Thursday, March 10, 2011
Silver Chart update
It's been a busy day today with a lot of action and quickly changing markets but here is an afternoon chart of silver. It looks like it was able to stave off the selling and recapture support near $35 which is promising particularly as we are now finally seeing some good upside volume compared to what we have been getting recently.
First order of business for the bulls is to get the price back over $35.50 and keep it there.
If they run and let the sellers get aggressive, today's low near $34.75 needs to hold to prevent a run back down towards $34.40 - $34.30
First order of business for the bulls is to get the price back over $35.50 and keep it there.
If they run and let the sellers get aggressive, today's low near $34.75 needs to hold to prevent a run back down towards $34.40 - $34.30
S&P 500 Looking very Heavy
Ever since Crude Oil began rallying, the US equity markets have been encountering stiff headwinds. Today, even with crude moving lower, stocks have been unable to get much of a bounce higher although they did attempt moving higher around midday. That bounce ran into eager sellers and down it went again.
From a technical perspective, this is the first time since August of last year than the S&P has dropped below the 50 day moving average and not bounced off of it. How it closes today will therefore be closely watched by technicians to see if we are going to experience a deeper pullback in stocks than we have thus far experienced this year.
On the daily chart the big down day in late February is now looking more and more like it was the near term top in a 6 month nearly vertical rally.
From a technical perspective, this is the first time since August of last year than the S&P has dropped below the 50 day moving average and not bounced off of it. How it closes today will therefore be closely watched by technicians to see if we are going to experience a deeper pullback in stocks than we have thus far experienced this year.
On the daily chart the big down day in late February is now looking more and more like it was the near term top in a 6 month nearly vertical rally.
Volatility, Volatility and more Volatility
There are several things at work in today's session - Commodities in general are getting sold as profit taking and some fresh shorts looking to pick tops are coming in. Copper continues to show signs of weakness with some talking about its chart pattern as indicative of expectations for a slowdown in global growth.
That is being fed by news of China's trade balance which has some talking about a slowdown in Chinese growth. I personally do not buy into that thinking as I think the data was skewed by the Lunar New Year holiday.
The USDA reports were viewed by most in the market as bearish for wheat, and not particularly friendly for corn although the numbers are certainly not bearish for corn. Beans are higher shrugging off weakness from its neighbors.
This is feeding through to the CCI which is falling today.
With crude oil sharply lower, the precious metals are getting hit with a strong round of selling that is being fed also by a move higher in the Dollar as the Euro is getting pounded over re-emerging fears of sovereign debt issues with the downgrade of Spain by Moody's.
All in all, selling is hitting nearly everywhere with the exception of the Dollar and the US bond market. US equities are off their worst levels of the session as bulls are buying the dip especially with the weakness in crude oil.
The crude oil market is obviously not expecting much to come of the so-called "Day of Rage" that has been promoted for tomorrow in Saudi Arabia. The manner in which crude is trading suggests that some are beginning to focus more on the fundamentals around oil especially with the Saudi's reassuring that they can make up any shortfall in crude oil supplies. They have been saying that for days now but suddenly it seems as if everyone is now believing them.
If those sovereign debt woes begin coming more to the forefront of traders' minds, look for gold to receive solid support especially in terms of gold priced in Euro terms.
That is being fed by news of China's trade balance which has some talking about a slowdown in Chinese growth. I personally do not buy into that thinking as I think the data was skewed by the Lunar New Year holiday.
The USDA reports were viewed by most in the market as bearish for wheat, and not particularly friendly for corn although the numbers are certainly not bearish for corn. Beans are higher shrugging off weakness from its neighbors.
This is feeding through to the CCI which is falling today.
With crude oil sharply lower, the precious metals are getting hit with a strong round of selling that is being fed also by a move higher in the Dollar as the Euro is getting pounded over re-emerging fears of sovereign debt issues with the downgrade of Spain by Moody's.
All in all, selling is hitting nearly everywhere with the exception of the Dollar and the US bond market. US equities are off their worst levels of the session as bulls are buying the dip especially with the weakness in crude oil.
The crude oil market is obviously not expecting much to come of the so-called "Day of Rage" that has been promoted for tomorrow in Saudi Arabia. The manner in which crude is trading suggests that some are beginning to focus more on the fundamentals around oil especially with the Saudi's reassuring that they can make up any shortfall in crude oil supplies. They have been saying that for days now but suddenly it seems as if everyone is now believing them.
If those sovereign debt woes begin coming more to the forefront of traders' minds, look for gold to receive solid support especially in terms of gold priced in Euro terms.
HUI on the receiving end of the ratio spread trades
The HUI is known for huge gaps both up and down. Today is no exception with the index gapping sharply lower and breaking down below both the 50 and 100 day moving averages. The index is crawling back above the 50 day but has some serious technical work to do in order to repair the damage on the charts.
Once again the huge ratio spread trades are supplying the crushing of the mining shares as they are performing worse than either gold or silver bullion.
Once again the huge ratio spread trades are supplying the crushing of the mining shares as they are performing worse than either gold or silver bullion.
Wednesday, March 9, 2011
Cotton showing signs of losing upside momentum
I wrote earlier today about the copper market looking very vulnerable here based on its daily price chart. In scanning some of the commodity markets another one is giving some signs that it too is possibly ready to wind down - Cotton.
As you can see by the chart, cotton has staged one of the most ferocious upside moves that I can recall in a commodity with perhaps the exception of Minneapolis Wheat some time ago. It is currently trading at levels not seen since Reconstruction when much of the South was laid waste coming out of the War between the States in 1861-1865.
As you can see by the chart, cotton has staged one of the most ferocious upside moves that I can recall in a commodity with perhaps the exception of Minneapolis Wheat some time ago. It is currently trading at levels not seen since Reconstruction when much of the South was laid waste coming out of the War between the States in 1861-1865.
The CCI, Continuous Commodity Index, has benefitted a great deal by this massive display of strength but in looking at the cotton chart, it is giving off some signs that its upward strength is sagging. This is not to say that it has topped yet - it has given off three separate signs of topping in its huge run and has gone on to negate every one of those signs and make new highs. But I do believe this bears watching.
We are beginning to see some evidence that various commodity markets are now topping out - Wheat, Sugar, Copper, and perhaps Cotton among them. Cocoa is beginning to look a bit heavy as well.
On the other hand we have Crude Oil, Gasoline, Heating Oil, Cattle, Hogs and Coffee all looking very strong.
In other words, we are beginning to see some of these markets now beginning to trade more on their own set of demand/supply fundamentals and not just getting a solid bid based on the Fed's debauchery of the US Dollar which resulted in money being pretty much jammed into the commodity sector rather indiscriminately. This development is going to cause the CCI to rise at a slower rate than it has heretofore been rising barring some sort of sudden development that affects a large portion of this group of commodities.
The wild card in all of this is the movement in the price of crude oil. Nearly all of our markets right now are basically trading crude. How it fares in the weeks ahead is therefore going to determine what some of these other commodities will do.
I also think we are going to continue seeing managed money flows ebbing and flowing into the food, base metals, and softs versus the energies and precious metals based on developments in MENA that could curtail oil production.
This is going to add another element of volatility to the markets. Fasten your seat belts; it is going to be a wild ride.
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