Editor's note: Go against the crowd... Finding beaten-down assets with solid upside potential offers a safe way to gradually build your nest egg. So when sentiment starts to improve, that creates a perfect setup for contrarian investors who are paying attention. Based on recent market indicators, True Wealth editor Brett Eversole says that's what we're seeing today in the commodities market. In today's Masters Series, originally from the June 6 and October 29 issues of our free DailyWealth e-letter, Brett reveals a commodity that could be poised for a huge breakout... This 'Dead Money' Asset Is Prepared to Take Off By Brett Eversole, editor, True Wealth It doesn't matter how bad things seem... commodity prices can only fall for so long. You see, commodities aren't like stocks. They're the building blocks of our economy. They can't go out of business... And they can't really go to zero. They can – and often do – fall further and for longer than anyone believes possible. But the worse the pain, the stronger the reversal is on the other side. So don't ignore the value of commodity investing – especially right now. That's because the benchmark Bloomberg Commodity Index has been rebounding in recent months. It's up 6.2% since bottoming in September. Take a look...
Commodities have had a rough couple of years. We saw a pandemic-induced boom in 2020 and 2021. But after peaking in 2022, prices dropped 30%. The bottom appears to be in, though. Specifically, this index made a significant move from its February low. To see what that means going forward, I looked at each new instance of this setup since 1970. These events have only happened 63 other times since then. And history shows we can expect big outperformance in the months ahead...
This is solid outperformance versus the typical buy-and-hold return for commodities. Plus, commodities have a history of major booms and busts. Prices don't move much over long periods. But this asset class sees plenty of huge rallies – and crashes – in the short term. Given that cycle, and the fact that commodities have crashed in recent years, this could be the start of a larger boom in this space. That setup is starting to take shape for one precious metal right now. I've been watching this sentiment setup closely over the past few years... But now, for the first time, the inevitable reversal seems to be truly in place. That means this commodity is a potential double in waiting. And it's an investment you should consider owning today. Let me explain... The precious metal in question is palladium. And it has taken one of the wildest rides over the past decade that you'll ever see. First, palladium soared roughly 500% from its 2016 low through its 2022 high. That's one of the best returns of any asset over that period. But the good times had to end eventually... Since peaking in 2022, palladium has collapsed. The metal fell more than 70% through the beginning of August. Now, though, prices have reversed. Palladium is up around 25% since that August low. What's more, the hugely negative sentiment surrounding the metal is finally improving. We can see it by looking at the Commitment of Traders ("COT") report for palladium... The COT gives us a look at the real-money bets in the futures market. When futures traders all pile in or out of an investment together, they're usually wrong. So this report is a useful contrarian indicator at extremes. Palladium's COT has been at extreme pessimism for a while. But now, for the first time since the bust began in 2022, that pessimism appears to be ending. Take a look...
The COT has been falling for years. But this reading just broke out. It recently hit its first 52-week high since 2018... a time when palladium prices were soaring. Importantly, this time around, we haven't missed the rally. History shows this reversal in sentiment isn't a bad thing. It means the recent run-up could be the start of a major move higher. How high could prices go? Higher than anyone believes possible... We've seen similar reversals from extreme COT pessimism over the past 15 years. Here's what palladium did after each setup...
These returns vary widely. But they're all good outcomes. Sentiment extremes can lead to quick double-digit gains... or to long-term trends with triple-digit upside. More than that, today's setup is a major sentiment reversal after an extreme low. The last time we saw that combination was in 2016. The metal went on to rally for a year and a half, eventually more than doubling in value. Nothing is certain. But we're likely in the early stages of a similar move right now. You can easily take advantage of this through the abrdn Physical Palladium Shares Fund (PALL). This simple fund tracks the price of palladium. And that makes it an easy way to profit from the rare setup that's underway today. Palladium has been crashing for years. Sentiment got worse and worse as the metal fell. Now, that bearish attitude is reversing for the first time in years... And according to history, we could see massive upside in the months to come. Good investing, Brett Eversole Editor's note: Finding ways to take advantage of under-the-radar setups will be especially crucial as we navigate the rest of 2024. Brett just sounded the alarm with an urgent new warning about where stocks are headed – and what to do with your money moving forward... He joined Stansberry's Investment Advisory editor Whitney Tilson for an online presentation to reveal how this setup is creating lucrative buying opportunities in one underrated corner of the market. Learn more here... | 