Tag: DJ-UBS Commodity Index

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Commodities declining

63-day Twiggs Momentum is forming another peak below zero, warning of further downside on the Dow Jones-UBS Commodity Index. Reversal below -5% would strengthen the bear signal. Failure of support at 136 would warn of another test of the 2012 low at 126. Recovery above 144 is unlikely but would suggest a rally to 152.

US Dollar Index

* Target calculation: 150 + ( 150 – 125 ) = 175

Rising commodities — other than gold and oil where other factors need to be considered — would suggest a recovering global economy and further gains for stocks in the year ahead. A fall in commodities, however, would warn of slack global demand and a more bearish outlook for stocks.

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Gold and commodities rising

Gold is forming a base between $1650 and $1700/ounce on the daily chart. Upward breakout would offer an initial target of $1750/ounce. Oscillation of 63-day Twiggs Momentum close to the zero line indicates consolidation but beware of a peak below zero — or reversal below $1650 on the spot chart — which would warn of another down-swing.

Spot Gold

* Target calculation: 1700 + ( 1700 – 1650 ) = 1750

Silver displays a similar long-term pattern to gold, albeit with a sharper spike in 2011. Bullish divergence on 63-day Twiggs Momentum suggests an up-trend. Breakout above $35/ounce ($1800 in the case of gold) would signal a long-term advance.

Silver

Brent and Nymex crude both threaten an upward breakout from their recent consolidation — which would signal a primary advance to their 2012 highs.

Crude Oil

Commodity prices are also improving, with Dow Jones-UBS Commodity index displaying a bullish divergence on 63-day Twiggs Momentum. Breakout above 150 would complete an inverted head and shoulders reversal with a target of 175. Rising commodities — other than gold and oil where other factors need to be considered — would suggest a recovering global economy and further gains for stocks in the year ahead.

US Dollar Index

* Target calculation: 150 + ( 150 – 125 ) = 175

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Is gold really undervalued?

I agree with James Turk that gold is a currency. It does not generate income and is simply a store of value. Demand for gold will rise in times of uncertainty and when fiat currencies, against which it is traded, are being debased by central bank balance sheet expansion. Now central banks have been printing money since the global financial crisis in 2008, so why is gold not soaring into the stratosphere as Turk predicts?

Spot Gold

The answer lies with global deleveraging. Central banks are attempting to counter the strong deflationary effect of private sector debt repayment. The inflationary effect of their activities is largely offset by deflationary forces emanating from the GFC. If we compare the performance of gold to the CRB and DJ-UBS Commodity Indices it is clear that most commodities have not risen in tandem with gold and there is little evidence of inflation.

US Dollar Index

Copper recovered after the GFC but also seems to have hit a ceiling.

US Dollar Index

Only Brent Crude shows similar price escalation to gold. Nymex WTI Crude is far more subdued.

US Dollar Index

Without strong inflation, gold is unlikely to continue its meteoric rise. More so if there is a down-turn in crude oil and copper. Watch closely.

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Gold and commodities find support

A look at the long-term (monthly) chart shows gold undergoing a correction before encountering support at $1650/ounce. Recovery above $1700 would re-test resistance at $1800, the higher trough suggesting resumption of the primary up-trend. Breakout above $1800 would confirm. A 63-day Twiggs Momentum trough close to the zero line would strengthen the signal, while reversal below zero would suggest that the 5-year bull-trend is over and a test of primary support at $1500 likely.

Spot Gold

Commodity Prices are a good predictor of stock market performance. Dow Jones-UBS Commodity Index retreated from 150 but support around 140 would indicate another attempt at a breakout — and recovery above 144 would strengthen the signal. Rising Twiggs Momentum suggests a primary up-trend but only breakout above 152 would confirm.

US Dollar Index

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Weaker commodities threaten down-turn

Commodities remain weak despite the softer dollar, with the DJ-UBS Commodity Index hovering above support at 140 on the weekly chart. Breach of support would test the primary level at 125/126, warning of a global economic down-turn. Reversal of 63-day Twiggs Momentum below zero would also suggest a down-trend.

