The following commentary comes from an independent investor or market observer as part of TheStreet's guest contributor program, which is separate from the company's news coverage.
NEW YORK (
) -- At
The FRED Report
), we are aware that nobody has a monopoly on research ideas, and we read as much research as we can on a weekly basis. We also, on occasion, highlight other firm's research, of course with their permission. It is rare for us to write a column criticizing another firm's research - but this is the case this week.
One of the major themes we have had since the founding of
The FRED Report
commodity inflation will continue
, and that this is a secular bull market in commodities that started in 2002, and should continue for many years. For this reason, the recent report by Goldman Sachs that suggested taking profits in commodities, especially oil, was very interesting to us.
This is a classic case of fundamentals disagreeing with technical analysis
. While fundamental models used in Goldman's work may show some overvaluation, the charts say otherwise. We show monthly charts of GLD, JJG, DBO, and DBC below.
It is important to note that all of these long-term charts are positive. Gold has been in a long-term uptrend and has hit new highs recently. The other three charts have recently broken out of long-term bases.
On a technical basis, if these markets were going to fail, they would likely have failed at resistance several months ago.
Furthermore, when we look at charts of the commodities that make up these ETFs, we note that, even in the case of JJG, the weakest commodity in the group (Wheat), has broken out of a base and is above resistance.
The "long-base breakout" is a particularly strong technical program, and on a monthly chart JJG can lead to a multiyear advance, and often these advances can be powerful.
Most big moves start from such a long base.
So, what to do now? Commodities often have strong seasonal tendencies, and one of the strongest for oil and gold is a drop into May, followed by a summer rally. There are a couple of stock ideas that would look especially attractive if there is a pullback into May. Stocks are often a safer way to invest in commodities. We show the XLE below, and a couple of stocks as well. Should these stocks decline into May they could be attractive investments.
Fred Meissner is founder and publisher of
. Fred is a CMT and past President of the Market Technicians Association (MTA). He recently left Merrill Lynch's Market Analysis Department and Sector Strategy Department to form The Fred Report.�A detailed bio is here: