Trading Mirrors: What This Week Taught Us

I’ve never had a dream in my life, Because a dream is what you wanna do, but still haven’t pursued. I knew what I wanted, and did it till it was done. I’ve been the dream I wanted to be since day one.

Aesop Rock

This was an interesting week, no doubt. The reflation trade moved against us, but here’s the twist… most commodities (excluding energy) held up just fine.

That’s important.

Copper and silver managed to finish the week in the green, and the softs and grains like canola, cocoa, coffee, soybean oil, sugar, wheat, and corn all stayed strong. Even lean hogs held up.

Meanwhile, equities struggled. The Dow and the Russell posted negative weeks, with the market leaders taking a breather.

But here’s the thing: when leaders take a week off, we start to see strength show up elsewhere.

And right now, it’s soft commodities.

Energy…

Energy looks bad. Nasty, even. Oil isn’t pretty at the moment, but here’s what stands out: it’s holding a key level, and that’s intriguing.

Also, the reversal model is flashing a buy signal, but let’s be real, that’s not the same as a trend signal.

Right now, oil is dead money setting up for a potential bounce.

Our regime models keep seeing rising probabilities for inflation.

At the moment the probabilities are…

showing that we are between reflation and inflation. (These are fundamental models)

Inflation Isn’t Done

When I look at the ratio charts, I keep seeing the same setup over and over again.

I’m not ready to fade stocks or go long oil just yet, but we’re inching closer to the value zone where reversals into commodities typically happen.

And when those reversals come, they tend to happen fast. A violent V-bottom kind of fast.

Core PCE is on the rise, and our models continue to see higher probabilities for inflation. Kevin Green explained it perfectly: most of the inflation we’re seeing is concentrated in services right now…

but that typically moves into the commodities complex.

Here’s what I’m watching: if inflation were truly fading, bonds would be leading the way. They’re not.

And the commodities to bonds ratio is telling the same story, it’s screaming that commodity inflation is next.

The breakout signals are what matter here. A breakout higher in commodity prices confirms the move. A breakdown would suggest the trade is dead, but I don’t see that happening unless the Fed changes course on rates.

What’s Next

For now, we’re not long energy commodities in our trend models. Not yet. But we’re paying attention because this is where reversals get violent. It’s about sitting on your hands, being patient, and waiting for the trades to come to you.

And next week? We’re watching semiconductors. I get it, you hate the sector, and honestly, I’m not its biggest fan either. But the setup is undeniable. SMH is setting up for a big move, and when you see the chart, you’ll understand why.

We’ll have an options strategy ready for paid subscribers next week, but here’s the key: if semis move higher, it’s clear skies for the broader market. If they break lower, expect headwinds for equities.

That’s the playbook, folks.

Stay focused, and let the market come to you.

Trend Definitions:

Primary Trend: 1 year or more

Intermediate Trend: 1 month to 8 months

Short-Term Trend: 1 week to 10 weeks

Going forward, this will be behind our paywall as well as the signal machine.

Also we will have an interactive model of this next week!

Lot’s of new tools and developments, stay tuned!

Against All Odds Research

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