Wednesday Commodities Round-Up

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A.) There is a lot of supply in the 40-41 area.

B.) Prices have found support at previously established price levels

C.) Momentum is decreasing, but notice that prices aren't crashing.

Bottom line: so far, it looks as though copper is holding its own.



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The industrial metals chart has the following points.

A.) Prices have been in an upward trend line since mid-February.

B.) Prices consolidated in April and May in a triangle pattern

C.) Prices consolidated in June and July in a pennant pattern

D.) Prices consolidated in August and September in a pennant pattern

E.) Momentum has decreased but prices have simply consolidated to the trend line.

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Are Gas Prices Heading Lower?

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A.) Prices have broken the upward sloping trend line

B.) There is strong resistance in the upper 35/lower 36 area.



Let's look at the sell-off in more detail

A.) Prices gap down. This is a bearish development as it indicates a big change in the supply and demand picture favoring the bears.

B.). Prices print a strong downward bar, a gap, and then a second downard moving bar. This is a big development. There is also strong volume on these down days.

C.) The 10 day EMA is moving lower and has moved through the 200 day EMA. The 20 and 50 day EMA are also moving lower.

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Wednesday Commodities Round-Up

Interesting developments in the copper market.

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A.) Prices are just below the long-term upward sloping trend line. Now, prices have not make a solid break through the trend line -- we don't have a strong downward moving candle. Instead we have prices consolidating just below the trend line. That could mean that instead of a break in the trend line we are seeing a new point to connect the low points; we need more data before we can make a final determination.

B.) There are three things we ultimately look for in technical analysis: reversals, continuations of current trends and divergences between technical indicators and price action. Point B looks like a rounding top pattern.

C.) Notice the MACD has been declining for two months. This tells us that momentum is decreasing.



A.) This shows us a better image of the trend break. Notice that prices have formed a very weak trend break -- the candles are very weak.

B.) Prices have run into a great deal of resistance in the 40.50 - 41 range.

C.) The 10 day EMA is moving lower and has crossed below the 20 day EMA. The 20 day EMA is moving lower as well. This tells us the short and intermediate trends are bearish.

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Wednesday Commodities Round-Up

Industrial metals are in a clear and strong uptrend that started in early March. the MACD is rising as is the RSI. The RSI is just starting to approach overbought territory. However -- the RSI can stay pegged over 70 for quite some time. Notice the 10 and 20 week EMA are moving higher and the 10 week EMA has crossed over the 50 week EMA.


The daily chart shows a good advance. First notice along the way we've seen consolidation in the form of pennant and flag patterns. Also notice the very bullish orientation of prices the EMAs -- prices are above all the EMAs, the shorter EMAs are above the longer EMAs and all the EMAs are rising. Prices recently broke through areas of key resistance and are moving higher.


This is fascinating chart. First, prices broke below the lower trend line a few weeks ago. Then they consolidated below this level. This led me to thing prices were going lower. However -- and here's the key point: that was based only on the information available from the chart; it did not take the fundamental backdrop into consideration. And that is what has moved the market higher. Commodities rallied earlier this week in anticipation of a recovery.


And that increase is seen very clearly on this chart -- notice the upward gap accompanied by the rising MACD and RSI. In short, earlier this week traders saw the economy improving.

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Wednesday Commodities Round-Up

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Industrial metals are still rising. The MACD and RSI are still increasing. However, prices are getting caught between the 10 and 20 day EMA on the lower side and the 50 day EMA on the upper side. In addition ---

This chart better shows the triangle consolidation pattern that is forming at the top of the rally. Also note that prices are barely hanging on to the upward sloping trend line. In addition, on the daily chart notice the MACD and RSI are moving lower. This chart tells us prices are really thinking about moving lower.



On agricultural prices, notice the chart has taken a big move lower. This is confirmed by the RSI and MACD making big moves lower.



