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February 9, 2012

Commodities: Copper and crude rise for different reasons

Copper continues in a primary up-trend, driven by speculative demand with a weakening dollar and anticipation of a US recovery. Retracement that respects support at 8000 on the weekly chart would strengthen the signal.

Grade A Copper

Brent Crude broke resistance at $115/barrel for altogether different reasons. Further disruption of supplies from Nigeria and heightened tensions as the US increases pressure on Iran raise concerns about future supply. Expect retracement to test the new support level; respect would confirm a new primary up-trend.

Brent Crude

* Target calculation: 115 + ( 115 – 100 ) = 130

The broader CRB Commodities Index has breached its declining trendline, but proceeds at a slower pace. Breakout above 325 would signal the start of a primary up-trend, with an initial target of 350*. Recovery of 63-day Twiggs Momentum above zero would strengthen the bull signal.

CRB Commodities Index

* Target calculation: 325 + ( 325 – 300 ) = 350

January 25, 2012

Gold & Commodities: Copper breakout as dollar weakens

The US Dollar Index has retraced to test medium-term support at 79.50. Respect would confirm a strong primary up-trend, while failure would suggest trend weakness. 63-Day Twiggs Momentum above zero still indicates a primary up-trend, but breach of the rising trendline warns that the up-trend is slowing. A weakening dollar is likely to cause stronger commodity prices.

Dollar Index

* Target calculation: 80 + ( 80 – 75 ) = 85

The weekly chart shows spot gold testing its descending trendline. Respect would indicate another test of primary support at $1500/ounce, while breakout would suggest that a bottom is forming. Reversal of 63-day Twiggs Momentum below zero would complete an iceberg pattern, warning of a primary down-trend. The bull-trend of the last few years was driven by quantitative easing (QE1 and QE2) from the Fed. We are unlikely to see another bull-trend without QE3.

Spot Gold

* Target calculation: 1600 – ( 1800 – 1600 ) = 1400

Copper broke through resistance at $8000/tonne, completing a higher trough and signaling a primary up-trend. Recovery of 63-day Twiggs Momentum above zero would strengthen the signal. The primary up-trend in this bellwether commodity suggests an economic recovery is under way.

Copper A Grade

* Target calculation: 8000 + ( 8000 – 7200 ) = 8800

The broader CRB Commodities Index, however, lags behind. Breach of the descending trendline indicates a base is forming, but only recovery above 325 would signal a primary up-trend. Cross-over of 63-day Twiggs Momentum above zero would strengthen the bull signal.

CRB Commodities Index

Brent crude is also forming a base, after breaching its descending trendline. Breakout above 115 would signal the start of a primary up-trend.

Brent Crude Afternoon Markers

* Target calculation: 115 + ( 115 – 105 ) = 125

December 7, 2011

Copper Bets Flash a Warning – WSJ.com

“….Copper is telling us that while the U.S. equity markets are being priced by such frivolous things as U.S. holiday retail sales, the global economy is experiencing a deceleration in growth [that will become evident] in the first half of next year,” said Jason Schenker, president and chief economist at Prestige Economics LLC.

via Copper Bets Flash a Warning – WSJ.com.

November 17, 2011

Commodities and crude

The CRB Commodities Index remains in a primary down-trend. Respect of the descending trendline, with reversal below 315, would warn of another decline. Breakout above the descending trendline is less likely, but would indicate that the down-trend is weakening. 63-Day Twiggs Momentum penetrated its descending trendline but remains below zero, suggesting that the down-trend has slowed but not reversed.

CRB Commodities Index

* Target calculation: 295 – ( 325 – 295 ) = 265

Copper rallied to test its descending trendline at $8000/tonne. 63-Day Twiggs Momentum deep below zero indicates a strong primary down-trend. Breakout above $8000 would indicate that the down-trend is weakening, while respect of the descending trendline would warn of a decline to 6000*.

Copper Grade A

* Target calculation: 7000 – ( 8000 – 7000 ) = 6000

Brent Crude broke out above its trend channel, indicating that it is forming a base above $100/barrel. 63-Day Twiggs Momentum recovered above zero to confirm the breakout. Expect retracement to test primary support at $100, but respect is now likely and would suggest a primary up-trend.

Brent Crude Afternoon Markers

* Target calculation: 5600 – ( 6600 – 5600 ) = 5100

Nymex WTI crude is rising sharply, closing the divergence from Brent crude. News of the Seaway pipeline reversal that will relieve congestion at the Cushing, Oklahoma hub sent crude futures soaring. Expect a short retracement followed by an advance to $115.

Nymex WTI Crude

Conclusion: Commodities remain in a primary down-trend caused by the strengthening dollar. Brent crude is forming a bottom, but rising crude prices are likely to dash hopes of an early economic recovery. Falling commodity prices should cause sympathetic weakening of the Australian Dollar and Canadian Loonie.

September 26, 2011

CME Raises Gold, Silver, Copper Margin Requirements – WSJ.com

Exchange operator CME Group Inc. will raise the collateral requirements for trading in gold, copper and silver futures after a volatile week.

Gold margins will be raised by 21%, silver margins by 16%, and copper margins by 18%, effective at the close of trading Monday, CME said in an email after trading closed Friday.

via CME Raises Gold, Silver, Copper Margin Requirements – WSJ.com.