Industrial Grade – February 19th 2021

The market continues to change its center axis. During the worst parts of the pandemic, the market was rewarding the high-tech names. The Nasdaq was one of the weakest indexes in the world this week. The rotation to Industrials, materials, energy and finance seems to be bringing those sectors forward. While the indexes might not have been advancing this week, the old economy names were. As the strength index weakens again, my focus is on the global commodity boom.

The US rollout is on pace to have 20% of the eligible population vaccinated with one shot this week. The vaccine results from Israel are very promising and provides real hope for the rest of the world. Isreal has vaccinated 47% of their population. The number of cases, hospitalizations and deaths are dropping fast. This doctor has positive news for the summer. The vaccine is a bridge to brighter days. JNJ’s vaccine could be approved in the next few weeks.

Crude oil hit new highs this week, but settled back to close down slightly on the week. Gasoline and Diesel moved higher as Texas refinery closures will put pressure on finished product availability. This has happened before during hurricanes. Frozen pipes are a bigger issue, but these big refineries will be back up as soon as possible. While the oil market may pause here, we don’t have enough new drilling globally to stop the inventory slide. The inventory trend is tightening, and continues to point to lower supplies.

Financials had another big week on the back of the move in yields. Broker/dealers soared. The KBE bank ETF broke to new 5 year highs. As the move in yields still has room to move, this might be a nice area to think about as it breaks above recent consolidation. I covered this off on the video.

Copper and industrial metals had a big week as the industrial ETF XLI and transports broke out to new highs as well. This area looks fantastic. Agriculture looks good too. The materials ETF XLB showed a big pop on Friday.

Summary: I continue to like the commodity trades as that matches with the inflation the Fed is trying to create. The backdrop in the USA is bullish, as things are improving. It also sounds like more stimulus is coming. The indexes took the week off in the USA, but Asia continues to lead globally. Asia is the biggest buyer of commodities. Let’s hit the charts.

To continue reading click the link below…