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“The Dam Is Going To Break”: We Are In The Early Innings Of A Colossal Migration Into Commodities

The great awakening is upon us, millions of investors are loaded to the gills with deflation bets.

Imagine being wedded to big tech stocks since July only to watch commodity plays pass you like a Ferrari on Sunset Boulevard. The psychology must be respected and it’s showing up in classical technical analysis.

We must be cautious, our trade is maturing. The empty meadow has become a fairground with patrons out for a walk in the midday sun. Over the last week, both Goldman Sachs and JP Morgan have implored their sales force to embrace the “commodity super cycle”. Just months ago they were talking down this “un-investable” sector. We must buy every dip we see, especially coming from commodity producing countries like ECH Chile (copper) and EWZ Brazil (oil, agriculture and iron ore).

Bottom line, we are overbought but still the early innings of this colossal migration into commodities.  The dam is going to break, there is still far too much capital in big tech. If the rate move is too aggressive we crash.

The Nasdaq has 50% downside from here, rebalance the portfolio before the market forces you to. Think 2020-2030, NOT 2010-2020. Remember: it is normal to be overbought in bull markets, and to stay that way much of the time.

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