Commodities Archives - Page 15 of 18

July 9, 2014

Commodities weak except for crude

Chinese stocks test long-term support
Commodities weaken
Crude oil remains high

China’s Shanghai Composite Index continues to test long-term support. 13-Week Twiggs Momentum holding below zero suggests continuation of the primary down-trend.

Shanghai Composite Index

Commodity prices are weakening, with Dow Jones-UBS Commodity Index breaking support at 133 to warn of another test of long-term support at 122/124. Reversal of 13-week Twiggs Momentum below zero would strengthen the signal.

Dow Jones UBS Commodities Index

Crude oil remains strong. The chart below plots WTI Light Crude over the consumer price index. The ratio is well above the historical average and is acting as a significant hand-brake on the post-GFC recovery.

Nymex WTI Crude

Considering the holes made in GDP (the green line) by crude oil spikes over the last 40 years, you can understand why Janet Yellen is reluctant to raise interest rates despite falling unemployment.

Nymex WTI Crude

July 3, 2014

Enough to make Gazputin grin

Chinese stocks drift lower
Crude oil rising
Other commodities weak

China’s Shanghai Composite Index continues to drift lower on the long-term, monthly chart.

Shanghai Composite Index

Apart from crude oil, commodity prices have fared little better. But crude plays such a dominant role in most commodity indices that they appear more buoyant. Dow Jones-UBS Commodity Index rallied to 140 before retracing for another test of primary support. Oscillation of 13-week Twiggs Momentum around zero, however, does not suggest a significant trend.

Dow Jones UBS Commodities Index

Crude oil is doing a lot better, heading for another test of $110/barrel on the back of supply threats from geo-political tensions. The ascending triangle is very large, but breakout would suggest a long-term target of the 2008 high at $145*.

Brent Crude and Nymex Crude

* Target calculation: 110 + ( 110 – 75 ) = 145

…Enough to make even Gazputin grin.

May 3, 2014

Crude and commodities retrace

The Dow Jones-UBS Commodity Index is again retracing to test support at 133/134, but is clearly in a primary up-trend (with breakout above 134 following earlier recovery of 13-week Twiggs Momentum above zero). Target for the advance is 144*. Reversal below 133 is unlikely, but would warn of a bull trap.

Dow Jones UBS Commodities Index

* Target calculation: 134 + ( 134 – 124 ) = 144

Crude oil, the most highly-traded commodity, is also retracing, with Nymex Light Crude headed for a test of primary support at $98/barrel*. Breach of support would signal a primary down-trend. Respect of support would indicate another test of $105. Brent crude, while declining slightly, would need to penetrate support at $104/barrel to signal a down-trend.

Brent Crude and Nymex Crude

* Target calculation: 105 + ( 105 – 98 ) = 112

April 14, 2014

Crude and commodities rising

Nymex Light Crude is headed for a test of resistance at $105/barrel*. Recovery of 13-week Momentum above zero indicates a primary up-trend. Breakout above $105 would confirm, offering a target of $112*. Brent crude, however, continues to range between $104 and $112/barrel.

Brent Crude and Nymex Crude

* Target calculation: 105 + ( 105 – 98 ) = 112

The Dow Jones-UBS Commodity Index respected its new support level at 134, confirming a primary up-trend. The signal reinforces earlier recovery of 13-week Twiggs Momentum above zero. Target for the advance is 143. Reversal below 134 is now unlikely, but would warn of a bull trap.

Dow Jones UBS Commodities Index

* Target calculation: 134 + ( 134 – 125 ) = 143

April 1, 2014

Gold losing its luster

Inflation pressures are easing and Elliot Clarke summarizes Westpac’s outlook for US inflation as follows:

This week we decompose the Personal Consumption Expenditure (PCE) deflator to assess what inflation pressures currently exist and how they are likely to develop. The conclusion is that the inflation picture argues for an extended period of extremely accommodative policy settings and it may even serve to delay the timing of the initial interest rate increase well beyond the timeframe currently envisaged by markets.

Soft treasury yields, a weak dollar and weaker gold price tend to support this view.

Interest Rates and the Dollar

The yield on ten-year Treasury Notes is ranging in a narrow band between 2.60 percent and 2.80 percent. Breakout above 2.80 would indicate an advance to 3.50 percent* — confirmed if there is follow-through above 3.00 percent — but declining 13-week Twiggs Momentum continues to warn of weakness. Breach of primary support at 2.50 percent is as likely and would signal a primary down-trend.

10-Year Treasury Yields

* Target calculation: 3.00 + ( 3.00 – 2.50 ) = 3.50

The Dollar Index is testing medium-term resistance at 80.50. Breakout would suggest that a bottom is forming, but only recovery above 81.50 would signal a trend change. 13-Week Twiggs Momentum oscillating below zero, however, is typical of a primary down-trend. Breach of primary support at 79.00 would signal a decline to 76.50*.

