Gold & Commodities

The Gold & Commodities category is a sub-section of General Market Analysis that includes charts and commentary associated with precious & industrial metals such as gold, silver, and copper as well as various commodities such as oil, gas, wheat, corn, etc…

Aug 192014
 

This video covers the three primary themes that have largely guided my investment & trade idea selection for 2014 & will likely do so for remainder of the year and into 2015. This video is longer than usual so for those wishing to skip ahead to a particular section, the following topics are covered in this order:

  1. A general overview of the three main themes for 2014: Bullish gold, silver & the associated mining stocks with the mining sector significantly outperforming US equities YTD; A more significant correction in US likely before year-end; New bull markets may be close at hand with select commodities such as coal, rare earth stocks, and certain agriculture commodities.
  2. An overview of gold & the precious metals mining sector including YTD performance statistics.
  3. An overview of the US equity markets.
  4. A look at some of the more promising commodities for the remainder of 2014 & likely into 2015 including the outlook for DBA (agricultural commodities ETF), wheat, corn, the coal sector and aluminum (as an example of a commodity sector poised for a correction and why I continue prefer a very selective vs. broad-based approach to commodities as with equities in general).

 

Aug 192014
 
ANR daily Aug 19th

ANR daily Aug 19th

ANR (Alpha Natural Resources) has reached the first profit target, T1 at 4.08, for a 13.3% profit. ANR was added directly as an Active Long Trade just over a week ago and has moved up sharply since, allowing the opportunity to either book quick profits here (full or partial) or raise stops to protect profits, for those holding out for the next target. T2 (4.70) remains the final target at this time although additional targets may be added to the ANR trade depending on how the coal stocks trade going forward (see Thurday’s post on ANR for the notes & charts of the coal sector).

I just completed a comprehensive video that covers my three main themes for 2014 & likely heading into 2015 including the gold & silver mining sector, an overview of the US equity markets, and select commodities including the agricultural and the coal sector. The video is currently being processed & uploaded and should be published within the next 30 minutes although I also have a technician en route to repair some issues with my internet connection that could take me off-line for a while today in which case the video will be posted later this afternoon.

FYI- In addition to ANR hitting the first target today, another coal stock trade setup, ACI (Arch Coal) has triggered an entry today. Click here to view the previous notes & live chart on ACI.

Aug 152014
 

I didn’t hit me until I saw the Russian/Ukraine-induced reversal in GLD a few minutes ago when I checked the 60 minute chart on GLD that I had mistakenly listed the support on GLD which gold was likely to find support at earlier today. In the post that I drafted shortly before the open today I had mistakenly referred to the 124.40 support level in GLD as the 125.40 support level. I had been watching gold futures and the streaming intraday chart of GLD (shown below) and in a rush to try and get that post out as close to opening bell as possible, as I was expecting a likely reversal off the 124.40 area, I had mistakenly referred to it as 125.40 and also mistakenly added that level to the updated 60 minute chart even though GLD was trading about $1 below that level at the time as shown here in the intraday chart.

 

Obviously the reports of an incident with that Russian convoy in the Ukraine that hit the headlines around the time GLD bottomed today at 124.42 certainly gave some tailwinds to the bounce off that level today. Call it lucky timing or the charts playing out (or a little of both) but so far, we are now looking at a successful backfill of that large Aug 6th gap that took GLD clearly out of that 60-120 minute bullish falling wedge pattern. From here, a break above the recent highs of 126.81 would be the next buy signal in GLD while a break below the 124.40 support and especially the 123 support level be bearish.

Aug 152014
 
GLD 60 minute Aug 15th

GLD 60 minute Aug 15th

By the time I get this post out, GLD should have gapped down at the open to around this support level that comes in around 125.40, a level defined by several recent price reactions as well as three gaps. I am viewing this as a opportunity to add some more exposure to GLD & the mining sector and as long as GLD remains above the 123ish support level, the intermediate-term outlook is intact IMO. Note, this chart was made in pre-market & does not yet show the opening prices although I have added the 125.40ish support level.

Aug 142014
 

The SPY is now at the bottom of the R3 zone. A reversal is likely either here or at the top of the zone (gap), while a break above that level would likely send prices to new highs. The QQQ is currently backtesting both the blue uptrend line as well as a horizontal resistance level defined by three recent gaps. The recent bullish falling wedge breakout in GLD is still well intact with gold prices continuing higher since the breakout.

Overall I remain somewhat cautiously bearish on equities, primarily the regional banking sector and other financial related stocks although I have a fairly diversified portfolio of individual shorts scattered amongst various sectors. I also remain bullish on gold & the mining sector as well as a few select commodities, including WEAT, CORN & select coal stocks in additional to a few miscellaneous long positions. While new highs in the US broad markets is certainly a possibility in the coming days/weeks, I continue to believe that the rally since the second & final near-term downside target (T2) on the SPY 60 minute chart was recent hit is simply the first counter-trend bounce in the early stages of a more substantial correction in stocks. As such, I have continued to add short exposure up to this level but from this point forward, will only add short exposure below these current resistance levels on the SPY & QQQ or on the most compelling individual short setups. As is most often the case, my stops are based on the individual technicals of each position and not what the broad market does although the bearish scenario will begin to rapidly deteriorate should the markets move much above these current resistance levels.