DJ-UBS Commodity Index

The gap between Nymex WTI Light Crude and ICE Brent Crude  Middle East widened to $24/barrel as a result of tensions in the Middle East. 63-Day Twiggs Momentum holding below zero suggests a primary down-trend despite the weaker dollar.

Nymex WTI Light Crude

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Gold long tail as dollar retreats

Yesterday’s long tail on the spot gold daily chart indicates support at $1700 per ounce. Recovery above $1750 would signal another test of $1800. 63-Day Twiggs Momentum well above zero continues to indicate a healthy up-trend. A weakening dollar would strengthen the signal.

Spot Gold

* Target calculation: 1800 + ( 1800 – 1700 ) = 1900

The Dollar Index (weekly chart) is testing medium-term support at 80. Failure would threaten a head-and-shoulders reversal. Breach of primary support at 78.50 would offer a target of 74*. 63-Day Twiggs Momentum holding below zero already suggests a primary down-trend. Recovery above 81.50 is unlikely but would indicate an advance to 84.

US Dollar Index

* Target calculation: 79 – ( 84 – 79 ) = 74

The DJ-UBS Commodity Index (weekly chart) respected support at 140, helped by the weaker dollar. 63-Day Twiggs Momentum above zero suggests a primary up-trend but reversal would re-test primary support at 126.

DJ-UBS Commodity Index

Nymex WTI Light Crude and ICE Brent Crude both trend downwards but the gap between the two is widening. Middle East tensions affect Brent Crude supply more than its West Texas cousin. 63-Day Twiggs Momentum holding below zero warns of a primary down-trend. Breach of primary support would confirm: WTI at $78 per barrel and Brent Crude at $90.

Nymex WTI Light Crude

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Gold strengthens as dollar retreats

Long tails on the last two days of the spot gold daily chart indicate strong support at $1700 per ounce. Breakout above $1740 would indicate another test of $1800. 63-Day Twiggs Momentum well above zero suggests a healthy up-trend. A weakening dollar would strengthen the signal.

Spot Gold

* Target calculation: 1800 + ( 1800 – 1700 ) = 1900

The Dollar Index (weekly chart) retreated below resistance at 81. Follow-through below 80 would test primary support at 78.50, while failure of primary support would complete a head-and-shoulders reversal with a target of 74*. 63-Day Twiggs Momentum holding below zero already suggests a primary down-trend. Breakout above 81.50 is unlikely but would indicate an advance to 84.

US Dollar Index

* Target calculation: 79 – ( 84 – 79 ) = 74

The DJ-UBS Commodity Index (weekly chart) respected support at 140. The 63-day Twiggs Momentum trough above zero suggests a primary up-trend. A weakening dollar would strengthen the signal, while breakout above 152 would confirm. Breach of 140 is unlikely but would test primary support at 126.

DJ-UBS Commodity Index

Nymex WTI Light Crude and ICE Brent Crude are both trending downward. The 63-day Twiggs Momentum peak at zero warns of a primary down-trend. Breach of primary support would confirm: WTI at $78 per barrel and Brent Crude at $90.

Nymex WTI Light Crude

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The Gold-Euro-Dollar conundrum Part II

Last week we discussed conflicting signals from the euro and US dollar. The Dollar Index and the euro are normally plotted inversely to each other.  I have reversed this on the chart below.  As expected, with the euro the largest component (57.6 percent) of the dollar index weighted basket of currencies, there is a strong correlation.  Divergences between the two seldom last as traders “arbitrage” the differences.

The rising Dollar Index is testing resistance at 81.50. Respect of resistance would threaten a head-and-shoulders reversal — with a target of 74* — following a breakout below primary support at 78.50. Falling 63-day Twiggs Momentum, below zero, already suggests a primary down-trend. But recovery above 81.50/82.00 would negate this, indicating another primary advance.

US Dollar Index

* Target calculation: 79 – ( 84 – 79 ) = 74

Spot gold (daily chart) is testing short-term support at $1700 per ounce. Respect of support would reinforce the earlier trendline break, suggesting another test of $1800. But a stronger dollar and failure of support at $1675 would indicate a more severe correction.

