Chairman Powell, under Congressional oath, just stated that raising the interest rate will have almost no effect on the price of oil and groceries.
Which, also means, that lowering of the fed target rate also has no effect on the price of oil and groceries.
Which means we should check-in on the 4 Horsemen of Surprised for their reaction to this obvious news.
Supply and demand are tricky things, and that dynamic acts differently across various industries. Oil acts differently than copper, which is different than corn, etc, etc. But we’re seeing weakness across all commodities. (even platinum). Maybe it’s only a pullback, maybe it’s sustained weakness, too early to tell.
We’re seeing a significant breakdown of Dr. Copper over this past week. Today, FCX broke significant support (and triggered my stop/loss). The OIH and all of the major oils are down almost 15% during the past week as well. Again, maybe it’s only a pullback, maybe it’s sustained weakness, too early to tell.
One of the expressions that commodity traders have clung to for several decades goes a long way to explaining our current relationship with commodity prices. “The cure for high commodity prices is high commodity prices.”
Every commodity CEO in the world rushes to get their product to market when their products are at the top of their price range and every CEO pulls back their product when the price is at the bottom of the historic price range. And if they don’t act in this manner, they aren’t CEOs very long. And, not surprisingly, CEOs want to keep their job too