Leo Haviland provides clients with original, provocative, cutting-edge fundamental supply/demand and technical research on major financial marketplaces and trends. He also offers independent consulting and risk management advice.

Haviland’s expertise is macro. He focuses on the intertwining of equity, debt, currency, and commodity arenas, including the political players, regulatory approaches, social factors, and rhetoric that affect them. In a changing and dynamic global economy, Haviland’s mission remains constant – to give timely, value-added marketplace insights and foresights.

Leo Haviland has three decades of experience in the Wall Street trading environment. He has worked for Goldman Sachs, Sempra Energy Trading, and other institutions. In his research and sales career in stock, interest rate, foreign exchange, and commodity battlefields, he has dealt with numerous and diverse financial institutions and individuals. Haviland is a graduate of the University of Chicago (Phi Beta Kappa) and the Cornell Law School.


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Chuck Berry sings in “’Round and ’Round”:
“Well, the joint started rockin’
Goin’ round and round,
Yeah, reelin’ and a rockin’,
What a crazy sound,
Well, they never stopped rockin’,
’Till the moon went down”.



Many marketplace high priests enthusiastically proclaim proverbs on price relationships. For some heralds, these adages are only guidelines; however, for others, they represent high (or very high) probabilities. Such aphorisms include the links between the United States dollar and commodities “in general”, or between the US dollar and the S+P 500 or other stock indices. For example, one widely popular chant: “weak dollar equals strong commodities”, “strong dollar equals weak commodities”. For some, the word “equals” in this formula implies “is connected to”, or “associated with”.

Observers differ, often substantially, in their choice between as well as the assessment of the supposedly relevant variables (data, evidence) and analytical time horizons. Perspectives on past, current, and future convergence and divergence (lead/lag) relationships between financial marketplaces (and factors influencing them) likewise can vary significantly.

In practice, viewpoints regarding the role of the dollar in determining commodity price levels, trends, and turning points nevertheless differ, and often a great deal. After all, other financial marketplace realms (such as interest rates and stocks), diverse economic and political theaters, and a wide range of other phenomena interrelate with both the dollar (and other currencies) and assorted members of the commodities world. So a variety of competing stories and predictions about the dollar, commodities (whether in general or in regard to individual sectors such as petroleum or base metals), and other marketplaces exist and change.

Moreover, historical review indicates that trends for commodities “in general” can intertwine in various fashions with currencies (such as the United States dollar), as well as with interest rate benchmarks (picture the US 10 year government note), and stock playgrounds (the S+P 500 and related indices of advanced nations; emerging marketplace signposts). Moreover, marketplace history, whether for a given arena or the relationship between two or more fields, is not marketplace destiny.

For further related marketplace analysis of stock, interest rate, currency, and commodity fields, see other essays such as: “Global Stock Marketplaces: Winter of Discontent” (3/5/18); “There Will Be Blood: Financial Battlefields” (2/9/18); “Busload of Faith: Financial Marketplaces” (1/15/18); “Marketplace Vehicles: Going Mobile” (12/13/17); “History on Stage: Marketplace Scenes” (8/9/17).


In any case, let’s now focus on the historical relationship between the broad real trade-weighted US dollar (“TWD”) and commodities in general over the past several years. The table below underlines that players should be on the watch for a fairly close coincidence in timing of major or other important turning points in those two wide realms. However, in the current context, they also should monitor TWD moves in relation to the critical height around 96.0. The broad real trade-weighted US dollar (“TWD”) recently fell decisively beneath crucial support around 96.2 to 96.6. The broad real TWD high during the global financial disaster was March 2009’s 96.6.


What does an investigation of the petroleum, base metals, and agricultural commodity groups since their first quarter 2016 major lows unveil? Many marketplace turns have occurred around the same time. All these commodity battlefields made important highs in first quarter 2018; so did the S+P 500 and other important advanced nation and emerging marketplace stock indices.

Yet not all commodity sectors (or members within a group) necessarily dance (make turns) together. In principle and practice, potential divergence can develop and persist within the commodity universe.

However, whereas petroleum arguably very recently threatened to exceed its 1Q18 barriers, base metals and agriculture apparently did not. Determined and sustained crude oil output restraint by OPEC and its non-OPEC allies such as Russia has helped to draw down OECD petroleum industry inventories. Fears of supply interruption (Middle East tension, including the Iran nuclear issue; Libya; Nigeria; Venezuela) exist. Numerous prophets assert the world economy will remain robust. The further weakening of the dollar since around mid-year 2017 has inspired some petroleum bulls.

The net noncommercial long position of petroleum players (see the CFTC Commitments of Traders) expanded massively since mid-2017, and this net noncommercial buying probably played an important role in rallying oil prices. It remains very large and is vulnerable to liquidation.

Prices for the oil group probably will not break above their first quarter 2018 highs by much if at all. Neither will broad commodity indices such as the broad S&P Goldman Sachs Commodity Index or the Bloomberg Commodity Index. The 1Q18 peaks in the S+P 500 and MXEF stock indices are two year diagonal bull time moves from their 1Q16 major troughs. The GSCI and BCI’s first quarter 2018 highs likewise are two year diagonal ascents from their major bottoms of 1Q16.