The daily chart better shows the move lower. Notice the MACD and RSI have taken big moves lower. Prices have broken the upward sloping trendline. And the EMA are moving lower as well -- the 10 and 20 day EMA have crossed below teh 50 day EMA and are looking to make lower lows.

With agricultural and oil prices moving lower it's highly probably industrial metals will follow suit.

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Wednesday Commodities Round-Up

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While the weekly chart is still in an uptrend, prices are right at longer-term support. However, the MACD and RSI are still rising. Also note the EMA picture is jumbled -- while all are heading lower the main issue is there is a great deal of congestion suggesting a fair amount of confusing about where traders want to send the market.


The daily chart shows a major correction that is moving the market lower. Notice the MACD and RSI are both moving lower in a big way. Also note the 10 day EMA has crossed below the 50 and the 20 is about to do the same. That tells us their is a pretty high probability of the market moving lower.


Industrial metals are still in a rally -- the MACD and RSI are still rising. Also note the 10 and 20 day EWA are moving higher and are providing technical support for the rally. Finally, prices are consolidating right below the 50 day EMA.


This chart shows that prices are still in a solid uptrend as evidenced by the very bullish EMA pictire -- all the EMAs are moving higher and the shorter EMAs are above the longer EMAs. Prices are currently consolidating in a triangle pattern.

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Wednesday Commodities Round-Up

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The weekly industrial metals chart is still bullish. Prices are moving higher, as are the MACD and RSI. The 10 and 20 week SMAs are moving higher and the 10 week EMA is above the 20 week EMA. Prices are also right below the 50 week EMA.


The daily chart is a mixed bag. First, prices are clearly in a strong uptrend and have been since the end of February. Also note the EMA picture -- the shorter EMAs are above the longer EMAs and all the EMAs are moving higher. Prices are right below the 10 week EMA which is standard technical support. Both nother the RSI and MACD are a bit mixed.

The weekly ag prices chart is generally still bullish, but there are some chinks in the armor. First, the MACD and RSI are still moving higher and the 10 and 20 week EMAs are still moving higher. But prices gapped down this week which is never a good signal.



The daily chart also shows the gap down and the reversing of the MACD and RSI. Also look how prices have blown through the 10, 20 and 50 day EMAs. If prices continue to move lower they're going to blow out various stops.

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Wednesday Commodities Round-Up

Let's take a look at gold.

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Above is the chart that bothers me the most -- and I hope I'm reading this wrong. BUT, the longer term gold chart could be seen as a reverse head and shoulders formation. This implies that gold has one hell of an upward run in the future.


I used the 6 month chart to get a better read of the the SMA picture. First, notice the 200 day SMA has been near neutral for the better part of the year. Considering the extreme moves we have seen, that's a pretty amazing stunt and implies the long-term outlook is still cloudy. However, the short-term indicators are pretty positive. The shorter SMAs are above the longer SMAs and all the SMAs are moving higher. The 10 day SMA has taken a short-term dip, but prices are just below and are using the 20 day SMA as technical support. If prices move through the 20, then the 10 day SMA will be in trouble. But until that happens, we're still in an up-swine.

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Wednesday Commodities Round-Up

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The weekly agricultural price chart is still very bullish. The MACD is rising and has some room to run as does the RSI. Prices have advanced above the 50 day SMA and continue to move higher. The 10 and 20 day SMA are moving higher with the 10 above the 20.

The daily chart is also very bullish. Notice that prices are above all the SMA, the shorter SMAs are above the longer SMAs and all the SMAs are moving higher. The MACD is sill rising, although it may be approaching topped out territory for now. Also note the RSI is at technically oversold readings, the RSIs can stay pegged at these levels for some time.

Industrial prices are continuing their move higher. After rising from a consolidation pattern they formed another triangle consolidation pattern over the last few weeks but have since moved higher through that. Note the MACD and RSI are still rising. Finally, the 10 and 20 week SMAs are moving higher and the 10 day SMA is above the 20 day. Prices are using them for technical support.


