Summary
Phil Anderson’s Gann #24 focuses on the commodity breakout theme as the defining late-cycle dynamic. GSG (iShares S&P GSCI Commodity-Indexed Trust ETF) broke out from a four-year Mexican Pete basing pattern, retraced 50% of the move, and is now turning back higher. Anderson frames this within the historical pattern: commodity/S&P ratio spikes occurred in 1973, 1990, and 2008 — all real estate cycle peaks — and the current rally has yet to produce a similar spike. An ongoing commodity rally puts pressure on inflation and the Fed to raise rates; the 30-year Treasury yield is attempting another breakout over 5%. Watchlist updates: XME removed (price action not constructive), DBA re-added to US Watchlist (Mexican Pete setup near 50.
Key Claims
- GSG broke out from a Mexican Pete basing pattern going back four years; retraced ~50% of the move into the $25 breakout level; now turning back higher toward the May high. The retracement low came just after a seasonal date. — confidence: high
- The S&P GSCI / S&P 500 ratio shows three historical spikes: 1973, 1990, 2008 — all real estate cycle peaks. Commodities have yet to produce a similar spike in the current cycle, suggesting more upside ahead. — confidence: high
- A large move higher in the commodity/S&P ratio could be driven by a sharp pullback in equities while commodities hold up — the cycle-peak dynamic where money rotates from stocks to commodities. — confidence: medium
- An ongoing commodity rally will put pressure on inflation and push the Fed to raise rates; the 30-year Treasury yield is attempting another breakout over 5% (citing last week’s bond market signal). — confidence: high
- Competition for resources takes center stage in the second half of the real estate cycle. Twenty years ago it was China’s construction boom; this time, data centre construction is the driver — materials + massive energy requirements. — confidence: high
- We could still be in the early stages of a commodity boom, with big implications for interest rates and the end of the real estate cycle’s upswing. — confidence: medium
Predictions / Forecasts
- Commodity rally has more upside ahead (no ratio spike yet vs 1973/1990/2008 analogues) — status: pending
- 30-year Treasury yield attempting another breakout over 5% — status: pending
- Commodity price pressure → Fed rate hikes — status: pending
Concepts Referenced
- Commodity Supercycle
- Mex Pete Trading Style
- Sector Rotation
- Bond Yields
- Watchlists
- Mex Pete Model Portfolio
- 18.6-Year Real Estate Cycle
Notable Quotes
“Competition for resources tends to take center stage during the second half of the real estate cycle.”
“Twenty years ago, it was China’s ascension on the world stage and insatiable appetite for commodities to fuel that country’s construction boom. This time around, data center construction is playing a central role.”
“While commodities are rallying once again, we have yet to see a similar spike in the ratio. Keep in mind that a large move higher in the ratio could also be driven by a sharp pullback in equities while commodities hold up better.”
“We could still be in the early stages of a commodity boom, which could have big implications for the outlook for interest rates (and ultimately the end of the real estate cycle’s upswing).”
Watchlist Updates
- XME (State Street SPDR S&P Metals & Mining ETF): Removed from US Watchlist — recent price action not constructive for the pattern; higher lows not forming in its base.
- DBA (Invesco DB Agriculture Fund): Re-added to US Watchlist — Mexican Pete setup; ideal scenario is one smaller pullback off $28.50 resistance before breakout.
- DRS (Leonardo DRS Inc.): Added to US Watchlist — buy above 50 multiple times.
- Portfolio status: Zero active positions in the Mex Pete Model Portfolio. “While we’ve slowed our trading activity recently, it has been due to a lack of proper breakouts from Mexican Pete setups. I’m noticing more setups are developing, but the key is to remain patient and wait for the proper breakout.”