CNBC’s Jim Cramer said on Wednesday that the commodity market may see a bullish trend in the short term, but it will eventually come down in the long term.
“The charts, as interpreted by Carly Garner, suggest that the recent commodity boom is not long for the world. We may still see some short-term upside… but in the longer term, she feels That this bull is about to be slaughtered.” ,mad Moneysaid the host.
“And when the objects are turned against you, it gets real ugly, real fast,” he said.
Before getting into Garner’s analysis, Cramer gives investors some insight into the commodity market that’s important to know:
- History shows that commodity rallies are temporary. This is because commodities do not have dividends or buybacks, as is the case with a company’s stock, he said. “This makes them very unattractive to long-term investors – instead, they are a magnet for short-term traders.”
- For the same reason as above, commodity markets are extremely volatile.
- Every commodity rally is “basically a commodity collapse waiting to happen. “This is because, according to Cramer, when commodity prices rise, commodity producers such as farmers and miners increase production. Prices tend to go down again as more supply enters the market—especially if the Federal Reserve allows the economy to grow.” If inflation slows to control, he added.
Entering personal items, Cramer begins his discussion with Oil. He examined monthly charts for West Texas Intermediate crude futures from three decades ago.
Cramer said oil had not been performing well for years, and would probably still be down if not for the Covid pandemic and Russia’s invasion of Ukraine, according to Garner.
Garner expects oil prices to be nearing long-term equilibrium between the two black horizontal lines on the chart — once the current supply shock wears off, he said.
“Of course, it is long term. She is not saying it will happen immediately. … It is possible that oil could explode another upside down. She just needs you to understand that the faster things go up, Go down that fast,” Cramer said.
For more analysis, watch Cramer’s video of the full explanation below.