The Commodities Chartbook
As investors, we face the same problem every day: how do we allocate capital to earn a good risk-adjusted return? Despite the regularity with which we must answer the question, every time we sit down to answer it, we must do so in a completely different political-economic context. This is true regardless of investment style or focus. While not an insurmountable challenge, maintaining an understanding of the context in which you are allocating capital (situational awareness) and having an informed opinion about whether and how the ongoing context change impacts the long-term value of the assets can be taxing from both a time and cost perspective.
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Potential risks to the investment thesis can be better anticipated, allowing proactive evaluation of potential portfolio impact and a great ability to fill information gaps associated with known unknowns.
Better grasp of the current investment context creates a more nuanced understanding of knowledge boundaries.
Situational awareness facilitates the maintenance of investors’ behavioral edge through quicker and surer adaptation to the dynamic investment environment.
The Commodities Chartbook
Wanted to highlight what appeared to be one of the more interesting charts in the Commodities Chartbook from April 22, 2025. The chart we are referring to is the mismatch indicator for NatGas, which identifies positioning mismatches between the net number of individual speculative traders and their net speculative futures position. Each Red Dot in our Charts shows a point when the net speculative positioning is short but the net traders is long. These points frequently intersect with price inflection points and can be useful trading signals. They are also associated with periods of heightened volatility and elevated newsflow in the market.
Mismatches can be very difficult to interpret and ideally need to be viewed in the context of broader market dynamics, as it is often unclear how prices will behave when they occur.
They are very sensitive and should be considered useful warning signs that are able to detect potential shifts in positioning and sentiment that many other indicators will fail to identify early enough.
Because they are difficult to read, mismatch signals are only really useful in combination with other positioning indicators such as the Dry Powder. This is the associated Dry Powder for NatGas Contracts:
We need to include some measure of importance of the signal from the mismatch indicator in the Commodities Chartbook, as it tends to be somewhat dependent on the commodity. We find positioning information in US NatGas markets very challenging to use productively.
We’re still working out why this is, but the following chart of the performance of NatGas around a mismatch confirms that although the indicator looks interesting, it is probably not as interesting as it appears. This chart is the price of NatGas 2nd Futures Contract for 90 days after the first mismatch in the last 16 instances of a mismatch.
We are going to keep adding pages to the chartbook, but our first task over the next few months is to add details to the chartbook that attempt to highlight the significance and importance of any of the measures.
The chart below shows price change from the date of publication, April 22, 2025, for natural gas futures.
Please find the latest Commodity Chartbook below.
Metals will grow scarce. Energy costs will rise. Supply chains will fragment, and geopolitical events will shakes markets.
Those who understand these shifts will prosper. Those who ignore them risk losses. Join us as we guide you through the intricate web of liquid financial markets, where we track more than just prices and provide a nuanced view of how to manage risk in the broader economic and political system.