This is the transcript of a live webinar, hosted by InvestingHaven.com, about the topic of investment opportunities in commodities markets. The expert and analyst of this webinar is Rob Tovell, with +3 decades of experience investing and trading global commodities markets. Readers can subscribe for our upcoming webinar How To Survive And Thrive In Today's Difficult Market or How To Include Central Banks And Monetary Policies In Your Investment Strategy.

Question: When you look at the current state of the commodities market, now, how attractive do you think that commodities as a group are, when you compare them with the broader stock market and bonds and currencies. In other words, are commodities as a group an interesting investment opportunity?

Rob Tovell: I'm going back to my roots here with commodities and I think as I said earlier, I like the commodity area because of its ? its relative transparency. You know we get supply and demand reports from the government, we can ? you can actually walk ? or I can anyway, I live in a growing belt here, we have cattle farms, we have soybean farms, corn, etc, etc. I just have to go down the street and speak to a farmer and say, ?Well, what do you think?? and get a response because he's actually growing the stuff, he's raising the stuff.

So, there is ? I think there's a lot more transparency there as opposed to a corporation that sits there and through clever accounting makes a profit. Or, they want their stock prices to go up, they just have ? they institute a stock buying program, things to take an ? to take advantage of the situation.

So, I ? I've always and I actually while I was a trader did a quick little aside why I can be ? why I'm a little harsh on stock markets is I did work in the investment banking side for a few years and was involved with market-making activities not directly, but, you know, other people were doing it on our behalf. And, the game is rig and I'm here to tell you right here right now and if we have time at the end of the webinar I will actually show you how it's done.

But, you can manipulate anything really, but it's a lot harder to hide a boatload of sugar or couple of trainload of corn, it's a lot easier to ? to fudge around with ? with financial statements. So, I think the commodities especially now where the ? we've had such a long downward slope on them like the last three years just blown commodities right away. Again, you can correlate that that right back to the strengths of the US dollar. So, now, I'm thinking the US dollar is beginning to turn and start to head down and now, I think we are going to see commodities rally and I think we're going to see some really good opportunities emerging.

Question: If you would have to pick I would say the most attractive commodities investment opportunities right now, say for the medium and longer term, now which specific commodities would you be looking at?

My favorite one in that I have not yet got an actual buy signal on is soybeans. So, I'll just go up a quick chart here on soybeans. So, the chart on the left here is the daily chart and now, I'll put it up here on a weekly chart. And, for those of you that have ? have Taki's been great in showing some of my videos and that sort of saying you'll probably recognize the style that I'm about to show how I look at things, I am a true believer in trends.

Trends, once they start are extremely persistent and they are extremely difficult to turn around especially in the commodities in foreign exchange markets just because of the fundamental factors that ultimately drive these things, they can last for years. So, when I look at ? when I'm looking for a new market to trade that I'm looking for a new trend to start to get on, I might only traded for a day or two and then get ? and then get back on again for a week or so, but I'm following the longer term trend all the time.

So, if we the sort ? so, just a quick little ? little lesson here on how I see my technical analysis, on here on this chart on the right, we can see the price has moved and crossed above sort of the mid ? the longer term average, this one right there. Now, that's fifty two weeks, so a fifty two weeks is obviously one year and we can see that it's been down, down, down, down and now, it is starting to turn up like so. You can see that sort of bottoming position here.

And, again, for the last three weeks the soybeans had been ? been very, very strong. I now, anticipate price to come down a little bit like so, then I expect that longer term moving average to begin its upward slope. It is going to take an awful lot to turn that slope around, so I will be over the next, you know, we are going into planting season and it's a little early yet up here, but in the next say six weeks or so we'll get ? we'll get planting counts so the fundamentals will start to affect things. But, I do believe that the ? if nothing else, if nothing else the commodities and soybeans in particular here are going to - are showing a weakening US dollar and therefore I see higher soybean prices going forward.

Now, of course, you know, they can have a bumper harvest in September and the prices come down, that will be a supply and demand thing, but as it sits right now, I'm very bullish on soybeans.

