by SIACharts.com
This week, U.S. stock markets experienced notable fluctuations, influenced by key economic data and the Federal Reserve's actions. Yesterday, the Fed announced it would keep interest rates unchanged at 4.25% to 4.5%, citing economic uncertainty and the complex effects of recent trade policies. Fed Chair Jerome Powell highlighted the lingering impact of tariffs imposed during the previous administration, which have contributed to inflationary pressures. The decision came alongside revised economic projections, with the Fed lowering its growth forecast for 2025 and raising inflation expectations. Despite these concerns, the stock market reacted positively, with major indices climbing after the announcement. Looking at U.S. stock market performance, the S&P 500 (SPX.I) gained 1.36% this week but is down 3.51% year-to-date, while the NASDAQ Composite (NASD.I) increased by 0.58%, but remains down 8.08% for the year. Smaller-cap stocks, such as the Russell 2000 (RLS.I), saw a stronger weekly performance, rising by 1.35%, though it’s down 8.47% year-to-date. Volatility indices also saw declines, with the CBOE SPY VIX (VIX.I) dropping by 17.73%, suggesting less market fear in the short term. On the positive side, the New York Composite (NYSE.I) rose by 1.94% this week, and the AMEX Composite (AMEX.I) saw a notable weekly gain of 4.73%. Global markets also displayed a mixed performance, with Canada’s S&P/TSX Composite (TSX.I) gaining 2.64% this week and turning slightly positive year-to-date at +1.38%. The biggest gain in Canada actually came from the S&P/TSX Venture Composite (JX.I) led with a 3.98% weekly gain and a 6.79% gain year-to-date. While some global indices have shown resilience, concerns about inflation and potential stagflation continue to weigh on investor sentiment, leaving many cautious as we move further into 2025. In terms of commodity performance, big gains were made in Natural Gas where North American futures climbed by 3.88%, while the UK equivalent moved higher by 1.95%. Other movers were High Grade Copper Futures, where the green metal was up by 5.17%, while the shiny metal Gold gained 3.20%. The remainder of the commodities were more or less flat, keeping the overall commodities asset class in the #5 position within the SIA Asset Class ranking.
Copper's Strong Technical Support and Potential Breakout
In lieu of the big gains coming from High Grade Copper, let’s take a moment to review the SIA point-and-figure chart, which we have scaled at 5% for long-term trend discovery. We have also overlaid the SMAX score (see red and green colors) to ascertain its relative strength characteristics against other asset classes over the long term, taking readings back to 2000, when copper was trading around 50 cents. Now, ten times that value, High Grade Copper contracts are challenging the $5 level and another point-and-figure PNF double top. The first discernible feature of the PNF chart is the high levels of support copper has beginning at the $4.17 level, which aligns with the intermediate trend line, along with recent (2021) levels of support. Long-term support extends back to 2008 and even 2004 at $3.97 and $3.78. Resistance is currently at $5.32, but should copper move to a double top on this 5% chart, we could extrapolate new resistance at $7.48 from the vertical count from prior levels of consolidation. Advanced point-and-figure analysts could argue for the entire last decade's consolidation block of 20 boxes (see blue box), but let’s walk that up as more breakouts materialize. It’s important for advisors to understand the ramifications of a breakout in Dr. Copper, especially as worries of a recession are the talk of the town. Copper currently carries a perfect SMAX score of 10 out of 10, further fueling its outperformance characteristic as a typically forward-looking commodity. This leaves the lingering question: Are we staring down the barrel of an environment stymied by stagflation?
Natural Gas: Breakout and Future Resistance Levels
Turning next to Natural Gas (Nat. Gas), we find a similar picture emerging. This commodity has broken out on the long-term 5% scaled chart, where we find the next PNF resistance at $5.21 and $5.47, as well as the entirety of the red bubble that formed in 2022. Bundled up in this trading range are several resistance levels Natural Gas prices will have to contend with, but two notable ones may be $8.08 and $9.82 at the upper end of the red bubble. Should it exit this range of resistance, there are upper levels at $13.81 and $15.23. While these prices are quite a way off, given that these industrial commodities are breaking higher with strong technical readings as we stare down the barrel of a recession, advanced technical analysts are in awe. These moves should be respected. We encourage you to print off these charts and keep an eye on them over the next few years; hopefully, they will help you stay grounded in the big picture. At SIACharts, we leave emotion out of the equation and instead respect the efficient market theory, relying on a rules-based adaptable approach. We respect these trends in spite of the chatter of talking heads. After all, the essence of statistical analytics lies in collecting, analyzing, and interpreting data to make informed decisions. It involves using mathematical techniques to uncover patterns, trends, and relationships within the data. Big data aggregation helps turn raw data into actionable insights for better decision-making and is the hallmark of SIACharts. If you would like to better understand the SIACharts platform, we are always ready and willing to assist in its integration into your advisory practice—simply reach out.
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