Mosaic Chart Alerts

Commodities setting the stage for higher inflation?

In this post, I’ll focus on setups that I’m monitoring for both long and short positions. With a chart and short write-up, this is a quick way to scan and plan potential trades.

These ideas are the end result of my process to identify stocks offering the right combination of growth fundamentals along with a proper chart setup.

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Stock Market Update

A better than expected consumer inflation report is stoking investor hopes for interest rate cuts this year. The Consumer Price Index (CPI) increased by 2.4% in May compared to last year while the core figure that excludes food and energy prices rose by 2.8%. While both figures are a slight acceleration from last month, they came in below economist expectations. With the short-term fed funds rate the highest above inflation this cycle since just before 2008’s financial crisis (chart below), progress on the inflation front now has market-implied odds showing two quarter point rate cuts by the Federal Reserve this year.

Chart from Nick Gerli on X

Investors may not want to become too complacent on the inflation outlook. Recall that the prices paid component on various surveys spanning manufacturing and service sector firms have risen sharply in recent months due to tariffs. Several Fed districts are noting similar trends among prices paid, which may be one reason why the Fed is reluctant to lower rates until greater clarity is gained. You also have a major breakout in commodity prices lurking. Copper is trading just below all-time highs, while oil prices are recovering from a failed breakdown of a descending triangle pattern. The iShares S&P GSCI Commodity-Indexed Trust ETF (GSG) tracks a broad commodities basket, and is back near the high end of a multi-year trading range (chart below). Given commodities have a high correlation to inflation, a breakout could warn of rising price levels ahead.

On the commodity side, several natural gas stocks on our focus list are trading near key breakout levels. Other names are trading constructively as they form the right side of their basing patterns. Keep reading to see:

• Open ETF positions.

• Open stock positions.

• Chart analysis for new trade ideas.