That, I would say that's my top pick as far as a new ? a new emerging trend. When trends start to emerge like this, they're very hard to spot, I mean so when you do, you babysit them along and just see what they do and then you start looking for your actual trade signals to actually get on.

Then, of course, the metals, we can ? I'll just get a little weekly chart, let's look at gold just to pull that up. Again, you see that sort of that same type of behavior where we have this big long down trend on the fifty two-week average and it is now turning. So, right now it's a little flat and that flatness is really a function of this consolidation up here.

And, so but once we see this move, I think gold is going to pull back a little bit, I do. It should ? it should pull back even as far back as 1163. It could, you know, somewhere there 1163, 1170, you know into that area and still be a healthy bull market. You know it's going to spear a lot of people, it's going to ? that are long and it's going to shake out people with weak positions that might be too highly leveraged.

So, if you are trading the metals back off on the leverage right now, keep a small position so that you can sleep at night because we should get a pull back and that would actually be healthy. And then, if you want to ? if you want to add to your positions do so then, but right now it's a little high. I'm still looking at longer term just going into orbit, but right now it's ? it needs to pull back. I'm not buying yet, I'm waiting for a pullback myself.

Question: We talked about investment opportunities, but what are the risks when investing in commodities? And what type of risk do I have when I'm selecting a commodity ETF?

The reason commodities are risky to the average investors and to a lot of institutional traders too that take advantage of it is because of the leverage that's involved.

If you think about it when you go buy a stock, the best your stockbroker is going to give you is 50% margin. When you're trading a commodity, it's only 5, you know 3, 5 at most 10%, you know when the market starts moving they'll up those margin requirements up to maybe 10%. So, you right out of the get go, you are dealing with an awful lot of leverage, but if you actually look at the daily price movement of a commodity, a lot of the stocks move much more on a percentage basis day by day than the commodities do.

So ? so, what it comes down to when you're trading commodities or learning to trade commodities is learning how to sort of make that distinction in risk. So, what I do is what I used to go on about is study the market and if you - and if you really want to gain exposure to the commodity markets. I actually I recommend and you do it myself longer term auctions and trading verticals spreads. And if you don't know what those are we can worry about that on another webinar or we can talk about it later.

But, you can actually take very full advantage of commodities through the auction market in a way that's not all hype like and bad news because I can already see your eyes rolling over going, ?Auctions, oh, my God, those things are terrifying.? Well, yes, they are, but they can actually be very, very good weapons in your ? in your arsenal for trading commodities when done properly.

ETFs have not been my favorite things and not that there's anything wrong with them, it's just I find that often if you're watching a futures market and it depict ? well, you know, let me qualify that. It depends which ones that you are looking at, like an ET ? each ETF is not created equally. I have actually played around trading direction, you know, the three times bull and three times bear played with those.

And, on - on a couple of occasions I've actually watched the Russell Index go up, but the actual, you know, the TNA or whatever the bullish one is TNA, I guess, it actually went down and it was, you know, it was just weird things that were going on because they start doing stock splits. And they ? so, the ones that you want to look for are the pure play ones like you don't ? as attractive as the leverage ones are they get monkeyed with when they're adjusting the portfolios and they get adjusted with one commodity is expiring like say June ? June corn, when that's coming off they're either buying back futures contracts and, you know, so it changes as opposed to the pure or the prices I should say or can actually go in the opposite direction.

So, if you actually happen to take the trade on a day they start adjusting what's happening inside the fund, you can actually get hurt. It happened to me, so I kind of lay low except for the pure play ones.

And with those pure plays we know that volume is a very important parameter to watch because some of these ETFs are so small that once you want to sell them for instance, that there isn't enough volume in the market, so that's an important criterion to take into account when selecting an ETF, right?

And, as you get better and better with commodities, you can, you know, I guess we should have another webinar on this topic is you can actually use that ? that poor liquidity to your advantage, but you do need to know what you're doing as far as market timing. So, it's not something that you want to go playing with right over the gate, but the high volume pure play ETFs are the way to go for sure.

