Commodities are still poised to run from here, stoking inflation, although everything hinges on what the Fed and ECB do next.
The entire world awaits the Fed’s pronouncements on Wednesday, September 21st. Will it announce just a little more thin-air money to be injected into the system, or a lot? Or maybe none at all?
To those of us watching all of this unfold, it’s every bit as surreal as it appears. How can it be that we’ve gotten to the point that trillions upon trillions of global paper assets are poised to inflect upwards or downwards depending on whether seven people currently seated around a board room table decide to manufacture infinitely leverageable ‘wealth’ out of thin air now, or wait another six weeks before doing it?
That true wealth cannot be manufactured out of thin air seems lost on quite a few market participants, who are more than happy to continue trading stocks and bonds back and forth for as long as the music continues to play. What their exit strategy is for when the music stops is open to question, but in many cases it will be a forlorn hope such as, “I’ll get (my clients) out in time!”
Commodities
I recently made the case that commodities looked technically and fundamentally ready to run higher in price. There’s been some recent weakness in commodities, which I want to put in proper context. Here is an updated chart of the continuous commodity index (CCI):
Note that even with the recent weakness, we are still well within the bull flag formation noted earlier (blue lines).
Arguments Against Commodities Going Higher (For Now)
Over the long haul, as we note the disappearance of high quality non-renewable natural resources and the continued growth in human population, the trend towards higher prices for commodities seems clear enough.
Over the short haul, anything can happen, and commodities are among the most volatile of assets moving up and down by stomach-churning amounts on a routine basis.
by jag 
