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Commodity Stocks vs S&P – Historic Lows

Cory
June 6, 2017

Here is an interesting chart published by our friend Ronni Stoeferle from Incrementum AG. I outlined this chart back in January when I presented at the Cambridge House show and since that time this chart has moved further down. Essentially what it outlines is the overall value of commodity equities, as judged by the GSCI commodity index (click here for a rundown of this index), compared to the overall value of the S&P.

These are the type of charts that illustrate just how extreme things can get in the markets. While not a perfect timing indicator it does show that this ratio will need to regress back tot he mean. Whether that means commodities go on a huge run or the S&P experiences a major pullback, when you reach these multi-decade lows it won’t stay here forever.

Here is a quote from Incrementum and the chart…

“In relation to the S&P500, the GSCI commodity index is currently trading at the lowest level in 50 years. Also, the ratio sits significantly below the long-term median of 4.1. Following the notion of mean reversion, we should be seeing attractive investment opportunities.”

CHART: Commodity prices slump to 50-year low against US stocks

Discussion
2 Comments
    Jun 06, 2017 06:38 AM

    $1297.40, the high in gold from earlier this year, would be the first peak to knock out for upside momentum in Gold. It would be refreshing to see Gold close above that level today and make a new high for 2017.

    Of course, there is the psychological bullish impact on sentiment above the century mark -> $1300 that would be nice as well.

    > $1377.50 [the high from last year] is the primary target to aim for later in the year though, during the Fall rally.

    Gold #Chart shows prior peaks & troughs and some key moving averages.

    http://stockcharts.com/h-sc/ui?s=%24GOLD&p=W&yr=5&mn=0&dy=0&id=p21742695491