Question: What is the outlook for crude oil prices both long term and short term?

As it stands right this moment, let's look at this chart that I have on the right over here and we can see we've got this, again, we can see our fifty two-week average, you know, it's been ? it had a nice slope coming down and it's now backing off, but it has not turned yet nor have prices move above it. So, from that standpoint, I would say it's not ready to buy yet.

However, our sort of our medium term average here, that one has indeed sloped up, so I call this what I call just being off trend. So, on sort of short term bullish sort of mid-term neutral, so what I want to see is some kind of resolution on the fundamental side. If we can see some fundamental easing in the crude oil market as far as production goes, I think we can actually see prices start to rally again.

The other thing that's going to play a big role as I've been going on and on about is the US dollar. So, if we see the US dollar further weaken, I think we're going to see higher crude prices. And also, too I'm also watching the Brent Crude, so this is the Brent Crude that we have up and if we just switch over to West Texas you can see that we pretty much have the same situation, we'll get rid of those things. We have the same situation there, so the charts are pretty well identical.

So, really, I'm ? I'm thinking what we need for higher prices is we need some kind of production cut in some way or another and we need a weaker US dollar and that will push to drive the prices up.

Question: How should an investor how should he look at fundamentals versus technicals and, you know, what's the most important of the two and, you know, how do you combine both of them or how do you look at that?

Fundamentals are going to ultimately create the direction of the market, you know, whether we have ? we're short or, you know, we're short product we've got too much products, fundamentals ultimately are what drives the market. What I use the technicals for is to time things.

Now, what do I mean by that? What I mean is if you're a cattle producer, let's say you own cows for meat and you've got to take these ? these cows to market, are you going to ? or any commodity, it doesn't matter what it is. If prices are too low, you can just hold back say only send out a few cows, let the other ones fatten up on the feed lot. So, you can see by way of prices how what ? how and what the producers are doing.

And, remember earlier I said I can show you how we used to manipulate prices for lack of a better word and this is ? and I would actually do this with stock is when prices were going up, I will hold it back. You know let's say I have a possession of twenty or thirty of forty thousand shares of something, when prices were moving up, I would hold back, when prices were going down, I would sell them the strengths. So the same things occurring is I actually use a price chart not so much to analyze, but you'll notice I don't have any indicators other than my moving averages. I look at purely the price.

So, for me, I look at the price movement more as the psychology of the market. So, right now in the case of crude oil with the prices going up, the psychology is people are bullish, so I'm looking for price declines like for instance right here to buy. So, once I see that the trend is establishing itself and that producers are doing what they feel is the right thing to do for their businesses and that is, you know, hold back production as prices go up, then ? not production per se, but sales into the marketplace let prices rally before they ? they start unwinding more of their positions.

So, I think that investors need to look at both. You don't need to sit there and talk about Fibonacci Retracements and Elliott Wave and all these other stuff, no, that ? I don't go there, just look at the chart and look at the fundamentals and go, wow, the fundamentals are bullish, but prices are dropping or vice versa. And when you see that, stay clear, don't ? don't fight ? don't fight price and don't fight the fundamentals, only make your trades only make your investments when you've got the fundamentals and this very simple technical glimpse at a chart when they're both doing the same thing at the same time, now, it's time to jump on board.

Question: The next rally in precious metals.

Gold in this consolidated pattern and this now has been going on. Now, this is a weekly chart so we've been stuck here for 1,2,3, 4,5,6,7,8, 9,10,11, almost three months we're sort of in stuck in sort of this $80 range.

Now, the one thing I strongly suspect is going to occur is that we are going to ? we're going to pull back. Now, that is going to be the time to buy my long term look at gold. I think we did something ? oh, about a month ago, I was looking about 1345 somewhere up there for gold, in the not too distant future which is right up here. What did I do here? I did something wrong. Here we go.

