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…

Nov 212014
 

PPLT (Physical Platinum Shares ETF) offers an objective long entry on this breakout above the bullish falling wedge pattern. T1 is the sole target at this time with additional targets likely to be added soon, depending on how the charts play out going forward. Suggested stop below 117.64 or higher if targeting only T1 although longer-term traders & investors might consider a scale-in strategy with higher price targets & wider stops.

With the $USD still in an uptrend and GLD currently still attempting to solidly take out the 115 level, more conservative traders & investors might opt to wait for those aforementioned events (dollar reversal & a confirmed GLD breakout) to occur before establishing a position. We’ve also yet to see a confirmed, end-of-day breakout in $PLAT (spot platinum prices) although keep in mind that the spot charts below are EOD (end-of-day) and reflect yesterday’s closing prices. Platinum futures are currently trading up nearly 2% so a close above the downtrend line on the daily spot chart below today is likely, barring a reversal into the close.

Daily chart of PPLT along with the daily & weekly charts of $PLAT (end-of-day spot platinum prices) below. Besides PPLT & futures, there are several other options for trading platinum although these are all thinly-traded ETFs: PGM, PTM, PLTM, LPLT, & SPPP. Click here for information on PPLT.

Nov 212014
 

SGG (Sugar ETF) will be added as an Active Long (swing) Trade & Long-term (investment) Trade here around the 41.45 level with a suggested stop slightly below the recent low of 39.55. Targets TBD. Daily chart of SGG and weekly chart of $SUGAR (spot sugar prices) below:

Nov 212014
 

As my primary focus remains on precious metals (gold, silver & the mining stocks) as well as select commodities (coal, crude oil and specific agricultural commodities), I continue to keep a watchful eye on the US dollar along with the Euro & Yen. With the US Dollar index trading higher overnight due to China’s first rate cut since mid-2012 along with some renewed jawboning from Mario Draghi threatening new stimulus measures to slay the deflationary dragon, it is worth noting that not only does the recent disconnect of the inverse correlation between the dollar vs. gold & oil continue, with both crude oil & gold trading sharply higher overnight in spite of the spike in the $USD, but should gold & oil hold onto (and especially continue to build upon) these overnight gains, both will have clearly taken out some key resistance levels: The aforementioned 114.70-115 former triple-bottom in GLD as well as the bullish falling wedge pattern on USO.

Also keep in mind that the technical case for the recent long trade in USO (crude oil etf) was two-fold: The bullish falling wedge pattern on the 120/60 minute time frame as well as the fact that USO had recent fallen to the bottom of a long-term support zone that has contained prices for over 5 years now (also while registering the most oversold reading on the weekly RSI since the global financial meltdown in late 2008). I had recently pointed out that USO was trading slightly below that support level so if these overnight gains hold, USO is currently poised to gap up right back to the bottom of that former support zone. As with my primary scenario in gold & silver, the recent break below key long-term support in USO would prove to be a bear-trap, should USO move solidly back above that support level.

In summary, although the day is still young, the pre-market action in both GLD & USO is poised to carry over to some potentially longer-term bullish technical events. The fact that gold & oil have been rising despite the recent strength in the dollar can only be viewed as bullish. Whether or not this proves to be a temporary disconnect between the typical correlation between these pairs is yet to be seen but if my call for a major reversal in the dollar does pan out, then gold, oil & most other commodities would likely move sharply higher.  The first chart below is the weekly chart of $XEU (Philadelphia Euro Index) that was posted on Oct 3rd, pointing out at that time that the EURO had about 2 1/2% downside left before reaching the bottom of a very large, well defined triangle pattern. The next chart is the update weekly of $XEU. Keep in mind this is an end-of-day chart & therefore, Draghi’s most recent jawboning is not reflected in this chart although as the third chart shows (real-time EUR/USD daily) the EUR is down just over 1%, which would currently put the $XEU much closer to that long-term support line.

note: This update was composed before the m

Nov 202014
 
USO 120 min Nov 20th

USO 120 min Nov 20th

USO (Crude Oil ETF) has broken above the bullish falling wedge pattern on the 120 & 60 minute time frames, thereby triggered the second, more conventional entry or an add-on to an existing position taken inside with wedge. I’ve added a minor horizontal resistance at the 28.95 level which, if cleared, would further increase the odds of this breakout sticking.

Nov 192014
 

The following charts were all covered in the recent trio of video updates. Starting with US equities, the $RUT (Russell 2000 Small Cap Index) continues to move lower after backtesting the dual resistance level defined by both its primary bull market uptrend line (blue) as well as the Fibonacci fan line that lines up perfectly with the primary uptrend line. As discussed in the recent Equity Market video, these Fib fan lines, generated off of the March 2009 lows, have done an excellent job of acting as support & resistance from above & below. If my call for a major correction in US equities by year-end/into early 2015 does pan out, the $RUT seems to have the most downside potential. It is also worth noting that unlike the large cap indices ($SPX, $NDX, $DJIA), the small caps have failed to make a new high since the March 5 & July 1st double-top high. Mid-caps (S&P 400 Mid-cap Index) are also still below the double-top highs that were printed around the same time although prices are only slightly below those former highs with the potential to form a triple-top pattern.