Spot Gold

* Target calculation: 1800 + ( 1800 – 1700 ) = 1900

The DJ-UBS Commodity Index (weekly chart) continues to test support at 140. A 63-day Twiggs Momentum trough above zero would indicate a primary up-trend. Recovery above 152 would confirm. A stronger dollar and breach of 140, however, would test primary support at 126.

DJ-UBS Commodity Index

Nymex WTI Light Crude and ICE Brent Crude are both headed for a test of primary support: WTI at $76/$78 per barrel and Brent Crude at $90. The 63-day Twiggs Momentum peak below zero warns of a primary down-trend.

Nymex WTI Light Crude

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The Gold-Euro-Dollar conundrum

The Euro broke support at $1.28 against the greenback (weekly chart). Respect of the descending trendline warns of a down-swing to test primary support at $1.20. Reversal of  63-day Twiggs Momentum below zero would strengthen the signal. But the Dollar Index and Gold suggest the opposite. Recovery above $1.28 would indicate a bear trap.
Euro

The Dollar Index is inversely rising to test resistance at 81/81.50. Breakout would indicate another test of 84.00 but 63-Day Twiggs Momentum below zero warns of a primary down-trend. Rising gold also suggests dollar weakness. Reversal below support at 78.50 would complete a head-and-shoulders reversal with a target of 74*.

US Dollar Index

* Target calculation: 79 – ( 84 – 79 ) = 74

Spot gold (daily chart) broke resistance at $1725 per ounce, signaling an advance to $1900*. The 63-day Twiggs Momentum trough above zero indicates a primary up-trend. Breakout above $1800 would confirm. The conundrum is the euro is weakening and dollar index strengthening but gold is rising rather than weakening as expected.

Spot Gold

* Target calculation: 1800 + ( 1800 – 1700 ) = 1900

The DJ-UBS Commodity Index (weekly chart) found support at 140. 63-Day Twiggs Momentum is testing zero. Respect would indicate a primary up-trend. Recovery above $1.52 would confirm. Breach of $140, however, and 63-day Twiggs Momentum below zero, resulting from a strengthening dollar and/or global down-turn, would test primary support at 126.

DJ-UBS Commodity Index

Nymex WTI Light Crude is headed for a test of primary support at $76/$78 per barrel. Declining 63-day Twiggs Momentum, below zero, warns of a primary down-trend. Brent Crude is also weakening, headed for test of primary support at $90.

Nymex WTI Light Crude

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Gold and dollar test support

The Dollar Index (daily chart) broke medium-term resistance at 80 before retracing to test the new support level. Penetration of the descending trendline indicates the correction has ended. A long tail on Wednesday indicates (short-term) buying pressure; respect of support would signal an advance to 81. But the primary trend is downward — reflected 63-day Twiggs Momentum oscillating below zero — and breach of support at 79 would signal a decline to 75*.

US Dollar Index

* Target calculation: 78 – ( 81 – 78 ) = 75

Still on the daily chart, spot gold found short-term support at 1700, penetrating the descending trendline. A stronger dollar would suggest further gold weakness but the $DXY primary trend remains down. Expect another test of $1700 but respect would signal a rally to $1800 per ounce*. A 63-day Twiggs Momentum trough above zero would signal a primary up-trend, while breakout above $1800 would confirm.

Spot Gold

* Target calculation: 1650 + ( 1650 – 1500 ) = 1800

The DJ-UBS Commodity Index (weekly chart) reflects an easing inflation outlook, breach of medium-term support at 145 signaling a correction. A 63-day Twiggs Momentum trough above zero would suggest a primary up-trend, while a fall below zero would mean further weakness.

DJ-UBS Commodity Index

Brent Crude (weekly chart) is testing support at $108 per barrel. Breakout would indicate a decline to $100. Reversal of 63-day Twiggs Momentum below zero would strengthen the bear signal.

ICE Brent Crude Afternoon Markers

* Target calculation: 108 – ( 117 – 108 ) = 99

Nymex WTI Light Crude is falling faster, headed for a test of primary support at $76/$78 per barrel. A 63-day Twiggs Momentum peak below zero warns of a primary down-trend.

Nymex WTI Light Crude

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