So, around 1345, I think that's where we're going to see in the near future. Now, whether that near future means, you know, three months from now or three days from now, it's really hard to tell with the way these markets are moving at the moment, but I do ultimately think we're going to see that. We're definitely going to see that this summer. I'm pretty sure about that. And then, quite possibly, you know, we're going to get into the 1500 sooner than you think, perhaps by year end I think we can see a really big resurgence in - in the metals and of course the silver market as well.

Question: What is the outlook for lithium going forward in 2016 and beyond?

Base metals are ? I don't really follow them all that well, but I did deliberately go out there and look at for uranium, lithium, and some of the other rare earth metals. And, what I uncovered was three or four companies, let me ? I'm going to get to the actual question in a second. They control 90-92% of the entire world's production of lithium.

Trading lithium, so now this is where it's ? goes into it into the question mark, lithium is actually in a downtrend, I phoned some of my guys some of the people I knew and they're ? they're not ? you would think it would be going up through the roof, you know, it's in everything from the power tools, you know, go out and buy a new cordless drill lithium batteries - cars, even home batteries for solar power, lithium.

I just saw a new lithium battery power cell for a house. So, you would think that these prices will be going up and up and up. The problem is as individuals, we don't know what the price is because there's no open market for it. Those four companies control the market in it and not only that it gets worse as far as trying to do a pure play in lithium is those companies only 10-20% of their entire bottom line is a direct result of lithium.

So, until we've got a futures market in it or some kind of pure play in it which is too bad, I don't know how to trade it. I would think that with the surging demand prices will go up, but I don't know how to play it, so that's where I'm at.

Question: Is cattle bottoming?

I always watch cattle, so let's just get over here and we've got ? I've got ? here are some feeders, I'm just pulling up a chart here.

So, here's my chart on feeders and just like what we are talking about, you know, on those other markets how I wait for my turn, I'm not so sure that the feeder in the case of the feeders that were there yet. We're going to get, I'm sure we might get, you know, a week or two going up and a bit, I think we can definitely see some upward movement, but I don't think it's tradable yet. We can see this bottom chart is the daily chart and it's just heading down, I mean they are all over this thing. The bears are just mauling these things and we ? I don't see any flattening on that fifty two-week average.

And, I'm saying that for everyone, you know, you can go and get these charts at, well, all kinds of places like FreeStockCharts.com at Barchart, any of them. And when you're looking for stuff just do yourself a favor, throw a fifty-two week average on it, that's the green one and the twelve-week, the twelve-week is for me is what I consider a fiscal quarter, so three months.

So, I look at the three-month average and I look at an annual average. And, right now, with the feeders, it's still going down, so it's still falling nice and I've kind of want to stay clear of that for the time being. And let's just quickly look at the live cattle and we can see the same ? basically the same chart, only we're getting a little bit upward movement, but, again, too scary for me. Don't ever try to pick up bottoming commodities. Remember we're talking about that leverage, this is where it will really ? it can really hurt you is when if you try to pick a top or bottom in commodities with 5% down, yeah, you can get ? you can get hurt really fast.

Question: Your outlook for uranium?

Now, it was almost the same when I was talking about or when I was investigating the lithium, the uranium came up as well. So, in Canada there's a company Cameco and they do a lot of uranium and so, I was looking at their financial statements and the price seems to be going down. It doesn't seem to be, you know, going anywhere. Why? I don't know, again, I don't know enough about the industry to understand why prices seem to be going down.

But, again, it's back to this pure play thing again and it's very difficult to isolate a producer that exclusively does uranium so because they might be mining copper and find uranium or mining gold and find a little bit of uranium or lithium or whatever these things are so that may set relatively small amounts to their bottom line.

So, you don't want to go running out buying a company stock just because they produce uranium or they produce lithium and, that would be a mistake because, you know, an adverse price move in another product that they're mining is going to take their stock down and whether or not lithium is going through the roof or uranium is going to through the roof. So, you have a lot of risks in that, you know, trying to play that. So, again, I would sit there and say don't buy a stock just because they produce uranium, it's not going to be really effective bottom line.

Question: Is coffee breaking out?

