While the major indices continue to weaken, U.S factories have seen a 1.2% increase in orders in August. This shows that although equities are struggling, the demand for goods is steady. Therefore, now is the time to pay close attention to which spaces are holding up while the general market wanes.
This leads us to food and energy commodities. While we've been trading commodities along with equities throughout the year, their current strength makes them extra enticing, as they offer safer plays that are currently countering the market. However, even if the market changes its direction, the demand for goods continues to increase and, therefore, commodities have the potential to push higher in both market scenarios.
Three commodity-based ETFs we have been watching are:
- Corn (CORN)
- Sugar (CANE)
- Oil (USO)
To start, CORN has recently cleared its 50-day moving average at $20.17. If 20.17 can hold as a new support area, we can watch for CORN to head back towards its highs near $23.
Another soft commodity that has enjoyed a huge run is CANE, which could be setting up for trade if it continues to hold the 50-DMA at $9.32 as support. Because sugar has gone through a period of consolidation, it has the potential to make a large move if it breaks out from its current range.
Moving on to energy, Oil has recently gained increased momentum. However, unlike CORN and CANE, it has yet to clear its 2020 highs. Currently, oil supplies are being restricted by OPEC, which has been cautious not to oversaturate the oil market since the crash. Having said that, USO was trading over $100 in early 2020 and still has a lot of room to grow.
Therefore, we should keep these three ETFs on our watchlist and continue to explore the commodity space as the general market struggles.
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On the latest edition of StockCharts TV's Mish's Market Minute, Mish looks at some top symbols held by Horizon Kinetics Inflation Beneficiaries for new ideas for inflation plays. Of course, Mish adds a few of her own picks as other possible options for an inflationary environment.
ETF Summary
- S&P 500 (SPY): Sitting in minor support area. Need to hold over recent low at 426.
- Russell 2000 (IWM): 225 resistance area. Holding within its range. Support 217.
- Dow (DIA): 334.13 next main support area.
- Nasdaq (QQQ): Watching to find support.
- KRE (Regional Banks): 67 support area. 70 resistance.
- SMH (Semiconductors): 247.67 support area.
- IYT (Transportation): 250 resistance.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
