Market review 24.02.25

Intermarket setup: accelerating trends

Hello everyone,

In these blog posts, I try to tell a story about what the market is doing and where the opportunities and risks lie.

This decade so far has been very interesting for markets. The chart of DBC vs. TLT captures it:

In Apr 2020, we hit one extreme with 0% rates and a negative oil price. Oct 2023 was another extreme, with rates hitting multi-decade highs while inflation remained a concern.

In the short term, the gap in the above chart is poised to contract further. I’ll show this by looking at commodities and bonds separately. Later in the post, I’ll discuss the bullish implications for equities. Let’s begin.

Commodities

Below is the weekly chart for DBC (a broad commodity ETF).

DBC peaked in Jun 2022 (when many stocks and Ethereum bottomed) and has been in a downtrend since. Some key commodities (eg. corn, wheat, lumber, and natural gas) have already erased their enormous gains from the Covid lows (link).

From July-Sept last year, commodities saw a brief countertrend rally (while equities took a hit).

DBC is currently near 52-week lows and looking vulnerable to a breakdown. It would not surprise me to see this downtrend accelerate from here (while equities take off).