 

For those that prefer trading the broad markets (SPY, DIA, QQQ, MDY, IWM) or any of the related inverse or leveraged ETFs, options or futures contracts, I’d have to say that a short around current levels with a stop over the recent highs, particularly for the $SPX & $NDX (SPY, SDS, QQQ, QID, ES, NQ, etc…), offers a unusually attractive risk/return ratio with minimal downside if stopped out compared to the potential downside, should the $SPX & $NDX join the $RUT (small cap), $MID (mid-caps), and $DJIA (DJ Industrials/blue chip, large caps), all of which have recently broken below their bull market uptrend lines generated off the 2009 lows. I would also have to add that any shorts on the broad markets at this time are still counter-trend trades until/unless we see both the $SPX, $NDX, & $RUT join the $DJIA & $MID in breaking down below their respective bull market trendlines and as such, should be considered aggressive trades, unless used as a hedge against existing long positions.

The bottom line on both equities and gold is that the next major leg, up or down, should be decided soon: Some of the major US stock indices like the $SPX & $NDX are just a stone’s throw away from making new all time highs (bullish) while just below sit those all-important bull market uptrend support lines. Gold, although up a respective 10% YTD and the gold mining sector (GDX) up about 33% YTD, still has some work to do in order to help add to the case that a new cyclical bull market is underway, namely a break above the highs made back in mid-March. Both the mining stocks as well as US equities have been much more conducive to active trading (swing trading) so far this year vs. buy & hold strategy and my expectation for the remainder of the year would be much of the same (trader’s market) although I am treating my most recent move back into the mining stocks as longer-term positioning for the next major leg up, unless stopped out or the charts convince me otherwise.

Aug 132014
 
ACI daily Aug 13th

ACI daily Aug 13th

ACI (Arch Coal Inc) is one of several coal stocks on my watchlist that may be poised for primary trend reversal following a powerful bear market in the coal related stocks. ACI will trigger a long entry on any move over 3.25, which will have clearly taken the stock above both this bullish falling wedge pattern as well as this resistance zone. Suggested stops using a 3:1 R/R based on one’s preferred target(s).  Also note that I currently have three likely profit targets listed, T1-T3, along with the first decent resistance level, R1, which comes in around the 3.45.-3.48 area. That level could also be used as an early target for those preferring to book quick profits while there are also two additional resistance levels above T3 which may be added as additional price targets, depending on how both ACI and the coal sector perform going forward.   click here to view the live, annotated daily chart of ACI

As recently mentioned in the ANR long trade entry post (which can be viewed here), I’ve been monitoring some potentially bullish developments on the coal sector and have about a half-dozen coal stocks on my watchlist at this time. Some of those charts need a little more work while there are a few others that have either recently broken out or are getting close and as such, will be added as Trade Setups and/or Active Trades soon.

Also keep in mind that although the coal sector, including the ETF KOL, appears to be carving out a potential bottom, it is still too early to officially declare that the bear market in the coal stocks has ended and as such, best to adjust your position size on these trade ideas accordingly, especially on some of the lower priced and more volatile coal stocks, should you decide to play the sector via individual stocks vs. the KOL ETF (which is not yet an Active Trade at this time).

ACI will be added as both a Long Trade Setup (a typical swing trade, with an expected holding period ranging from a couple of weeks to several months) as well as a Long-term Trade Setup (trend or investment trades with above average return potential and holding periods of typically 6-12 months or more).

Aug 122014
 
GDX weekly Aug 12th

GDX weekly Aug 12th

The Inverse Head & Shoulders bottoming pattern on the GDX (Gold Miners ETF) is now fully formed with volume patterns confirming this potentially powerful reversal pattern. With prices currently up against the neckline, any solid weekly close above the pattern would trigger a long-term buy signal for the miners although my preference will be to see any breakout of this IHS pattern confirmed by a bullish breakout in GLD, as per the recently discussed criteria. My price target, should both GDX and GLD confirm the long-term buy signals, would be the 38.50-39.00 area with the first and only major resistance area before then expected to come in around the 31.30ish area. As such, should both GLD & GDX trigger these long-term buy signals, my expectation would be to see the miners play out per this scenario drawn with the orange lines: A sharp move towards the 31.30 area, followed by a tradeable pullback off that resistance area, then followed by one final thrust up to the 38.50-39.00 target area.

Astute Ellioticians might notice how well this scenario fits into a basic 5 wave sequence with wave 1 (up) starting from the Dec 31st lows (i.e.-bottom of the head), wave 2 down being the move from the NL down to the bottom of the right shoulder, wave 3 up in progress now and to be continued until the 31.30sih pullback target (and yes, wave 3 would measure as the most powerful wave, should the pullback (wave 4) be relative minor as expected), and finally followed by a 5th wave up to hit the final target area of 38.50-39.00.

Sounds almost too perfect and as I always say, predicting future price moves is a lot like forecasting the weather; the cone of accuracy widens along with the time period of the forecast.  e.g.- Mr. Weatherman can tell you with a fair degree of accuracy the chance of rain tomorrow and throughout the week as well as the expected temperatures but not so much what conditions will be like 3-6 months from now. As with weather forecasting, a market technician must continually revises and adjust his/her expectation of where prices are headed as the data (chart/price action) changes over time.

One final note to add: Assuming gold continues to move higher and this IHS pattern on GDX goes on to breakout soon, one variation to this scenario would be to allow for the possibility of a backtest of the neckline shortly following the breakout, a fairly common occurrence.

s2Member®