Saturday, May 31, 2014

Weekly Commodities Report: Part I

Agriculture Fund: DBA
With regards to DBA near term outlook looks like an imminent transition to a positive channel. Because this was recently put up, a "sell" would have normally been announced at the end of the first week of May.
  • TRIX and MACD have all be negative for the past week
  • Trending consistent with a sharp and narrow declining band
  • A foresee a pause in its decline next week as several solid areas of resistance are in place. Ascent back in February and March was observed with several gaps. Furthermore, extending a resistance line from the bottoms put into place in the last week of March and the first week of April means two lines will be met almost simultaneously.
  • PPO short term indicator is about to turn negative. Long term PPO however is positive and quite strong. A possible bounce off of the 'zero' line for the short term might take place in the region of the two resistance lines. 
  • A very strong fall in the next four trading sessions with a close will be required to negate the above scenario.

Aluminum: JJU
As a metal with such importance as an indicator of the health of the global economy, JJU continues to fluctuate in a large declining channel and has since last year. I think it would be reasonable to expect a tap on the upper limit at around $19.00.
  • Does JJU break out of the channel? A convincing case can be made. PPO short term indicator is going to turn positive for only the fourth time in a year and a half. A breakout to the upside may be coincident with the short PPO also turning positive
  • MACD histogram is also imminently going to turn positive.
  • A "buy" alert would have been issued in mid May.
  • Four previous taps have been seen on the upper limit already.
  • Transition may have already begun as denoted by the red lines.
  • This particular run may go to $19.75.

Coal: KOL
KOL has been in a bearish rising channel since February. I believe a breakdown is imminent.
  • Troublesome is that I am having problems finding possible sites of resistance. Previous peaks and troughs are not connecting.
  • A "sell" signal is being issued for KOL altough a previous "weak sell" would have normally been issued back in the second week of April.
  • MACD histogram has been in a gradual decline for some time now (around the second week of April in fact). Extended momentum declines usually gather steam which is why I feel a breakdown is imminent. 
  • With only three taps on the lower limit (I would like to see four, normally) we might have a small reprieve next week with a climb to $18.80 or $19.25 (more on why later) before it finally gives up.

Coffee: JO
A hit has been made (it's third) on the lowermost resistance line at $34.00 whereupon I expect the bounce to eventually continue. Please exercise patience and caution when making this purchase as a week may elapse before a break out occurs. An alternative scenario is a breakdown so be mindful and have your stops nice and tight. Macro sentiment is generally bearish and quite poor, but has been for over a year so I don't know what guidance this provides.
  • MACD histogram is still negative. Watch for a notice on the hourly charts to be sure.
  • MACD has not yet had a signal line crossover.
  • TRIX has crossed over but still in negative territory.
  • Short term PPO is bearish but long term PPO is still going strong, so this may just reflect the movement to the lowermost line of the channel.
  • This is a "weak buy."

Commodities Fund: DBC
Since DBC was only added this week, a sell signal probably would have been issued when the upper limit of the channel was contacted on the 3rd week of May. As it appears, DBC is quite unhappy at the moment. "Sell" remains in effect.
  • PPO short term is crossing downwards again the long term. Signal for the short term line is downwards
  • MACD histogram is negative with a signal line pointing downwards
  • MACD is also negative.
  • A lot can happen in four weeks so once contact is made with the red lower limit line at around $25.90 or so it may return moving towards the upper channel before contacting the blue lower limit line at $26.20.

Copper: JJC
JJC is listed as a "short." I do not expect movement above the $38.75. JJC should spend June crossing the various intermediate bands
  • TRIX has finished cresting and has had its signal lines cross over downwards
  • MACD/MACD histogram are both negative with signal lines that have also crossed over. 

Corn: CORN
Channel holds, narrow and steep. It remains listed as a "short." Resistance points will be coming into play so I expect pauses and movement into the top half of the channel while it continues its descent to about $30.70.

Cotton: BAL
BAL has been in a sharp narrow descending channel. I feel that contact will eventually be made the lowermost resistance line in the first week of June. Cotton is a "strong buy" at around $51.25. Two views have been presented in order to impress upon the long term strength of these resistance lines which go all the way back to 2012.
  • Contact should be made with the upper limit line of the blue descending channel at around $52.50 after-which a sharp steep decline should resume. 
  • All signal lines and indicators are still negative illustrating the remaining the dollar or so it has to fall, so please be patient. The blue "buy" arrow has been placed on the chart indicating roughly where we should be seeing our transition to an upward channel.
  • Please pay close attention to the hourly charts during the second week of June.

Crude Oil: USO
I issued a "short" on USO on thursday or friday (thick red arrow). My recommendation holds. Not a whole lot of data is available for this declining channel but USO has made some nice taps on the upper limit of the channel and then retraced approximately 50%.
  • MACD signal lines have not yet crossed over but appear to do so imminently. 
  • Slope of the short term PPO line has also just turned down negative.
  • MACD histogram has just turned negative.

Gold: GLD
GLD should have bee listed as a "short" starting the last week of May (the red arrow has been put in retrospectively). I'm not particularly gun-ho about precious metals in general. I maintain that our first site of major resistance for this sharp/steep channel is just below of $120.00. Throughout June it may retrace back up to around $120.80 and on again to $123.00 but a fall to between $116.00 to $115.00 in the medium term still seems like the surest bet at the moment. This "final resting place" of gold is related to a bottom put in back in late December and early July 2013.