Sunday, October 05, 2014

Update: Weekend Commentary

Even I'll admit the market is a little oversold. We started to see a really nice bounce back on Friday after the (predictably) stellar jobs report. Something had to stem the bleeding and a great jobs report was just the thing. I'm not saying I have any confidence in the market, oh no. I'm just saying that we're going to have a little bounce back. The Russell has broken a critical support and I believe the rest of "air" in our system will be let out as gradually as possible. 

The following are my recommendations for the beginning of medium to long-term setups:
  • short crude oil (USO)
  • short timber (CUT)
  • long natural gas (UNG)
  • long wheat (WEAT)
  • long corn (CORN)
  • long livestock (COW)
  • long coffee (JO)

Agriculture: DBA
A lot of agricultural products are starting to look really good. I think that news of the bumper harvest this year has put agricultural equities into a little of a hole so some of them are charging back. DBA is a perfect example. It's still bearishly positioned but if you look at the weekly chart it's imminently going to break out of it's current descending channel. A lot of indicators are starting to crest so keep a close eye on this index in the following week or ten days.

Aluminum: JJU
Support found at an intra-channel line, $18.80. I think more pain is on the way for aluminum. The weekly chart has the EMA(17) close to crossing EMA(45).

Coal: KOL
I've redrawn the weekly chart for KOL a little as it has now found support at just below $17.00. I feel that a bit of a bounce may occur in the following week to compensate for the oversold conditions but my StochRSI indicator is telling me more of a descent from here is likely.  Looking at the daily chart the recent descending channel has been too steep and too narrow. A bit of oscillating I think is highly likely at it's current level before continuing on downwards.

Coffee: JO
People will remember a few weeks ago I was goo-ga over JO and sure enough it shot up and then slid back down. I think the sell off of the last two weeks is overdone. Arabica beans are still below harvest expectations in Brazil and Vietnam is still reporting depleted stocks. I've been a little ambitious but I've drawn in heavy blue lines what the presumptive ascending channel might look like. JO is still bullishly oriented on the weekly chart with the EMA(17) over the EMA(45). Next week we'll find out.

Commodities: DBC
It just keeps falling and falling! On the weekly chart bars are appearing outside the Keltner channels so things are heated. A little horizontal movement to get back inside the channels would be appropriate at this stage. Some positive overtures might appear next week before continuing downwards again.

Copper: JJC
While making these charts I hadn't realized that JJU on the weekly figures is in the middle of nowhere at this point. I don't see any reason why this shouldn't continue downwards to $35.00. I keep mentioning how the descending channel in the daily charts looks solid and it's now looking more solid than ever!

Corn: CORN
It's risky, I know, and the EMA's are not appropriately positioned yet but I am calling a long term buy on CORN. I wrote an article about it earlier in the week.

Cotton: BAL
This is the riskiest "long term buy" I'll issue but the cotton dispute between Brazil and the U.S. has been resolved and an effort to stay above $41.00 has been going on for two weeks now. Let's watch BAL closely next week.

Crude Oil: USO
It broke down on the daily chart and now this week it finally broke down on the weekly chart. This is a no-brainer. Short crude oil with DWTI. I'd be most comfortable to see this at settle at $32.50.

Gold: GLD
No comment possible at this point, but my "sell/short" from June still stands.

Lithium: LIT
I lament the loss of lithium, it had looked so good for so long but when the EMA(13) crossed the EMA(34) and almost the next day crossed below the MA(144) you knew this was finished. I love rechargeable batteries (I have done a lot of consulting in the Junior Canadian Mining Sector on it) and lithium holds great promise for the future, so just as URA is getting similarly punished it just means a better buying opportunity is waiting to present itself. We will hopefully see support firm up at around $12.00, but failing that it's back to the beginning at $11.00.

Livestock: COW
COW is one of the few equities I can actually recommend. The moving averages on the daily chart have reoriented themselves bullishly and COW is continuing it's march towards resistance at $33.80. The volatility of the last two months or so make COW very difficult to read on my daily indicators because it experienced both a sharp descent and ascent. The weekly indicators however are saying that "nothing is wrong" and that this appears to be the beginning of another upleg.

Natural Gas: UNG
I've been taking guidance from Phillip Flynn of Price Group because the continuation pattern has really been aggravating me. As I've stated earlier the continuation pattern doesn't look like it's going to break down but the equity has been moving horizontally within a tight range for so long that the EMA's have converged (as opposed to crossing bullishly or bearishly because the stock went up or down). The EMA(13) is imminently about to cross the EMA(34) on the daily charts just as the heating season begins. The KST and Coppock curve are above zero and pointing upwards respectively, but unfortuntely I cannot take comfort in any other indicators I have at the moment because they all look 'weak.'  Next week will be a critical week and this recommendation is speculative but I think UNG is beginning to look like a "buy." On the weekly charts UNG looks oversold and needs to reverse. The pessimism of excess natural gas supply has had on the price I think has been overdone.

Palladium: PALL
No comment possible at this point, but my "sell/short" still stands.

Platinum: PPLT
No comment possible at this point, but my "sell/short" still stands.

Silver: SLV
No comment possible at this point, but my "sell/short" still stands.

Sugar: SGG
On the weekly chart I feel a double bottom being put in. We're going to have to wait a few more weeks to see where this goes but I think this massive decline in sugar is hugely overdone and a bottoming pattern will begin to develop. This of course will be in tandem with a reversal of the American dollar. On the daily charts you can see how this is going to play out as the EMA's are both horribly divergent at this point. Time will be needed for the two to revert much like natural gas did after it's cataclysmic fall. Some patience will be needed, but if I'm right this a great buying opportunity.

Soy Bean: SOYB
SOYB has been absolutely crucified and unfortunately will continue to for the foreseeable future. On the weekly chart a very awkward/anomalous low point was put in back in June of 2012 at $18.25. Only in the last week has SOYB moved outside the Keltner Channels so the descent is heating up which is hard to believe because of how far apart the EMA(17) and EMA(43) are on the weekly chart. I'm not prepared to recommend SOYB as a "buy" at this point but an opportunity is approaching. Like a lot of the agricultural products whose sell-offs have been overdone SOYB is no different. Patience will be needed here too.

Steel: SLX 
The moving averages on the daily charts crossed back in mid-September and I called a "sell/short" as it got closer and closer to the final channel support line. Since then it has been narrow and steep descent with the weekly moving averages having not yet even crossed. The news out of China has not been reassuring on the level of steel production, especially when managers talk about "stemming losses" rather than making profits (covered beautifully by the South China Morning Post). Hopefully you are all shorting SLX at the moment because the descent is most likely to continue. 

Timber: CUT 
On the daily charts CUT has found support on the lowermost channel line. Despairingly however the weekly charts showed a cross of the EMA(17) below the EMA(43) coupled with the fact that CUT is approaching the final ascending channel support line from January 2012. CUT is a massive "short/sell."

Uranium: URA
I'm still disappointed that URA has broken down but maybe in the next week we'll see support at around $12.00 as this is where support is on the weekly chart. If it breaks below $12.00 it could mean that URA's decline since 2011 is coming to an end and a bottom is being put in with a pattern similar to SGG. 

Wheat: WEAT
I humorously quipped earlier in the week that Goldman Sachs has listed wheat as a "sell" which means it's doing the opposite and buying. Why weren't price cuts recommended in May of this year? This is also a highly speculative "buy" but I believe that another bottom is being put in with WEAT's recent break below the channel support line. Additionally the daily charts have begun to look very constructive, so let's continue studying this.

Jakob Richardson © 2014