July 10, 2024: Sequence of events

A standard analysis method is to examine every element of a set individually. Review elements such as fundamentals, or supply and demand factors (present and expected future), and balance sheets.
The information provided by fundamental analysis offers a general idea about prices during a given year.

Technical analysis can help analyze price movements in many different time frames.

One of the more compelling attributes of technical analysis is its ability to view multiple securities and sequence their movements.

The example is Chart 1 where the movements of three commodities (gold, copper, light crude oil) and the yield on the US 10-year T-bond are compared.

The sequence of events shows that gold prices led to copper prices. The red metal led light crude oil (WTI) and oil has a slight lead on US 10-year yields.

The driving forces that unite all four assets are economic growth and inflation.

The benefit from an investing perspective is the expected future movement. With gold prices trending up, copper prices are just starting to advance. WTI is unlikely to begin forging higher until late 2024 or early 2025.

US bond yields appear to need more time before a similar low that developed in copper in early 2024, and an expected low for WTI in late 2024. An anticipated low for T-bond yields is mid-2025.

Suggested action: Gold is the first of the three commodities to break out and rise. Copper is near a breakout. The start of the advance is expected in Q3. Oil prices need more time to strengthen. Models point to year-end. US T-bond yields are anticipated to continue to weaken and decline into mid-2025.

Bottom line: Understanding the sequence of events for gold, copper, light crude oil and US 10-year yields provides the investor with direction and timing for the more profitable trades. It also assists in steering away from asset classes that are not yet ready to advance.