Most price signals have extended into overbought territory, although pullbacks could be temporary over the next quarter. Elsewhere, metals have stabilized and  oversold signals could present buying opportunities. 

Trading performance was positive in Q1, built on the success of Q4. Short palladium and long soybean oil were the  best performing trades, while sharp moves in wheat and oil detracted from overall gains. At times, volatility can lead to frequent or contradictory signals. 

Evidently, returns across commodities are not equal. At times, there is wide divergence between sectors such as oil/gas, agriculture and metals. That means the risk of a core long position can be offset with tactical long/short positions in specific commodities.

​For now, here is our base-case into Q2:

• The copper/gold ratio, a gauge for risk-on/risk-off, is stuck in a resistance range, similar to what occurred in 2017-2018 when market volatility increased.
• WTI Crude Oil broke above a decade-long resistance level at $105/bbl and faces stronger resistance near the 2008 price high at $147/bbl-$150/bbl.
• The recent decline in stocks relative to commodities is starting to stabilize, although failure to hold a decade-long uptrend indicates further downside in the ratio, especially if bond yields continue to rise.

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