Intermarket Relationships Show Commodities To Be Strongest

Past performance is not an indicator of future results

In the monthly chart above we show the long term relative strength between the major financial markets post the pandemic lows (dashed blue vertical):
1. Stocks [represented by the S&P 500 (SPX)].
2. Bonds [represented by the iShares 7-10 Treasury ETF (IEF)].
3. Commodities [represented by the Thomson Reuters CRB Index (TRJEFFCRB)].

The top chart shows the relative strength (RS) between stocks and bonds. The RS is between the upper blue and upper red bands - the area of strength for the numerator. Therefore, stocks are outperforming against bonds.

The middle chart shows the relative strength (RS) between stocks and commodities. The RS is between the lower blue and lower red bands - the area of weakness for the numerator. Therefore, stocks are underperforming against commodities.

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The lower chart shows the relative strength (RS) between commodities and bonds. The RS is between the upper blue and upper red bands - the area of strength for the numerator. Therefore, commodities are outperforming against bonds.

Please note that the commodity weighting for TRJEFFCRB: Energy: 39%, Agriculture: 41%, Precious Metals: 7%, Base/Industrial Metals: 13%.

Russell Shor

Senior Market Specialist

Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.


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