Dollar Index

* Target calculation: 79.0 – ( 81.5 – 79.0 ) = 76.5

Gold and Silver

Silver failed to imitate gold’s performance in the first quarter and is headed for a test of primary support at $19/ounce. 13-Week Twiggs Momentum likewise failed to cross to above zero, suggesting continuation of the primary down-trend. Breach of primary support would offer a target of $16, while respect of support would test resistance at $22/ounce.

Spot Silver

Spot gold is undergoing a strong correction, having breached the rising trendline and support at $1320/ounce. The outlook remains bullish, but breach of primary support by Silver or continued decline of 13-week Twiggs Momentum below zero would negate this. Failure of primary support at $1200 is unlikely, but would offer a target of $1000/ounce*.

Spot Gold

* Target calculation: 1200 – ( 1400 – 1200 ) = 1000

Copper

Copper is a commodity rather than a precious metal, but is also used as a store of value. At present, copper is testing long-term support at $6800/tonne. Follow-through below $6600 would signal continuation of the primary down-trend to $6000/tonne*. Recovery above the descending trendline (at $7000) is unlikely, but would suggest that a bottom is forming.

Copper

* Target calculation: 6750 – ( 7500 – 6750 ) = 6000

March 18, 2014

Dr Copper: China weakening

Falling copper prices reflect a weakening Chinese economy. Follow-through below $6600/tonne, after breaching primary support at $6800, signals a primary down-trend.

Copper

March 11, 2014

Commodities retrace

The Dow Jones-UBS Commodity Index is retracing to test its new support level at 134. Respect would confirm the primary up-trend, signaled by the earlier breakout and recovery of 13-week Twiggs Momentum above zero. But a falling Shanghai Composite Index warns of weakening demand. Reversal below 134 would suggest a bull trap.

Dow Jones UBS Commodities Index

* Target calculation: 128 + ( 128 – 122 ) = 134

February 20, 2014

Crude and commodities signal recovery

The Dow Jones-UBS Commodity Index followed through above resistance at 128, after breaking its descending trendline, completing a double bottom reversal with a target of 134*. Breakout above 134 would confirm a primary up-trend.

Dow Jones UBS Commodities Index

* Target calculation: 128 + ( 128 – 122 ) = 134

Nymex Light Crude followed, completing a large double bottom reversal, with a target of $110/barrel*. Recovery of 13-week Momentum above zero indicates a primary up-trend. Brent crude continues to range between $106 and $112/barrel.

Brent Crude and Nymex Crude

* Target calculation: 100 + ( 100 – 90 ) = 110

Rising commodity prices suggest that the global economy is recovering, but copper (widely considered a bellwether for the global economy) has yet to follow. Bullish divergence on 13-week Twiggs Momentum favors an upward breakout. Breakout above $7500/tonne (and the descending trendline) would signal a primary up-trend.

Copper

February 10, 2014

Commodities follow Shanghai Composite

Copper prices, bellwether for the global economy, have been consolidating in a narrow band for almost a year. Breakout above $7500/tonne (and the descending trendline) would indicate a primary up-trend. Reversal below support at $6800/tonne, however, would offer a target of $6000. Narrow oscillation of 13-week Twiggs Momentum around zero reflects the current indecision.

Copper

The monthly chart below illustrates how the Shanghai Composite Index tends to lead broad commodity prices by up to 12 months. The Dow Jones-UBS Commodity Index is testing its descending trendline, but another decline on the Shanghai Index would likely cause further weakness. Recovery above 135 is unlikely at present, but would suggest a primary up-trend.

Dow Jones UBS Commodities Index

January 22, 2014

Crude and commodities still bearish

Nymex crude continues its downward trend. Respect of the descending trendline would warn of further weakness, while breach of support at $92 would indicate a decline to $84/barrel*. Recovery above $100 is unlikely, with 13-week Twiggs Momentum declining below zero. Brent crude continues its consolidation above $105, reflecting global supply constraints. Breach of $105 would warn of a down-trend.

Brent Crude and Nymex Crude

* Target calculation: 92 – ( 100 – 92 ) = 84

Commodities also continue their primary down-trend, encouraged by a falling Shanghai Composite Index. Bullish divergence on Dow Jones-UBS Commodity Index 13-week Twiggs Momentum, however, warns that a bottom is forming. Breach of the descending trendline would strengthen the signal — as would recovery of Momentum above zero. Breakout above 128 would signal a primary up-trend: a bullish sign for resources stocks.

Dow Jones UBS Commodities Index