Saturday, May 24, 2014

Weekly Commodities Report

Coal: KOL
KOL has enjoyed a positive uptrend since the beginning of the year, but I do expect it to contact the lower part of the channel at around $18.50 at some point. Currently the MACD, TRIX and RSI are all pointing to a downtrend with negative momentum. No 'buy' signal at this point. If the channel holds during this phase, $18.50 (or thereabouts) may be a good entry.

Coffee: JO
I'm listing coffee as "neutral." Contact may still be made with the lowermost line of the channel (around $34.21) which has only been tapped twice. Upward movement can be expected from there. Alternatively, it could breakdown completely from its current channel on the third tap. More will be known the closer we get to it. TRIX, which tends to catch things a little early has already moved up. Signal lines on the MACD are converging indicating a cross is near-term. A full buy is not being issued but I expect it will in the coming week if the current channel holds and MACD starts to show upward movement. If it does bounce I feel it could be quite weak.

Copper: JJC
JJC on the daily chart is not looking positive at all. Frankly, I'd rather blow-torch my nipples off which is not an optimistic thing to being saying about such an important metal. First off, a resistance line set by a lower low back in February has successfully resisted its current uptrend. From that earlier resistance it has traveled horizontally, not going above approximately $38.62. Both the MACD and TRIX look like an imminent cross over is going to happen. Currently likened to downward movement in an overall upward trend the RSI seems to have peaked. I don't expect it breach this resistance line and this channel will eventually transform. This could be the beginning of that transition.

Corn: CORN
CORN isn't looking much better. We have a very steep descending channel with CORN occupying most of the lower half of said channel. The current chart is missing a resistance line which should be shown at $32.50, a line if it were present should be broken when the upper resistance channel line is contacted. TRIX is too far underwater for me to look seriously at this equity, in fact after the next cross over a "short" might be in order.

Crude Oil: USO
USO has been operating within a fairly large channel since the end of 2013. Around January and February I really thought that crude would break down and head lower. Political pressure could have precipitated a move like that since Putin needs crude to be within the $100 to $110 range in order to continue operating the Russian deficit. Many commentators (including Buffet as I recall) stated that the American Strategic Reserves should be opened as a punitive measure. Nothing of course has come of this and it continues to climb. The momentum of the three peaks seen since February have gotten increasingly smaller as time has gone on. Eventually, $35.50 might be tested but first the current peak needs to retrace first. We are currently in the third such peak so I expect a reversal from $38.18 but so far there's no reason for it to be any more dramatic than its decline in March and mid-April. USO is currently a "short."

Natural Gas: UNG
UNG has tapped the lower limit of the channel. MACD and TRIX are both showing upward direction, however momentum has not become positive yet nor have the signal lines for either of those indicators crossed yet. Since its meteoric rise between November to February, UNG has been in an overall decline since then. In the back of my mind I fear a break down like so many other commodities have, some of which have given up all their gains since that rise. I want my signal lines to be a little bit closer before I issue a "strong buy" signal. If you were to allocate capital to a tentative purchase, make it between 10 to 20%. I think it's still bottoming out as part of this descending triangle so please stay vigilant. In the medium to longer term however no breakdown from this channel I would label as very bullish.

Gold: GLD
I am sorry, I really am but I have struggled to develop patterns for GLD. It continues to look like crap. Looking back at some of the bottoms put in place back in October, December and January I don't see any reason for it to be staying above $123.52. Furthermore the MACD signal lines have been virtually horizontal since April, and when they go horizontal more-often-than-not they continue the pattern they had prior, which was a steep decline. Testing of $123.52 and $120.00 will take place in my opinion. Gold is currently labeled as a "short." A former colleague of mine at Waseco Resources (WRI.V $0.075) announced to shareholders that drilling on a property of theirs will resume now that gold is above $1300. Many junior gold companies I fear have used this logic as well. Unfortunately I think holding back on further drilling and exploration would have been wise as a fall back below $1300 seems all but inevitable.

Lithium: LIT
Lithium, my favorite element! I can't label this either as a "strong buy" because it might bounce off the upper band and re-test one of the inner resistance lines at about $13.00, but breakout of this channel seems imminent. This at least seems like a "weak buy" since there hasn't been much probing of the upper-most resistance line which is why I feel skittish of a fall back to $12.78 before breakout. Allocate capital in appropriate percentages for this.

Palladium: PALL
PALL has had a wonderful of late, but I wouldn't touch this with a ten-foot barge poll. MACD has almost been caught in a horizontal pattern since March and TRIX has been in a gradual decline. Let's watch for a transition to a channel pattern, but in the meantime coverage should be sought. PALL is listed a "short."

Siver: SLV
Ahhh silver, the !@#$%^&* child of gold. I apologize for this chart as well but patterns and channels are a little hard to see. I think the reason for this is the ambiguity people are feeling towards precious metals. After last years wipeout people are anxious to get back in and I'm afraid to report that this is not the time to be doing this. A breakdown of the channel was going to happen and with the close on the 1st of May we knew it was coming. What I've struggled with is the current descending channel which I've tried my best to fit (red). Contact with the upper band has been made and the slope line of MACD has begun to point downwards. Next week will be interesting but this channel is here to stay for the immediate term.

Sugar: SGG
Some commentators, like tradingchannels, suggested that sugar was due for a breakout similar to coffee. It is currently holding its descending resistance line after its first breakout which is still positive. Direction is downward currently so a re-test of $53.89 is entirely within the realm of possibility but the current channel and triangle will have a breakout. I still like the look of sugar but patience is needed.

Uranium: URA
In the news it was mentioned (on the heels of Russia's crap natural gas deal with China) that that they would be helping Iran build 8 more nuclear facilities. Despite the tragedy that occurred at Fukishima, I love nuclear power and I believe it holds tremendous promise for the future. Uranium is not a "strong buy," as much as I would like it to be. Movement along its current resistance line will continue as MACD and TRIX are showing a downward trajectory and some of the negativity on the MACD histogram needs to be worked off, but I am keenly interested in seeing if this resistance line at $14.00 will hold. I'd say this is a "weak buy."