2022.06.22 21:03

LIVE MARKETS-Commodity stocks crumble amid crude comeuppance

U.S. equity index futures red; Nasdaq 100 down ~1.5%

  • U.S. equity index futures red; Nasdaq 100 down ~1.5%

  • Fed Chair Powell Senate Banking testimony 0930 EDT/1330 GMT

  • Euro STOXX 600 index down ~1.4%

  • Dollar ~flat, gold gains; crude, bitcoin down

  • U.S. 10-Year Treasury yield slides to ~3.14%

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Commodity stocks are joining the 2022 stock rout in earnest in June as crude oil is once again reversing sharply to the downside.

The RefinitivCRB Commodity Equity index (.CRBQX) , tracks globally traded stocks that are principally engaged in the production and distribution of commodities including energy, metals, and agricultural products.

While still up for the year, so far in June the index is underperforming the S&P 500 (.SPX) . CRBQX is down more than 11% this month vs an SPX decline of about 9%. With this, materials

(.SPLRCM) and energy (.SPNY) are among the worst performing major S&P 500 sectors this month.

Meanwhile, NYMEX crude futures (CLc1) are threatening to end a six-month win streak, which is the longest run of higher monthly closes since an eight-month streak from September 2010 to April 2011. This, after the futures once again flirted with important chart resistance :

The futures closed the week ending June 10 at 1.98 times their 200-week moving average (WMA). Of note, oil put in a major top in 1990, and again in 2008, when the 200-week disparity hit the 2.07/2.08 area on a weekly closing basis.

More recently, in early March, just shortly after Russia invaded Ukraine, crude spiked to a high of $130.50 - while its 200-week disparity hit more than 2.2 intra-week - before sliding back to end at 1.98. By mid-April, crude hit a low of $92.93.

During the week ending June 17, crude reached a high of $123.68, which put the disparity reading at about 2.02, intraweek. It then reversed, and the disparity once again ended at 1.98.

Crude is now trading around $103, down more than 14% from its high on a weekly closing basis. Disparity has fallen to 1.68. This, as President Biden is expected to suspend taxes on fuel.

A test of the early April disparity trough at 1.66 would put crude around $100. However, given that the rising 200-WMA is around $61.50, crude’s downside potential could be far more severe if the disparity were to even threaten parity over the near-term.

A weekly disparity close above 2.07/2.08 can instead suggest a major upside breakout.

(Terence Gabriel)



(Terence Gabriel is a Reuters market analyst. The views expressed are his own)

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