In today's Action Alerts PLUS Daily Rundown, Carley Garner stops by to take a look at how the prices of oil, wheat, gold and much more could impact both the portfolio and the market at large in the weeks ahead.


J.D. DURKIN: Good morning, subscribers. With a new month now well underway, Carley Garner joins me now for a look at what commodity prices could tell us about the markets and, of course, the portfolio in the days and weeks ahead. Carley, good morning. Thanks for joining me.

CARLEY CARNER: Good morning. Thank you.

J.D. DURKIN: So let's kick off the conversation with a look at crude oil. It surged to 2023 highs. It just happened a few days ago after both Saudi Arabia and Russia announced extensions to their previously announced production cuts. Was this a peak, Carley, for 2023?

CARLEY CARNER: Well, for the consumers sake, I wish I could say that it was, but unfortunately, I don't believe it was. Once we broke above 84, 85 in oil, that was a technical breakout on our charts. With the next resistance being 92, and to be honest, I think we probably have 100, 101 in our crosshairs. And most of the-- there's many reasons for this. For one, seasonally, the oil market tends to top out like second or third week of October, so we have some seasonal strength there the next handful of weeks in addition to the momentum we've been seeing.

And there's a big disconnect, basically a big spread between where the smart money is actually putting their money and where they're putting their mouths. And what I mean by that is the COT report it's issued by the government the Commodity Futures Training Commission. They tell us who's long and who's short, and they're telling US large speculators are holding one of the smaller net long positions in oil we've seen in quite a while. They're holding about 250,000 net long contracts.

Normally, this group is more around 400, 500,000 net longs, and we've seen as high as 750,000 net long. So the takeaway is, there's a lot of buying power. Everybody, the sentiment readings are very bullish. We're seeing sentiment readings, polls of insiders or industry insiders at about 70% bullish crude oil. So if everybody's bullish, but they haven't acted yet, we feel like there's a lot of buying power for those people that are bullish with their mouths, to put their money where their mouths are.

And so, I think we've got quite a ways to move on the upside in oil in the short run.

J.D. DURKIN: Carley, I know that subscribers may wonder if the rise in oil is inflationary. Wall Street's reaction to oil on Monday would certainly have us thinking so. But for any of our viewers that also have that question, where do you stand?

CARLEY CARNER: You know, I think that most of it's already baked in the cake. If you look at previous crude oil rallies, like for example, 2007, 2008, in 2007, oil rallied from $50 to $100, and the CPI at that point was about-- I think it was about 2.8%. In 2008, oil made it all the way to $150 a barrel, and the CPI was still under 4%. So it's very poss-- and with that said, I know the CPI isn't perfect and there's a lot of flaws.

But if we're going off of CPI, I think that higher oil probably won't be as inflationary as the market's predicting. And we have to keep in mind, even if oil goes up to 92 or 100, like I think it probably will, natural gas is down 70% on the year, corn and wheat are down 30% on the year. So some of the other commodities are picking up the slack and I think that it balances out. Another thing to keep in mind is gasoline prices. The national average is somewhere around 360, 370 at current levels in oil.

In 2008, when oil went to $150 a barrel, gas was still only about $4. So again, I think a lot of it's already built into market pricing.

J.D. DURKIN: Carley, when it comes to the market at large, is there anything that you think that maybe we are not paying enough attention to? What could lead us higher or lower in the weeks ahead? I know that China is something that you and many others have had their eye on.

CARLEY CARNER: To me, it feels like we're getting into a situation where we're near peak Chinese pessimism. And what I mean by that is we've seen a slew of bearish data out coming out of China. And as a result, speculators have become overwhelmingly bearish China and anything that's related to China, and that's obviously a natural reaction. But in any scenario, in any market, you always get to a point where all the bearish news is out, and the market starts looking for the next story.

And usually, that story paints a different picture when it comes to price. And I think we're getting really close to that in China. I would never suggest that anybody trade the Chinese Yuan, but I can say, the Yuan, if you look at a chart, we're coming up against some pretty good support. I use it as a proxy to what's going on in China. My best guess is the Chinese currency finds a bottom here in the next week or two, starts moving higher.

