Commodities#239tier 2live in productionNew

`cme basis curve steepening`

cadence: Dailydata: mediumlong only

2006

Erb, C. & Harvey, C. (2006). "The strategic and tactical value of commodity futures." FAJ. Gorton, G. & Rouwenhorst, K. G. (2006). "Facts and fantasies about commodity futures." FAJ.

Read the paper →

What it checks

When the crude/copper curve flips into steeper backwardation, cyclical industrials (CAT/DE/FCX) outperform for several weeks.

Mechanism

Front-month vs back-month spread for crude/copper. Backwardation steepening (front > back rising) signals cyclical demand strength → LONG cyclical equities (FCX, XLB, CAT, DE).

No production champion data for this family yet. Stats appear once the discovery pipeline promotes at least one strategy with this family tag, or once a multi-family blend that includes it earns a champion slot.

Signal rule

Δ(front - back month) z>1.0σ → LONG cyclical basket (FCX/SCCO/CAT/DE/XLB). Hold 10/20/40d. T+1 lag.

Data dependencies

daily_prices
Adjusted-close OHLCV for every US-listed ticker; primary price feed.
cme_futures_settle
Worker data table — see services/worker schema.

Expected edge

Paper alpha: 200-400 bps over 20-40d
Paper window: T+1 to T+40d

Erb-Harvey + Gorton-Rouwenhorst show 4-8% annual term-premium harvest in steepening regimes; equity passthrough adds ~200-400 bps over 20-40d.

Example tickers where this is likely to fire

FCX SCCO CAT DE XLB

Illustrative only — the signal fires based on the live data, not a fixed list.

Related families

cme silver gold ratio regimeMeta-regime

SI/GC ratio z-score. SI/GC rising = silver outperforming gold = industrial-metals regime → LONG industrial miners (FCX, SCCO, X). SI/GC falling = monetary-stress regime → LONG GLD/IAU only.

macro regimeMacro

Beyond regime_overlay (#10) which uses VIX + SPY trend, this family keys off the macro regime detected from FRED data: term-spread inversion (10Y−2Y < 0), credit-spread widening or compression (BAA−10Y z), and Fed funds cycle direction. Single-name version: gate the simple long-trend signal (SMA50 > SMA200) on the FRED macro regime — full long only in risk-on, half-size in neutral, flat in risk-off, short in inversion.

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cme basis curve steepening