Summary
Phil Anderson identifies a potential breakout in broad commodity indexes, focusing on the Invesco DB Commodity Index Tracking Fund (DBC) forming a Mexican Pete pattern since mid-2022 with resistance in the 24 zone. He draws a parallel to the two-phase GSCI commodity rally of the last real estate cycle, suggesting the second rally phase of the current cycle may be beginning. The email also updates the U.S. watchlist by removing CPER and adding CXDO.
Key Claims
- DBC has been forming a Mexican Pete pattern since mid-2022 with resistance at 24 and higher lows building since September 2024 — confidence: high
- DBC breaking above the 24 — confidence: high
- Broad commodities (heavily weighted in oil/oil derivatives) tend to move very late in the real estate cycle — confidence: high
- During the last cycle, GSCI rallied in two distinct phases in the second half; the second phase began August 2007, just months before the S&P 500 peak, and ran to June 2008 — confidence: high
- Current cycle analog: GSCI first rally ran May 2020–June 2022; after a three-year consolidation, the second rally phase may now be beginning — confidence: medium
- CPER removed from watchlist because it tracks U.S.-listed copper (highly distorted by trade war dynamics) rather than the global LME benchmark — confidence: high
- CXDO setting up in a Mexican Pete pattern since early 2024 with resistance at $7.50 and higher lows — confidence: medium
- New all-time highs on a breakout increase the probability the move holds, because no prior transactions exist above that level to create selling pressure — confidence: high
Mex Pete References
- DBC (Invesco DB Commodity Index Tracking Fund): Mexican Pete pattern forming since mid-2022; resistance zone 24 (shaded box on weekly chart); higher lows from September 2024; breaking above $23 at time of writing.
- CXDO (Crexendo): Mexican Pete pattern building since early 2024; resistance level at $7.50; multiple retests of that level while forming higher lows. Notable caveat: a breakout would not be at new all-time highs, reducing breakout reliability relative to prior additions like XOM and FUEL.
Stock Picks / Signals
- DBC — Watch for confirmed breakout above 23. No explicit buy signal issued yet; observation/alert stage. Note: chart uses distribution-adjusted prices.
- CXDO (Crexendo) — Added to U.S. watchlist. Mexican Pete setup with resistance at $7.50. No explicit entry trigger or stop loss stated; monitoring for breakout.
- CPER (United States Copper Index Fund) — Removed from U.S. watchlist.
- XOM and FUEL — Referenced as recently added to the commodity segment of the watchlist (no new signal in this email).
Predictions / Forecasts
- Broad commodity indexes (DBC, GSCI) are potentially beginning the second late-cycle rally phase, analogous to the August 2007–June 2008 GSCI surge in the prior real estate cycle.
- If the current cycle analog holds, this commodity rally would be expected to peak well after the current S&P 500 peak — no specific date or price target given.
Notable Quotes
“Broader commodities tend to move very late in the cycle since they are heavily weighted in oil and oil derivatives like gas.”
“Record highs increase the likelihood that a breakout will hold, because at new highs there’s never been a prior transaction that could bring about selling pressure. It’s like an airplane seeking calmer skies at a high altitude to escape turbulence.”