Searching For Momentum Clues With Commodities

Commodities have been one of the best performing asset classes of the year - in part because of inflation and the supply disruption following Russia's invasion of Ukraine. As measured by the iShares S&P GSCI Commodity-Indexed Trust (GSG), commodities are up about 16.5% on the year. The S&P 500 is off 17.20%. Emerging markets, as followed by the iShares MSCI Emerging Markets ETF, are down 20.12%.

But commodities have weakened in the second half of the year and, as investors begin to believe that inflation may be tempering and a recession could be in the offing in 2023, the outlook for commodities has been uncertain at best.

At Excalibur Pro, we have tools that help the investor look for clues about momentum - and we present them in one easy-to-read format to help make decisions. On one screen with several graphs, we give you Markov state changing information that compares with price movement, we give you traditional moving averages, we give you RSI, MACD and finally one-month rolling volatility/returns data. Individually, these graphs are like the paragraph in a story. Together, they become a chapter of that story.

Below are two graphs showing the relationships of those momentum indicators for the above GSCI ETF. One graph is meant to show you the charts alone - the other shows that you can hover and slide your cursor across the graphs and get a series of pop-up windows that show you the values of all of the data points to help understand what all of these metrics are telling you.

What are they telling us today? Recently, when Markov state 1 has crossed state 2, you see some price gains. RSI is hovering near the oversold level of 30. The price remains well below the moving averages. But MACD is weak. And volatility has remained near levels that cut into returns. A mixed bag for the short-term. But indicators that tell you to keep an eye on them for further clues.