And if that's the case, that's probably a good sign that China could recover at least somewhat, and that would be supportive for commodities and stocks. I'd love to ask you about Chipotle here, specifically beef and poultry prices and how they play a role in the whole conversation, Carley, because they do play a part, at least as it pertains to Chris Versace's approach to Chipotle as a club holding. Talk to me about your outlook for both as we get closer to the end of the year.

CARLEY CARNER: To be 100% honest, I don't follow poultry that closely, simply because I'm a futures and options broker and there's not a tradable product on the NCME group that allows us to speculate or hedge in poultry, but poultry and cattle have basically been moving higher together in correlation with one another, and it makes sense. I mean beef prices are high because we've had some supply issues. Weather has kind of worked against the production of cattle.

And some of the demand is filtered into chicken, which is an alternative, obviously. The interesting thing is the pork market hasn't seen really much of an increase at all, given the high prices and other meats, so that's something that's interesting to me. And off topic, I do think that the hog market or the pork market probably firms up, simply because some of those dollars are going to start looking for alternatives. Cattle is trading near an all time high, and the fundamental story is extremely bearish. Supplies are tight.

It takes a long time to produce cattle. It's not something that you grow in a couple of months. It takes some time. So if the supply side of the equation is going to fix the problem, it's probably going to be something that occurs in late 2024. But if the demand side fixes the equation, then we might see something a little sooner. But the reality is high prices and commodities always cures high prices. It's just a matter of when, not if. So I do think cattle prices are-- they're either at or near all time highs.

And I think we're probably, despite some upward momentum here in the short run, I think in the big picture, we're probably looking at much lower prices. In 2014, we saw a very similar picture to the one we see now and prices dropped 40%, 50% in a handful of months, and it took nine years to recover. So be careful with commodities. Sometimes they catch people off guard because they go up and they're overwhelmingly bullish and then suddenly they're not.

J.D. DURKIN: Sticking with the world of food, Carley, over on X, the artist formerly known as Twitter, you posted about the lack of media fanfare when it comes to the price of wheat, interesting, I think, for a lot of our viewers to learn more about. A recent low saw the commodity under $6 a bushel. Why is this an important metric to watch? Why do you follow it so closely?

CARLEY CARNER: So the wheat, one thing to point out about commodities is the commodity markets are not anywhere nearly as deep as the stock market is. So when there's a big fundamental story, like in 2022 when Russia invaded Ukraine, there was a lot of panic and news cycle and lots of chatter about the supply of wheat, because Ukraine and Russia are both really big suppliers of that commodity.

And so, between the news cycle and the propaganda or whatever you want to call it, just the chatter, there was a lot of money that flew in, that flowed into the wheat market in a speculative nature that just the market couldn't absorb. Futures markets have price limits. They can only trade up or down so much in a certain day. Wheat was limit up. I think it was either six or seven days in a row. I can't remember exactly what, but basically, in a nutshell, there was so much speculative dollars and speculative money flowing into wheat.

The market couldn't absorb it. It distorted prices tremendously. Shortly after, we saw wheat peak at about $13. And now, we're at six, so we're at the exact opposite end of the spectrum. And now, everyone wanted to talk about wheat when it was $13. Nobody wants to talk about it when it's at $6. But the reality is we probably should be doing the opposite of just that. I think wheat is probably a sleeper.

J.D. DURKIN: All right, fair enough. Finally, given the club's position in the SPDR Gold Trust, Carley, I'd love to get your thoughts on gold. What stands out to you?

CARLEY CARNER: Long term bullish gold, the short run is a little bit-- it's a little bit sketchy, simply because we have a runaway dollar rally. I still believe the dollar rally is going to run out of steam somewhere around 105 and maybe 106. So my initial target was a little bit lower, but I haven't changed my overall premise. I think we're getting really overstretched in the dollar. If the dollar rolls over, that'll be very helpful for gold. And if that's the case, I think gold has a chance at not only retesting 2100, which is the all time high, I think we probably break through it.

J.D. DURKIN: Carley, I always get smarter every time we do these interviews. And if I get smarter, I know the same is true for our subscribers. Thank you so much for taking the time to stop by. That's the one and only Carley Carrner. Carley, Thank you.


J.D. DURKIN: Members, Chris Versace we'll be back on Monday to get ready for another busy week ahead. Have a fantastic weekend and we'll see you then.