On the daily chart notice the prices started moving higher at the end of February. This chart better shows the consolidation that took place from mid-April until just recently. However, prices have advanced through upside resistance on a big gap higher.

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Wednesday Commodities Round-Up

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Today I'm going to look at the gold market, largely because of an article I wrote with a friend. Here is a link. The data does not indicate inflation is an issue and so far won't be for the near future. However, that does not mean investors are not concerned about inflation prospects. As a result, keeping an eye on gold prices is a good idea.


Above is a 9 month chart. Notice a rally that started at the end of last year and continued until the beginning of March. That is when investors switched from other markets to equities -- meaning gold dropped. Prices then formed a downward sloping flag pattern but have since risen through the top of that pattern.


In the above chart, notice that gold is started another rally in mid-April and has been moving higher even since. Also note the price/SMA picture has slowly turned more bullish -- prices are above the SMAs, the shorter SMAs are above the longer SMAs and all the SMAs are now moving higher.


Also note the MACD is rising and



The RSI is moving higher as well. Also note the technical divergence circled on the chart. In April gold made two lows right around 85. But the RSI made a higher high on the second low. This is the kind of technical divergence that traders look for as it gives signals in advance of moves.

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Wednesday Commodities Round-Up

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Like all commodities, industrial metals took a nose-dive at the end of last year. Since then prices have consolidated in a sideways moving rectangle pattern and risen through the upside resistance line of that pattern. The MACD and the RSI are still rising, although the RSI has moved sideways for the last few weeks. Finally, prices are moving into the 10 week SMA and the 10 and 20 week SMAs are moving higher.

The daily chart better shows the consolidation of the last few weeks. Notice that prices have a slight upside bias but are really mired in a consolidation pattern. The MACD and RSI printed a lower number on the second top of the last month and a half, indicating an overall weakening. But prices have not crashed or moved significantly lower, indicating traders are contemplating their next move. The stochastics -- which are a better indicator in a trending market -- are printing a total right at 50. Although the long-term average is still moving higher (the 50 day SMA), the 10 and 20 day SMA are moving sideways. In addition, prices are tightly bound with the SMA indicating a lack of overall direction.

Like all commodities, agricultural prices took a nose-dive at the end of last year. Since then prices have consolidated in a triangle pattern and risen through the upside resistance line of that pattern. Prices are right below the 50 day SMA. A move through this level would be an important technical development. However, the 10 and 20 week SMA are tied in a tight range and neither is moving higher right now.


The daily chart is very interesting. Prices are consolidating above an important technical level. In addition, the RSI is printing right below 70 and the MACD is still rising (although it may be moving to give a sell signal soon). However, the price/SMA picture is very bullish -- prices are above all the SMAs, the shorter SMAs are above the longer SMAs and all the SMA are moving higher.

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Wednesday's Commodities Roundup

I'm going to break this into two different sections. First we'll take the CRB and Gold



Remember that overall the CRB has been rallying since the beginning of 2007. It has continually moved through upside resistance and made new highs. Also note the SMAs are in the most bullish alignment possible. The shorter SMAs are above the longer SMAs and all the SMAs are moving higher.



On the daily chart, notice that prices have been technically moving higher since late March. However, also notice that whenever prices have made new highs they have immediately fallen back to previous levels indicating traders are less than thrilled with the new highs.

An the SMA front, notice the following:

-- The 20 and 50 SMA are both moving higher

-- The 20 is greater than the 50, but the 10 is trading right at the 20.

-- All the SMAs are moving higher

-- Prices are above the SMAs

This is still a good alignment, but it could be better.



On the P&F chart, notice that prices have made continually made new highs.



On gold's weekly chart, notice that it has broken through support and is currently consolidating in a triangle pattern.



On the daily chart, notice that after hitting a new high in March the market has been selling off and is currently in a triangle consolidation pattern. Also note that prices and the SMAs are bunched up with little direction. This indicates a we really don't know what the next move will be.



