Last Friday, we bought the Invesco Agricultural Fund based on a breakout from a consolidation area. With inflation continuing higher, we see food prices joining for the ride.
One problem with soft commodities is that, when countries need more food, there is no instant fix, as it takes time to grow. Along with drought and other potential issues, it could take another 2 to 3 years before we see stable food prices. However, the fundamental picture was not enough to take the trade.
From a technical perspective, DBA has been consolidating within a wedge type pattern. This can be seen from the trend lines drawn in the above chart. We can also see that on our Real Motion indicator, the red dotted line, never broke underneath the 50-day moving average, showing that momentum was holding along with the price.
Additionally, the Leadership indicator just below Real Motion is showing that DBA is now outperforming the S&P 500 (SPY), as it crossed over the red line the day we took the trade. This is no surprise, since all the major indices were beat up Tuesday and are all under their 50-day moving average.
With that said, while the market has trouble holding up, we've been taking small positions in equities and looking for the outperformers that tie in into the long-term economic picture.
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ETF Summary
- S&P 500 (SPY): 441 pivotal.
- Russell 2000 (IWM): 192 next to hold. 201 to clear.
- Dow (DIA): 343 pivotal.
- Nasdaq (QQQ): Watching to build support.
- KRE (Regional Banks): 66.85 to clear.
- SMH (Semiconductors): 237 support.
- IYT (Transportation): Needs to find support or get back over 243.
- IBB (Biotechnology): 128 support.
- XRT (Retail): Failed the 50-DMA at 77.33.
Forrest Crist-Ruiz
MarketGauge.com
Assistant Director of Trading Research and Education