Yet suppose the petroleum complex does attain new highs relative to those of 1Q18. As petroleum is an important part of many widely-watched commodity signposts (especially the broad S&P Goldman Sachs Commodity Index), that may boost such broad indices to levels above first quarter resistance.

It is important whether or not the base metals crew (copper, aluminum, zinc, and others) also achieves new highs, for both base metals and oil link closely to international economic growth trends (and arguably more “immediately” than agriculture does).

Many major highs (lows) for commodities “in general” have roughly coincided with major peaks (bottoms) in the S+P 500. But not all have. The 2007-2009 global economic disaster era displayed an exception. The major high in the S+P 500 (10/11/07 at 1576) preceded the GSCI’s pinnacle (7/3/08 at 894). However, the S+P 500’s final top, 5/19/08’s 1440, bordered the July 2018 commodities summit.


Regardless of whether or not key commodity indices achieve highs above their first quarter 2018 plateau, the first quarter 2018 resistance for the S+P 500 and other advanced and emerging marketplace equity benchmarks probably will remain in place. As “There Will Be Blood: Financial Battlefields” (2/9/18) stated: “The S+P 500’s recent high, 1/26/18’s 2873, probably was a major top.”

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As the Financial World Turns- Commodity and Other Marketplace Domains (4-2-18)

COMMODITIES IN CONTEXT- NOVEMBER NOTES © Leo Haviland Four notes written during November 2012

Regarding the S+P Goldman Sachs Agriculture Index (11/12/12):

Thus in recent years, some major trends in the Goldman Sachs Agriculture Index have paralleled those in the broad GSCI and US stocks (S+P 500). There of course have been leads (lags) in the timing of major price turns between the GS Ag Index and the broad GSCI and the S+P 500.

Despite a rally to the 7/20/12 plateau at 534, the recent failure of the Ag Index to sustain a move over the 2/27/08 summit around 513 and the 496 peak of almost 40 years ago (11/20/74; also see the price gap in summer 2012 around that 496 level) is a bearish sign. So is the Ag Index’s erosion since- and despite- the Federal Reserve’s announcement of QE3 money printing on 9/13/12. Since 9/14/12, note the similar slumps in the S+P 500 and the broad GSCI.

Chart Analysis- Goldman Sachs Agriculture Index (11-12-12)

Regarding metals marketplaces (“Metals, Marketplaces, and Meltdowns”, 11/8/12):

In 2011, key base and precious metals began bear trends. Take a look at the attached charts. Though different metals commenced their descents at various times, they all have fallen. Even gold has not surpassed its 9/6/11 top at 1921.

The Federal Reserve unveiled a third round of money printing 9/13/12. However, unlike what occurred after QE1 and QE2, US stocks (S+P 500 and Dow Jones Industrial Average) have not sustained an advance. Stock and commodity bulls might argue that only a few weeks have passed since mid-September. Nevertheless, the S+P 500 (9/14/12 at 1475) and Dow Jones Industrial Average (10/5/12 at 13662) made highs and then slumped. Declines in gold, silver, and the London Metal Exchange’s LMEX Index (and Brent/NSea and NYMEX crude oil) coincide with the 9/14/12 to 10/5/12 top in stocks.

In recent years, price and time trends of commodities “in general” and stocks have roughly mirrored (“confirmed”) each other. Thus the weakness in the overall metals complex is a noteworthy bearish warning sign for US (and “related”) equity marketplaces.
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The supply/demand picture of agricultural playgrounds such as wheat, corn, soybeans, cotton, sugar, coffee, and cattle of course vary. Yet depending on the arenas and situation, fundamentals and price trends of a given agricultural commodity may substantially or increasingly intertwine with one or more other agricultural ones. The landscape of agriculture (though energy costs matter to it) is not typically viewed as the realm of energy. The fertile fields of so-called financial arenas like equities, interest rates, and currencies do not officially incorporate farming or energy. Nevertheless, agriculture is not an economic island entirely or even substantially separate from energy and financial provinces. Recent history underlines that the agriculture complex “in general” does not inevitably or always possess such independence. Not only traders in energy (and base and precious metals), but also foreign exchange, equity, and interest rate players, should monitor agricultural price levels and trends.

Governments and international organizations build numerous yardsticks to measure inflation. Not only do these indicators within a nation vary in the importance they assign to agricultural phenomena. Benchmarks between countries can differ, perhaps substantially. Picture a consumer price index of an advanced (industrialized; OECD) nation in contrast with one of a relatively poor developing country. Despite such variations, elevated and rising agricultural prices alongside similar patterns in the petroleum complex (and many metals) make it increasingly difficult for central bankers, finance ministers, and their political friends to claim that inflation levels will remain low. The withering of the United States dollar (broad, real trade-weighted basis; “TWD”) has assisted rallies in commodity prices.

The longer food- and other agricultural and energy prices- stay lofty, the more difficult it is to claim that so-called core inflation will remain (is) unaffected by them. Consequently, interest rate gatekeepers around the globe- even America’s stubborn Federal Reserve Board- face more and more pressure to boost policy rates.

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Agricultural Prices and Inflation (Desperate Housewives, Episode 8 )