Wednesday, October 08, 2014

Should I get excited? A familiar pattern is beginning to emerge in sugar (SGG), silver (SLV), soy (SOYB), wheat (WEAT) and coal (KOL)

I had a late shift at the care home last night so I was only able to post charts without comments. Here is a recap of my calls over the weekend:
  • short crude oil (USO) - down 0.98%
  • short timber (CUT) - down 0.95%
  • long natural gas (UNG) - down 2.31%
  • long wheat (WEAT) - up 3.89%
  • long corn (CORN) - up 4.76%
  • long livestock (COW) - up 1.14%
  • long coffee (JO) - up 4.77%

With the exception of natural gas things are moving appropriately this week. I expect natural gas to make a move after tomorrows EIA report as rain and cold weather have moved into the American Mid-West and an increasing number of foreign companies and governments are expressing an interest in North America's natural gas industry (see this morning report in the Financial Post).

I have also noticed a pattern in some of the commodities recently. After a long, steep and narrow decline (line "A" on my diagram seen on the SGG chart) for commodities like sugar (SGG), coal (KOL), silver (SLV), soy (SOYB) and wheat (WEAT)  about three weeks ago they began (green circle) an even steeper decline (line "B") and many ETF's broke down from their descending patterns which I thought was a little odd. The whole point of channels is that eventually there will be a break in the opposite direction of the larger preceding channel, but not for the above mentioned ETF's. Of course many might think it could be a bearish signal but I would offer to all of you that it's quite the opposite. The accelerating selloff that it represents (line "B") eventually has a sharp rebound which I think is the first point in a double bottom (line "C"). These commodities have had enough it seems.

Sugar ETF: SGG
Silver ETF: SLV

Jakob Richardson © 2014