Commodities relatively cheap, not yet absolute

For the first time in 3 years, (collectively) commodity prices are ‘at their cheapest’ when compared to equities.

Relatively, yes.

But not yet on an absolute basis.

As I warm to commodities (per my writings over the past 2 months), my ‘read of the tape’ says there is reasonable probability of a additional decline.

The chart below shows how the S&P GSCI Index has now reverted back to its 200 week moving average.

This mean reversion doesn’t translate into a ‘buy signal’ but it does tell me that I had no business buying it in the 700-800 point range.

My contrarian predisposition is to prepare for some selected long positions.

January 2, 2023

by Rob Zdravevski

rob@karriasset.com.au