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Indices and Bitcoin in Spotlight


Bloomberg Commodity Index:

The 2020 rally in commodity indices was one of the more impressive of any asset class, although that strength has cooled in recent weeks. Since peaking at 87.7 on Feb. 24, the Bloomberg Commodity Index (trading symbol BCOM.X) has retreated a little over 4% with questions being raised about whether the correction has more room to run. The Bloomberg Commodity Index did briefly trade below its 50-day moving average last week but was able to settle above that level on Friday. The 100- and 200-day moving averages sit down at 79.6 and 74.7, respectively. The most encouraging thing in our opinion has been momentum as indicators like stochastics bottomed in early March and made higher lows last week while the Bloomberg Commodity Index made lower lows. This is a textbook divergence and would suggest the index correction could be close to running its course. When looking at the markets that comprise the Bloomberg Commodity Index, energy obviously makes up the lion’s share of the weighting. With crude oil turning more consolidative, it should allow the index to slow its descent. The hotter the inflation talk the more interest should be brought into commodities, which remain the best inflation hedge there is.

April Bitcoin Futures:

In keeping with the financial market and inflation talk, we thought it worth taking a peek at Bitcoin futures. Few markets received more attention in 2020 and 2021 than bitcoin, and for good reason. Since peaking on March 15 at $61,255, April futures have undergone a bit of a correction, although the correction pales in comparison to the rally even since the beginning of 2021. Long-term moving averages are well below spot prices while short-term moving averages are resting between Friday and overnight price action. Figuring the correlations between bitcoin and things like fiat currency or commodities remains a bit murky yet given the relative newness of things like bitcoin futures. That said, bitcoin will likely be looked to as an indicator for inflation, making it important to the broader commodity market. Bitcoin futures have some objective risk parameters present with 50,360 to the downside and all-time highs at 61,255 to the upside. While admittedly wide, these two levels provide the only true directional triggers from which to gauge long-term exposure in this market.

Comments above are for educational purposes and are not meant to be specific trade recommendations. The buying and selling of grains and grain futures involve substantial risk and are not suitable for everyone.

Tregg Cronin can be reached at tmcronin31@gmail.com

Follow Tregg Cronin on Twitter @5thWave_tcronin



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