I do and here comes the chart. And I watch coffee, in fact, what ? coffee was one of the main reasons how I really started to trade commodities, I was actually a coffee roaster for a few years. I love the coffee market and it's a pretty wild one and we can see here that really for almost a year now it has been putting in this, you know, this ? this base, however what it has been doing and you can see it on the weekly chart, it is sort of got this slight downward movement. Okay?

But, what do we know about trends? How do I define a trend? I defend - I define a trend as a series of lower highs. So, this ? this high is lower than that one and that one is lower than that one and that one is lower than that one and that one is lower than that one, so that sort of started to meet my criteria as well as lower lows. So, that low is lower than that one, that one is lower than that one. I think you get my point, it's heading that down.

But, that change right there, that change in the last couple of months ? oh, I beg your pardon, in the last few weeks that change and it shot up. Now, we have a situation albeit it's very, very young, but we've got ? we have a low here, but we now have a higher low. What I want to see is I want to see ? oop, I don't know how that happen ? what I want to see is I want to see a higher high, I want to see price adjust go up here around the 140 range. We've got the flattening on our moving average, so I think it is bottoming, but, again, I wouldn't buy it yet.

You know something really bad could happen in Brazil and they could lose, you know, a crop and shoot it up which is fine or they find the whole bunch and shoot it down, but I really think that this nice double bottom and we've got as I say we now have a higher low. So, I think we're close, I think we're close, but I wouldn't ? I wouldn't go yet.

Question: Is natural gas in a bull market and do you think that 213 the resistance zone will be cleared?

I think we're turning here as well just like the coffee. Now, this ? this one here, I mean the candles are a little small and I apologize for that. But, we can see here on the daily chart down here at the bottom that we've got our series of basically higher highs or I beg your pardon higher lows going in as well as the higher highs.

So, in the short term we are ? I would call this a bull market, we are trending higher. If we look at them on a weekly chart, we're still heading down, right? So, my moving average is heading down and we've only just began our higher high sequence and our higher low sequence, so it is definitely in the process of turning.

Personally, just throughout the years my fifty two-week average has really stood me well in that once we get above it or below it in this case here, that's when the trend really starts to go. And, I'm going to just give you another little tidbit that I found works well too as traders. I, as a trader am not so concerned about price. Now, I know everybody is going to sit there and gasp and go, ?What? You're supposed to buy low and sell high.? True, but you can also buy high and buy higher.

And, I get a lot of slacks from people when I say something like that, but what's more important is the direction that the market is going. You know it's all really kind of neat to say, oh, yeah, look, I sold natural gas right up there at the top. I mean that's a pretty good power trip and you might be able to pull that off 3% or 4% of the time, but really is it better to take ? to try to sell here, I'm going back to your risk question again. Is it better to sell here and then live and go through all of that pain or to sell at a slightly lower price, but have it go your way almost right away?

So, I tell people don't be so conservative about selling the absolute higher buying the absolute low, wait ?till you're 80% confident in the direction that the market is going to go, that is when you trade. And, I learned that from a couple of floor traders in Toronto. They said, ?Rob, don't even bother trying to pick the top and bought them. We're in it this to make money not to show off. The easy money is the 70% lead 15 on the top 15 on the bottom and take the 70% in the middle. That's how you make money in trading.?

So, don't focus ? and that's why I trade the way I do and that's the way I analyze the markets the way I do. I learned very very on ? very early on in my career don't worry so much about the price, if you're going to buy the company, that's different. Then, you, you know, then you're going to buy the stock at the best price you can, but if for investing and for trading, it's the trend that's important, it's the trend that's going to make us money not buying the high or selling the low or vice versa.

Question: Is a three-year decline in grain markets and is asking whether you think the tide is turning and what the probability is of a longer term of trends starting here?

Here, let's just pull up some corn. So, here we can see this ? we had that incredible downward move this is to what ? what he's referring to this huge move coming down and that's been going on for a while. And then, we've had this ? this sort of sideways market and it's just killing people, I mean, you know, people are trying to trade it and you're just getting whipped some days they make 20 cents some days their limit down and, well, your guest knows for sure what I'm talking about.