On the P&F chart, notice the series of lower highs, indicating a general sell-off.

Gold's chart tells us that inflation expectations have dropped a bit. That's good news.

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More of Agricultural Prices

Below are some individual charts from the agricultural sector.



On the weekly corn chart, notice the clear rally/consolidate/rally pattern that has emerged over the last year and a half. Also notice that prices are currently consolidating at high levels.



On the daily chart, notice that prices are still in an uptrend, but they are clearly in a trading range for the last two months. On the SMA front, notice the following:

-- Prices are bunched up with the 10, 20 and 50 day SMA, indicating a great deal of indecision.

-- The 10 and 20 day SMA are both horizontal right now.

-- The SMAs are in a very tight range, indicating more indecision.



On the rice chart, notice that prices have now broken through support of a trend line that started at the end of January. Also notice the following:

-- The 10 and 20 day SMAs are both moving lower

-- The 10 and 20 day SMA have both moved through the 50 day SMA

-- Prices are below all the moving averages, which will keep pulling the SMAs lower.



On soy beans weekly chart, notice that prices broke the uptrend that started at the end of September, but are still in a longer-term trend that started at the end of September 2007. Also notice that prices are currently consolidating in a triangle pattern.



On soy beans daily chart, we can see the trend break far more clearly. Also notice that prices and the SMAs are tied up in a very tight range, with all the SMAs essentially giving a very neutral read.



On wheat's weekly chart, notice that prices have come down to late fall 2007 levels.



On the daily chart, notice the following:

-- The 10, 20 and 50 day SMA are all moving lower

-- The shorter SMAs are below the longer SMAs

-- Prices are running into upside resistance with the SMAs, implying prices are moving lower.

With the exception of corn (which has a huge boost from ethanol) all other agricultural commodities are coming down in price right now. That's good news for inflation.

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Wednesday's Commodities Roundup

Let's take a look at a few charts to see how these markets are doing.



The overall CRB index has been in a rally since the end of last summer and is still there. Notice the index broke through previous price levels at the beginning of this year and has been rallying since.



On the P&F chart, notice the prices broke through resistance but have since fallen back. The 427 - 433 area has proven tough to get through.



And on the daily chart, we see the difficulty in a bit more detail. Notice prices made two runs at the 422 area before getting through. And now after prices have moved through this area they have retreated a bit.

On the SMA front, notice that prices and the 10 and 20 day SMA are tangled up. The 20 day SMA and the 50 day SMA are still moving higher, but the 10 has stalled a bit. The 10 is more volatile, so this isn't the best long-term predictor. But notice it has stalled a bit as well.

The CRB may be stalling. As with all chart we'll have to wait and see how this plays out. It's also possible we're consolidating for the next move higher as well. So long as prices stay above the long-term trend that is always a possibility.



Agricultural prices have been a concern of mine for the last 6-9 months. So the latest price retreat is a welcome development from an inflationary perspective. However, several long-term uptrends are still in place, indicating the latest pennant formation could be a simple consolidation before we move higher.



On the P&F chart, notice the series of lower highs, indicating the upward pressure is easing.



On the daily chart, notice the following.

-- Overall, prices have moved to levels we saw at the beginning of the year

-- The short term SMAs are all pointing lower, with the smaller below the longer. This is a bearish configuration.

-- However, prices have moved through the 10 and 20 day SMA, and the resistance line that started at the recent peak of 509.12 has become support. That could be a sign the market is ready for another move higher.



On the three year gold chart, notice the long-term uptrend is in place but prices have retreated over the last few months. This indicates that inflation expectations are still looking at higher future prices, but traders are reevaluating the overall tenor of the economy to see if that could change.



On the P&F chart, notice we have three major price peaks at lower levels.



On the daily chart, we have several diverging trends.

-- Prices have dropped from their peak of 1033.90.

-- However, like the agricultural chart, we have resistance becoming short-term support along with a jumbled price/SMA picture. We need some more time with this chart for a long-term trend to develop.

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