$RUT daily Nov 19th

$RUT daily Nov 19th

The first chart below is the daily chart of GLD (gold ETF) that was covered in the recent video whereby I had stated that GLD needs to regain the 115 level and remain above that level. So far, as expected, that large gap down from Nov 3rd has been backfilled and GLD is current challenging the 115 area (trading at 114.93 as I type). To reiterate, if GLD can regain & remain above this level, that would be a very bullish technical event that is likely to bring in new buyers as well as squeeze out some of the shorts that initiated positions on the recent breakdown. It is also worth noting the recent strength in gold and especially the mining stocks in spite of a rising dollar.

The second chart below is the weekly chart of GDX which shows prices continuing to move impulsively higher after the third tag (which is often the final touch) of the bottom of the aforementioned descending broadening wedge pattern, a potential bottoming pattern. Just to reiterate, on a valuation basis alone, the gold mining stocks look very compelling. Should gold (and silver) prices also start to move higher and begin to show signs of a likely trend reversal, the miners have the potential to be one the best performing sectors going into year end and well into 2015. However, there’s still a little more work to be done from a technical perspective to say with a fair degree of confidence that this lately rally is anything but an oversold rally/dead-cat bounce.

Moving on to the other dollar sensitive assets brings us to one of my favorite trades at this time,  USO (crude oil ETF), which I still believe is poised for a potentially sharp reversal following a bear market that has wiped nearly 30% off of the value of USO since the June 20th peak. As discussed in the recent video, both oil & coal have an even tighter inverse correlation to the US dollar than do gold & the gold stocks. Therefore, the success of the USO trade is hinges largely on a reversal in the $USD (3rd chart below). The fact that the USO trade is based off an intraday time frame (120-minute chart) is reflected in the fact that I am more confident in at least a tradable counter-trend correction in the dollar vs. an outright primary trend reversal. I still believe the latter is likely to occur soon but as of now, my focus is on a counter-trend pullback with an expected rise in USO from about 11% (T2) to 20% (T4, the current final target), depending on how the charts play out going forward. Also as mentioned in the video, the coal stocks are just coming off a very powerful run-up and KOL (coal sector ETF) recently ran into the former key support, now resistance level (17.25 area) and may need a little more time to digest the recent gains. The next buy signal in the coal sector will come on a solid break above  the 17.25 area as well as a bullish cross on the daily MACD (both lines) above the zero level.

In summary, I remain near-term bullish on crude oil (USO), gold & silver mining stocks (GDX, GDXJ, SIL, etc…) and near-term neutral but longer-term bullish on the coal stocks.  I also favor a resumption of the recent downtrend in US equities, especially small caps, but have yet to see enough technical evidence to justify adding short exposure at this time other than a very speculative/aggressive position. I’d rather focus on the miners & select commodities versus general equities until I get a better read on the broad market. However, I will say that simply glancing at the daily chart of the $SPX, $COMQ, etc.., I think at the very least, US stocks are looking at a period of sideways consolidation from this point and quite possibly, a considerable retracement of the recent sharp rise off of the mid-Oct lows.

Nov 182014
 
USO 120 minute Nov 18th

USO 120 minute Nov 18th

USO (crude oil ETF) was added as both a semi-aggressive long entry on Thursday with the expectation of an upside breakout of this bullish falling wedge pattern as well as a Long Trade Setup with a more conventional entry to be triggered on an upside breakout of the wedge. Since Thursday, prices have continued to drift slightly lower (about 50 cents) within the wedge but remain well within the typical breakout range of a bullish falling wedge pattern. As discussed in the recent Crude Oil, Coal & US dollar video, the success of this trade hinges largely on a reversal in the dollar.

The specific price targets (suggested sell levels) have been added to this updated 120-minute chart of USO. Price targets for long-side trades are set slightly below the actual resistance level (i.e.- where a reaction is likely) in order to help increase the odds of missing a fill, should the trade reverse just shy of resistance. Suggested stops would be based on at least a 3:1 R/R from the average entry price to the preferred price target(s).

Nov 172014
 

The SOYB (Soybean ETF) long trade hit the second target for a 13% gain last week. T3 (the downtrend line) remains the next target with the potential for additional targets to be added soon. As previously discussed, my preference on this trade is to use the charts of $SOYB (soybean spot prices) in lieu of SOYB (the soybean tracking ETF) in determining the entry & exit points on the soybean ETF as the ETF is thinly traded and the charts are not as clear. As with the other agricultural commodity trade ideas, SOYB has the potential to morph into a longer-term trend trade/investment depending on how they trade going forward. Previous & updated daily charts of $SOYB below:

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