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  • Stocks hit a speed bump with the most significant decline since March on June 11
  • Gold and silver edge higher, platinum and palladium move lower
  • Energy commodities fall across the board with an over 8% loss in both crude oil benchmark futures contracts
  • Most agricultural commodities moved lower over the past week
  • The dollar index bounced higher, while Bitcoin moves lower over the past week

 

The story of this week:

 Volatility Returns In The Stock Market

Last week I wrote about benign neglect in the stock market. The recovery since the March low came as optimism returned to markets despite rising unemployment claims and social unrest in the United States. On June 5, the VIX index, which measures the implied volatility of put and call options on S&P 500 stocks, fell to a low of 23.54. The VIX hit its lowest level since late February. On June 10, the tech-heavy NASDAQ traded above the 10,000 level. On January 11, optimism evaporated as several states reported a surge in COVID-19 cases. The potential for more shutdowns pushed the stock market down an elevator shaft and sent the VIX soaring.

Source: Barchart

The chart highlights the rise in the VIX to a high of 43.88 on June 12. The VIX was above the 37 level late Friday.

Source: CQG

The daily chart of July NYMEX crude oil futures illustrates the recovery that took the price from a low of $17.27 on April 28 to a high of $40.44 on June 8. Like the stock market, the shift in the market’s sentiment sent oil lower to below $36.50 per barrel at the end of last week.

The potential for another shutdown in areas of the US poured cold water on the bullish trends in stocks and the crude futures market. Meanwhile, the Fed told markets to expect the short-term Fed Funds rate to remain at zero percent through 2022 at the latest June FOMC meeting this week.

The mirage got a dose of reality last week, reminding us that Coronavirus, social divisions, and the upcoming Presidential election will cause periods of significant price volatility in markets across all asset classes. Volatility creates opportunities for nimble traders with their fingers on the pulse of markets. However, high levels of price variance can be a nightmare for investors. Keep stops tight and take profits when they are on the table. Enter markets with a balanced plan for risk-reward. Never worry about missing a trade because, in volatile markets, another opportunity is always just around the corner.

 

Highlights in commodities: 

  • August gold rose by 3.23% on the week, settling at $1737.30 per ounce as the stock market corrects
  • July silver rose only 0.02% for the week as the precious metal settled at $17.482 per ounce on June 12
  • July platinum fell 1.37% on the week. July platinum was at a $918.30 per ounce discount to August gold futures, which widened since last week
  • September palladium fell 0.72% and settled at $1,938.50 per ounce. Rhodium rose $400 per ounce to a midpoint of $7,200 over the past week
  • July copper was 1.74% higher to the $2.6000 level since June 5 after trading to a high of $2.7000 during the week
  • July iron ore futures moved 4.80% higher over the past week
  • The BDI continued to rise and posted a 32.75% gain since June 5 to the 839 level
  • July Rotterdam coal moved 4.10% lower since last week
  • July lumber was 3.85% lower since June 5 and was at the $354.60 per 1,000 board feet level
  • July NYMEX crude oil fell 8.32%. The July contract closed the week at $36.26 per barrel
  • August Brent crude oil declined 8.43% since last week to $38.76 per barrel
  • The premium for Brent over WTI in August closed Friday at the $2.25 level as the spread was down $0.28 per barrel since last week
  • July gasoline fell 7.36% while July heating oil futures posted a 4.28% loss over the past week
  • The gasoline crack spread in July was 3.77% lower since last week. July heating oil crack moved 14.19% higher since June 5 as gasoline underperformed and heating oil outperformed crude oil
  • Natural gas fell 2.86% on the July futures contract closing the week at $1.731 per MMBtu. The EIA reported an injection of 93 bcf into storage on Thursday for the week ending on June 5
  • July ethanol fell 2.76% on the week on weakness in energy commodities
  • July soybeans moved 0.40% higher since last week in post-WASDE trading
  • July corn was 0.38% lower on the week on weakness in energy
  • CBOT July wheat fell 2.57% since last week to just over the $5.00 per bushel level. July KCBT wheat trading at a 53.50 cents discount under July CBOT wheat as the discount moved towards the historical norm by 0.50 cents per bushel since last week
  • July sugar fell 1.25% since June 5 and closed at 11.87 cents per pound on Friday
  • July coffee posted a 3.74% loss since last week as the price fell to 95.20 cents per pound level
  • July cocoa fell 0.08% since June 5
  • July cotton fell 3.16% since last week as the fiber futures were at the 59.84 cents per pound level
  • July FCOJ futures fell 3.68% since the previous report to $1.2285 per pound
  • August live cattle moved 0.88% lower since last week
  • August feeder cattle fell 2.29% since June 5
  • August lean hog futures were 4.17% lower over the past week
  • The June dollar index futures contract rose 0.40% on the week to 97.305
  • September Long-Bond futures were trading at 177-02 up 4-04 for the week
  • The Dow Jones Industrial Average closes at 25,606 on Friday, June 12 down 1505 points from June 5. The S&P 500 fell 4.78% since last week. The VIX was trading at around 35.74 on Friday up 11.60 on the week as stocks corrected lower
  • Bitcoin was trading at $9,448.72 on Friday down $288.19 or 2.96% since June 5
  • Ethereum was trading at $236.57 on Friday, down 2.70% since the last report

 

Price Changes for the week:

DBC closes at $12.01 per share, down 29 cents since May 15

 Source: Barchart

 

DBC is the Invesco DB Commodity Tracking product which represents a diversified basket of commodities futures contracts, has net assets of $818.32 million, and trades an average daily volume of 1,454,214 shares. The fund summary for DBC states that it holds a diversified group of commodities futures but is weighted towards energy. The average volume fell, net assets were steady over the past week, and the price of the ETF moved lower.

 

Any investment involves substantial risks, including, but not limited to, pricing volatility, inadequate liquidity, and the potential complete loss of principal.  This document does not in any way constitute an offer or solicitation of an offer to buy or sell any investment, security, or commodity discussed herein, or any security in any jurisdiction in which such an offer would be unlawful under the securities laws of such jurisdiction.   

                                                         

 

 

 

 

 

 

 

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