Our Secret Inflation Barometer Is Building a Breakout Base
2024.07.03 03:28
Mother Nature can be cruel.
On March 6, 2024, I wrote an on and .
The biggest takeaway:
We will know about where inflation is headed by watching:
- -and if it can begin to outperform gold-CHECK
- , if spikes over $80 a barrel-CHECK
- Sugar, if even with increased production begins to move up back over 23 cents a pound-NOT YET
- The fails 103 and selling pressure returns. Rumor has it through Russia that BRICS is working to create an independent payment system based on digital currencies and blockchain NO
Focusing on sugar
Recent weather conditions like the ones listed below are set to affect sugar prices.
- Below-normal rainfall in Brazil may cause dry weather that will reduce sugarcane yields and curb Brazil’s sugar output.
- India’s agricultural agency reported a fungus crop (red rot) was spreading through a key sugar-growing region.
- India’s below-normal monsoon rain may curb sugar output-current monsoon season down -11% from the long-term average.
Then add some concerning geopolitics:
- Protectionism is rising as countries look to protect their domestic markets.
- Developing nations, already grappling with food shortages and inflation, are particularly affected. Import-dependent countries, such as many in sub-Saharan Africa, remain vulnerable. For instance, Nigeria, which buys 98% of its raw sugar from other countries, faces challenges due to rising prices.
- Bolivia has been grappling with economic turmoil, which could, directly and indirectly, impact sugar prices-Bolivia’s economic woes may indirectly contribute to global sugar price fluctuations, especially if it disrupts trade or production.
- The same is true for Kenya, currently in turmoil.
The futures chart shows clear support at the 50-DMA after it consolidated and formed a base above 20.00.
The next hurdle is 22.00.
The chart also shows a decent bounce once the 50-DMA cleared and the price of 12.00 (risk point).
CANE is outperforming the benchmark for the first time in a while.
Real Motion shows us momentum inclining with the clearance of the Bollinger Band.
Resistance is higher at 13.30 or the 200-DMA.
While we keep hearing about disinflation, I keep seeing signs of nuanced inflation.
Whether sugar is our ultimate X factor or not, it is super reliable to watch because it checks all the boxes
- Weather
- Geopolitics
- Social unrest
- Supply chain and labor
ETF Summary
- (SPY) 5400 support 5600 resistance
- Russell 2000 (IWM) 197-202 tightest range to watch
- Dow (DIA) 40k resistance
- Nasdaq (QQQ) Sideways but still looking solid
- Regional banks (KRE) Watching the range 45-50 CAREFULLY
- Semiconductors (SMH) 260 pivotal support
- Transportation (IYT) 67 hurdle to clear 64 support to hold
- Biotechnology (IBB) 140 pivotal resistance
- Retail (XRT) 200-week moving average support at 72.75. Needs to recapture 74.50
- iShares iBoxx Hi Yd Cor Bond ETF (HYG) 76.50 key support
