A Big Opportunity Is Setting Up in Natural Resources By Brian Weepie
The U.S. dollar is killing natural resources.
The dollar has rallied nearly 8% since July… and bullish traders are bidding it higher.
Meanwhile, natural resources denominated in U.S. dollars have fallen.
Precious metals, oil, and many agricultural commodities are all down double digits since July.
In short, the strength of the dollar is demolishing the natural resources sector. And that's great news for investors. Here's why…
As regular Growth Stock Wire readers know, many natural resources often trade opposite the dollar. So these assets fall when the dollar rallies… and rally when the dollar falls.
That's exactly what we've seen in the natural resources space since July.
You can see this in the chart below…
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Gold is down around 10%… West Texas Intermediate Crude (WTIC) oil is down around 15%… and corn is down around 20% since July.
Natural resource related stocks are also down…
The big gold miner fund GDX is down more than 20% since July… Large oil giants like ConocoPhillips (COP) and Chevron (CVX) are down an average of 11%.
Investment firms like Apollo Global Management (APO) that have a large portion of the money they manage in the natural resources sector are also down. Shares of APO have fallen around 15% since July.
But the weakness in this sector won't last.
As we've shown you in these pages before, natural resources are tremendously cyclical. They go through huge boom and bust cycles. Most natural resources have been in "bust" mode the past few months.
But based on history, the U.S. dollar could jump-start the next "boom."
As my colleague Jeff Clark showed you last week, the dollar IS going to break down.
The dollar is now trading at the highest level of "excessive optimism" ever recorded (the data goes back to late 1999) at top-notch analytics site SentimenTrader.com. The dollar could still strengthen from these levels, but eventually, the move higher HAS to end.
We've seen bullish sentiment in the dollar like this nine times since 2009. It led to a fall in the dollar within the next four months every time but one.
For example, the last time sentiment was almost this bullish on the dollar was in July 2013… the dollar went on to fall more than 5% in just three months. Meanwhile, natural resources moved higher. The price of gold moved up 7% and silver went up nearly 15%.
It's possible we'll see something similar this time around. And today's depressed levels are about to give investors a great opportunity to get in.
Source:
www.growthstockwire.com
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