Palladium Surges to New All-Time Highs
Jim Cramer, host of CNBC’s Mad Money begins every single show by reminding his viewers "There’s always a bull market out there!" With the recent volatility, many are questioning if the bull market in stocks is still alive. Luckily, in this day and age, we have access to a broad range of non-correlated asset classes like commodities and don’t have to confine ourselves to analyzing only U.S. stocks. If you’ve happened to see a chart of Palladium futures lately, there is no question that the precious metal is in the midst of a bull market.
The chart above shows a daily chart of Palladium futures contracts. You can see price initially broke out to new all-time highs in October 2018 and have continued to push higher to close today at $1,273.70. The previous highs were around $1,125. This former resistance will now likely act as a support level to trade against.
Charlie Bilello, Director of Research at Pension Partners shared this tweet today highlighting the strength in Palladium. The chart is a line chart of the spot market for Palladium with a 3-year percentage change indicator beneath it. He explains that Palladium continues to print all-time high prices and that the commodity is currently up 161% in just 3 years. Palladium futures made a new high yesterday at $1,282.50 an ounce. Much of the demand for the metal is driven by the auto industry where it’s used in car exhaust systems. Its rival, Platinum, sits at a 10-year low price of around $820 an ounce.
Tom Bruni is a technical strategist at Allstarcharts. In the tweet above, he uses a long-term ratio chart of Platinum to Palladium futures to compare the relative performance of the two precious metals. Traditional technical analysis tools can be applied to ratio charts to gain insights on the relationship between the two assets. Tom explains that Platinum is down 90% relative to Palladium since its 2009 high. He reiterates the fact that the ratio is nearing its the lowest level in 18 years! He highlights Platinum’s weakness by stating that momentum (RSI) hasn’t hit overbought conditions since 2004. Bruni concludes that there are no reasons to suggest that Platinum will begin to outperform Palladium in the foreseeable future. For now, this ratio is suggesting Palladium has further to run.
With the market 10% below the highs, stocks may not be in the bull market most investors would like. It’s important to look at different asset classes like Palladium to find strength and achieve alpha. Palladium is undoubtedly in a bull market and some of the smartest technicians think the rally could continue. We’ll continue to keep an eye on this rally and look for pockets of strength outside of U.S. equities.