Brent crude oil extended yesterday, showing that the recent war rally is running out of steam. Exit any longs you may have and wait. We will consider whether to try a short-side trade hereabouts but it is probable that there will be a better candidate in the energy sector – perhaps gasoline.
Soya beans also extended in the last two days, which seems to show that the whole commodity rally is now in its last stages:
We already recommended taking profits on long positions in Soya beans late last week, which leaves only copper and corn as our two remaining recommended commodity longs. We would now either simply sell those too or place extremely close protective stops. Copper may even be worth a short-sale here, if you really like risk, just because it hasn’t rallied during this period of strong prices in many other metal and commodity markets. We don’t have a recent copper-specific signal however and this chart shows that the price is at the bottom end of its recent range, meaning there is danger of whipsaw in selling here. Don’t risk much if you try it:
Stocks have also fallen hard in the last 24 hours, which puts US indices at or below the levels where we advised buying on Thursday. The bottom extension signal in the Dow that led to that advice is still current but the markets may be in the grip of war fear that could continue to overwhelm them - fairly close stops are needed. Europe has certainly started a fresh down move that we have obviously missed, despite warning for months that the Spanish, Italian and French markets were vulnerable. Apologies. We assume that long positions in Germany also recommended on Thursday were liquidated yesterday and we will look for places to establish shorts in the Southern European indices if we see a chance to do so. It is possible that prices will simply keep falling, so we may not see a suitable signal.