious underperformer is the Energy sector.
Relative to the benchmark Commodities DBC ETF, the Energy sector is at risk of breaking October 2016 lows and multi-month trendline support. A downgrade to Underweight is now pending, as investors continue to reduce exposure.
Whilst focus remains on the Energy sector, we are seeing steady improvement in the Agriculture sector.
The multi-year bear trend is showing signs of stabilisation. Prices are extending the bounce from the 19.16 low of April, whilst positive divergence unfolds on improving momentum studies. The proprietary Tension Indicator is also strengthening. Collectively, we see potential for further gains in the coming months as sentiment gradually improves.
Commodities investors are also noticing price improvement relative to the benchmark Commodities ETF.
All in all, we believe money managers are seeing opportunities in the Agriculture sector, and will continue to gradually increase exposure in the coming months.