But, here we are, again, right back to what I'm talking about. We've got this, you know, this bottoming situation, we've gone above our moving average, then we came crushing right back down again. Remember, when we were talking about this earlier vis-à-vis the US dollar and now, it's just for ? it weren't coming right back up again and bouncing right off of that level that we've been talking about right there, right? That's where it bounced.

Okay. So, that was corn. And, of course we're getting the same thing in wheat. Where is wheat? There is wheat, only as you can see here we're still below, we're still below that level, but soybeans are going up. If you look at the entire soybean complex mill and oil, they're way up as well. And, if we look at wheat on the daily chart, we can see how this thing absolutely went streaming up, came back down and then here this moving average is my 60, remember I think I called it my fiscal quarter, right? That is equivalent to my twelve-week average and then we bounced straight off it.

So, really what I'm looking for like I'm always looking for and let's our ? let's see those longer term averages turn up. So, again, now would be an interesting time to really start monitoring it. Again, I wouldn't pull the trigger on the natural futures contract yet. If you're really knowledgeable about the grain markets and the fact that you ask that question I'm going to assume that you are, you probably have forgotten more than I'll ever know about it. But, if you're going to put a gun in my head and say, ?Rob, I've got a ? I've got to trade this, I've got to trade wheat, what would you do??

I would say long and I'd say probably December, the December contract. I wouldn't mess around with front months and getting caught up in that. I'd go December contracts and auctions, I do ver ? I do vertical ? I start off with a vertical spread, you know, like I would like maybe buy, you know, maybe a $5 call and sell a $6 call, anything just to get my toe in the water. But, I sure wouldn't be risking any big money on it, that's for sure.

But, go far out, don't ? especially if going to be playing auctions, yeah, you might pay a little bit more premium, but don't forget you're going to make in a vertical spread. So, again, you know, I'm probably getting way beyond the context of this webinar, but ? but you get my point. What I'm trying to say is if you think it's really going to go, don't ? don't risk futures contract, play it safe with a spread, an auction spread at that. So, that's how I would do it.

Question: What in your mind is the ideal, you know, entry signal, is it the moment it starts trending above the, you know, previous highs or would you prefer that it's first rallies then comes back test and at that point you would get the buy signal?

Absolutely. It's ? and I call that break hold and go. And, so right here let's just say you're eyeballing this area, right? There is the obvious line, right? That's the obvious resistance line there all these sort of areas we'll just threw that in.

What I would do and ? let me just change the color here so we can ? is I would let it break up. Now, what do know when we break? We know that there's going to be a whole lot of demand here. Now, that demand is going to come from stock so we're going to have people that are short being stocked out. We're going to have typical retail traders there, their broker said, oh, buy the breakout here. That's fine and dandy.

So, we know we're going to have some orders there. What we don't know is the follow through. I'm all about follow through. And what do I mean by follow through? Let's ? so we're just going to have a quick little lesson here and technical analysis. Let's have a look up here. So, we put in a high, it came down. It re-tested that high, couldn't go anywhere, it couldn't make it, so it comes back down and as we all know, this is sort of this 1,2,3 that, you know, hear so much about. We knew going in when we saw that two point go in, it is going to be a whole lot of stocks there.

Sure enough, the stocks were run, the stocks came down and then it bounced, but look where it bounced. It bounced back to where it broke out from or broke down from. So, that to me is what I call my confirmation. I have a big model like what I teach my students and my clients never ever trust a breakout, they can't be trusted. Like over here you can see right here where that little ? that little ? it just went through it a little bit I've kind of buried it by accident, but it went through it by a few ticks, so that brought people in and then they slam the door on them and down it went.

And then, ultimately it went up, so that kind of stuff happens all the time. So, I always wait for the confirmation and this goes back to that sort of lead 15% on top, 15% on the bottom, and take the middle. So, when this occurs going back to your question, I would like cotton back off, it's going to back off a little bit. If you're really sure if, again, if you know the cotton market well which I don't, I'm just going purely on the psychology of the market and the way I interpret price movement?

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