Looking to the Futures

Bloomberg Commodity Index Lower to Start the Year

March 1, 2024 Dan Sweeney
Two months into the year, the Bloomberg Commodity Index ($BCOM) is down 2.1% at 96.78.

Two months into the year, the Bloomberg Commodity Index ($BCOM) is down 2.1% at 96.78. The index tracks a broad basket of commodities in energy, metals and agriculture. It has a related futures product (ER*) with a multiplier of $100 x the index, leading to a nominal contract value of about $10,000. Meanwhile the YTD performance of the major stock indexes ranges from +0.6% for the Russell 2000 ($RUT) to +6.5% for the S&P 500 ($SPX) and NASDAQ 100 ($NDX).

Within $BCOM, products and product groups have had divergent results. The best performer has been lean hogs (LH*), up 25.9% YTD. Part of the performance is due to expectations of decreased pork imports from Canada. Corn (C*) is the primary input in hog feed and is down 9.9%. Soybean meal (SM*) is the second-largest component for hogs and is down 16.2% on the year. On the other side of the crush spread, soybeans (S*) are down 11.6%. Wheat (W*) serves as a filler and is down 8.6% for the year. Cattle (LC*), like pork, has also performed well, gaining 10.1% so far this year. In short, it has been a good year for feedlots and tough sledding for farmers.

Energy has seen similar disparities. The crude oil family is up across the board, with WTI crude (C*) up 10.4% and Brent (BZ1*) up 6.4%. Refined products are led by gasoline (RB*) at a 20.6% gain. Gasoline has been buoyed by consumer strength, as demand has remained inelastic. In contrast, natural gas (NG*) is down 19.6%. While it may seem counterintuitive, increased oil prices may be leading to lower natural gas prices. This is due to natural gas coming as a byproduct of oil production. Increased prices for oil lead to more drilling, resulting in more natural gas production.

Metals have seen the least volatility among the major product groups. Gold (GC*) is the largest individual component of the commodity index at 14.3%. It has traded in a relatively narrow channel between 2010 and 2070 this year representing a range of about 3%. It’s currently down less than 1% for the year. Silver (SI*) has seen slightly more volatility but has been similarly rangebound between 22 and 24. Over the last two months of 2023 it had a wider range between 22.50 and 26. For the year, silver is down 4.9%. Copper (HG*) is often viewed as a barometer on the global economy, given its use in construction and manufacturing. The red metal also traded in a range to start the year. It has traded between 3.70 and 3.90 thus far, leading to YTD performance of -0.9%.

Divergence within the index illustrates the limitations of using commodities as a single asset class. In this way it is similar to the S&P 500 where component stock performance ranges between +60% (NVDA) and – 27% (MKTX) for the year.

Technicals

The chart below is zoomed in to show the index from the start of 2024. It reveals a selloff to start the year followed by rangebound trading between 95.50 and 97. Some recent strength has pushed the index above its 9- and 20-day simple moving averages. It is approaching the Parabolic SAR value and another green day could see it flip to a supportive value soon. The RSI is around 56%, above the median but not reaching overbought levels. In fact, the index has not reached overbought or oversold levels for the year. The MACD is positive and trending upward.

April 2024 Natural Gas Futures (NGJ24) Chart

Contract Specifications

Bloomberg Commodity Index March 2024 Futures (ERH24)

April 2024 Natural Gas Futures (NGJ24) Specifications

Trading Calendar

Construction Spending 10:00 AM ET

ISM Manufacturing Index 10:00 AM ET

S&P Global US Manufacturing PMI - Final 9:45 AM ET

Univ. of Michigan Consumer Sentiment - Final 10:00 AM ET

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