Growing Financial Success

U.S DOLLAR INDEX SEPTEMBER FUTURES PRICE CHART

This chart of the U.S. Dollar Index has caught my eye. We have essentially been in a consolidation phase for the better part of the last 45 days. This chart is as of 2:45 am eastern time on July 15th. As you can see the U.S. Dollar has broken marginally below the bottom end of the wedge formation. Any follow through on this price break during the day trade later today and we should see a major acceleration of technical selling. This bearish pattern should it materialize would project a breakdown of the 79 area and an eventual retest of the all time lows set early last year near 72.

S&P 500 SPOT PRICE FUTURES INDEX CHART

The stock market and the commodity markets have been linked ever since the financial crisis began last summer so one should also pay close attention to the signals being given off by this asset class. As you can see the recent S&P 500 price action also seems to be confirming this inflation trade idea,given off by a possible breakdown in the U.S. Dollar,by the recent surge in prices that negates what looked like a major head and shoulders top and major technical break down. Once again this is a strong sign that financial markets are getting ready for the inflation trade round 2 from round 1 that began in early March.

Continuous Commodity Index Spot Price futures Chart

The CCI is on the verge of breaking back up as well. As you can see, any further strength in price from here that breaks the downtrend line and pushes prices through the 50 day ma and the 200 day ma and a major bullish technical breakout will be triggered. I have argued that such a major bottom is very likely given the strong 30 year seasonal pattern for major lows in mid July.

September 30-Year Treasury Bond Futures Price Chart

As you can see, the 30-year Treasury Bond prices area rolling over in price having broken the uptrend line suggesting that money is less worried about flight to quality/deflation and are more worried about future inflation/dollar debasement. Another sign that the inflation trade seems to be building a head of steam here.

I believe that the signs emanating from the U.S Dollar price action, the S&P 500 price action, the CCI price action and the 30-Year Treasury Bond price action against the backdrop of a 30 year seasonal low point in mid July for commodities suggest that the inflation trade is ready to fire up again and that commodities are about to embark on the second wave of the bull market that began in early March.

This would be especially bullish for those commodities that have very bullish forward looking fundamentals. I will give you my best candidates in each commodity asset class from where prices are today.

Grains-

Rice=Record tight old crop and new crop supplies and potential problems with India’s rice crop due to poor monsoon season.

Oats=New crop supplies will drop by 60% due to dramatic lower planted acreage in Canada and the U.S, poor crop ratings in Canada and improved demand.

MN Wheat=Very tight old crop supplies and the likelihood that yields and planted acreage will be very disappointing.

SOFTS-

Coffee-Record tight supplies come next spring in Brazil, possible weather issues and the Brazilian government buying 3 million bags of coffee for $1.50/pound and higher. The first auction takes place today for the first 1 million bags.

Energy-Natural Gas-Lower rig count, dramatic increase in depletion rates for current shale wells and improved demand

Precious metals- Palladium-Dramatic reductions in mining production, improved demand from Asia and Europe, nonexistent Russian stockpile sales and possible U.S based physical ETF creation.

Miscellaneous-Milk-Record slaughtering of dairy cows will collapse supply as Asian demand improves.

Have a great day and if you have any questions or would like to open an account with Hackett Financial Advisors, Inc. please call 888-535-5525.

Shawn Hackett

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