If you swore to tell the truth, the whole truth, and nothing but the truth, were you a buyer of commodity stocks on January 21st of this year?
Objection!
Over ruled. Kindly answer the question. Or don’t. But the facts are the facts.
Not many people were buyers. But if you look back at gold, oil, and iron ore, that’s when producers of those commodities started to rally. Today, you learn that iron ore prices were up 19% in Asian trading. But did you know that Aussie iron ore producer Fortescue Metals is up 110% since 21st January?
If the ‘momentum crash’ described by Charlie Morris is ‘losers winning,’ then we appear to have a crash in momentum on our hands. Glencore, up 76% year to date. Gold miners, up 44% year-to-date. Even Brent Crude has managed to eke out a 4.5% gain year to date. And over the weekend the papers were full of stories on how the ‘short squeeze’ in oil means an end (at least temporarily) to the oil price crash.
The key question now is whether ‘the momentum effect’ won’t work this year. Normally, and somewhat counterintuitively (if you’re a contrarian) winning stocks keep winning and losing stocks keep losing. Momentum drives the best stocks higher.
But in a ‘momentum crash’ everything changes. That’s what Charlie’s been sorting out in as he builds the Whisky and Soda portfolios in The Fleet Street Letter.
Category: Market updates