Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
AI Tech Stocks Investing Portfolio Buying Levels and Valuations 2021 Explained - 2nd Mar 21
There’s A “Chip” Shortage: And TSMC Holds All The Cards - 2nd Mar 21
Why now might be a good time to buy gold and gold juniors - 2nd Mar 21
Silver Is Close To Something Big - 2nd Mar 21
Bitcoin: Let's Put 2 Heart-Pounding Price Drops into Perspective - 2nd Mar 21
Gold Stocks Spring Rally 2021 - 2nd Mar 21
US Housing Market Trend Forecast 2021 - 2nd Mar 21
Covid-19 Vaccinations US House Prices Trend Indicator 2021 - 2nd Mar 21
How blockchain technology will change the online casino - 2nd Mar 21
How Much PC RAM Memory is Good in 2021, 16gb, 32gb or 64gb? - 2nd Mar 21
US Housing Market House Prices Momentum Analysis - 26th Feb 21
FOMC Minutes Disappoint Gold Bulls - 26th Feb 21
Kiss of Life for Gold - 26th Feb 21
Congress May Increase The Moral Hazard Building In The Stock Market - 26th Feb 21
The “Oil Of The Future” Is Set To Soar In 2021 - 26th Feb 21
The Everything Stock Market Rally Continues - 25th Feb 21
Vaccine inequality: A new beginning or another missed opportunity? - 25th Feb 21
What's Next Move For Silver, Gold? Follow US Treasuries and Commodities To Find Out - 25th Feb 21
Warren Buffett Buys a Copper Stock! - 25th Feb 21
Work From Home Inflationary US House Prices BOOM! - 25th Feb 21
Man Takes First Steps Towards Colonising Mars - Nasa Perseverance Rover in Jezero Crater - 25th Feb 21
Musk, Bezos And Cook Are Rushing To Lock In New Lithium Supply - 25th Feb 21
US Debt and Yield Curve (Spread between 2 year and 10 year US bonds) - 24th Feb 21
Should You Buy a Landrover Discovery Sport in 2021? - 24th Feb 21
US Housing Market 2021 and the Inflation Mega-trend - QE4EVER! - 24th Feb 21
M&A Most Commonly Used Software - 24th Feb 21
Is More Stock Market Correction Needed? - 24th Feb 21
VUZE XR Camera 180 3D VR Example Footage Video Image quality - 24th Feb 21
How to Protect Your Positions From A Stock Market Sell-Off Using Options - 24th Feb 21
Why Isn’t Retail Demand for Silver Pushing Up Prices? - 24th Feb 21
2 Stocks That Could Win Big In The Trillion Dollar Battery War - 24th Feb 21
US Economic Trends - GDP, Inflation and Unemployment Impact on House Prices 2021 - 23rd Feb 21
Why the Sky Is Not Falling in Precious Metals - 23rd Feb 21
7 Things Every Businessman Should Know - 23rd Feb 21
For Stocks, has the “Rational Bubble” Popped? - 23rd Feb 21
Will Biden Overheat the Economy and Gold? - 23rd Feb 21
Precious Metals Under Seige? - 23rd Feb 21
US House Prices Trend Forecast Review - 23rd Feb 21
Lithium Prices Soar As Tesla, Apple And Google Fight For Supply - 23rd Feb 21
Stock Markets Discounting Post Covid Economic Boom - 22nd Feb 21
Economics Is Why Vaccination Is So Hard - 22nd Feb 21
Pivotal Session In Stocks Bull Bear Battle - 22nd Feb 21
Gold’s Downtrend: Is This Just the Beginning? - 22nd Feb 21
The Most Exciting Commodities Play Of 2021? - 22nd Feb 21
How to Test NEW and Used GPU, and Benchmark to Make sure it is Working Properly - 22nd Feb 21
US House Prices Vaccinations Indicator - 21st Feb 21
S&P 500 Correction – No Need to Hold Onto Your Hat - 21st Feb 21
Gold Setting Up Major Bottom So Could We See A Breakout Rally Begin Soon? - 21st Feb 21
Owning Real Assets Amid Surreal Financial Markets - 21st Feb 21
Great Investment Ideas For 2021 - 21st Feb 21
US House Prices Momentum Analysis - 20th Feb 21
The Most Important Chart in Housing Right Now - 20th Feb 21
Gold Is the Ultimate Reserve Asset - 20th Feb 21
Is That the S&P 500 And Gold Correction Finally? - 20th Feb 21
Technical Analysis of EUR/USD - 20th Feb 21
The Stock Market Big Picture - 19th Feb 21
Could Silver "Do a Palladium"? - 19th Feb 21
Three More Reasons We Love To Trade Options! - 19th Feb 21
Here’s What’s Eating Away at Gold - 19th Feb 21
Stock Market March Melt-Up Madness - 19th Feb 21
Land Rover Discovery Sport Extreme Ice and Snow vs Windscreen Wipers Test - 19th Feb 21
Real Reason Why Black and Asian BAME are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 19th Feb 21
New BNPL Regulations Leave Zilch Leading the Way - 19th Feb 21
Work From Home Inflationary House Prices BOOM! - 18th Feb 21
Why This "Excellent" Stock Market Indicator Should Be on Your Radar Screen Now - 18th Feb 21
The Commodity Cycle - 18th Feb 21
Silver Backwardation and Other Evidence of a Silver Supply Squeeze - 18th Feb 21
Why I’m Avoiding These “Bottle Rocket” Stocks Like GameStop - 18th Feb 21
S&P 500 Correction Delayed Again While Silver Runs - 18th Feb 21
Silver Prices Are About to Explode as Stars are Lining up Like Never Before! - 18th Feb 21
Cannabis, Alternative Agra, Mushrooms, and Cryptos – Everything ALT is HOT - 18th Feb 21
Crypto Mining Craze, How We Mined 6 Bitcoins with a PS4 Gaming Console - 18th Feb 21
Stock Market Trend Forecasts Analysis Review - 17th Feb 21
Vaccine Nationalism Is a Multilateral, Neocolonial Failure - 17th Feb 21
First year of a Stocks bull market, or End of a Bubble? - 17th Feb 21
5 Reasons Why People Prefer to Trade Options Over Stocks - 17th Feb 21
The Gold & Gold Stock Corrections Are Normal - 17th Feb 21
WARNING Oculus Quest 2 Update v25 BROKE My VR Headset! - 17th Feb 21
UK Covid-19 Parks PACKED During Lockdown Despite "Stay at Home" Message - Endcliffe Park Sheffield - 17th Feb 21
How to Invest in ETFs in the UK - 17th Feb 21
Real Reason Why Black and Asian Ethnic minorities are NOT Getting Vaccinated - NHS Covid-19 Vaccinations - 16th Feb 21
THE INFLATION MEGA-TREND QE4EVER! - 16th Feb 21
Gold / Silver: What This "Large Non-Confirmation" May Mean - 16th Feb 21
Major Optimism for Platinum, Silver, and Copper - 16th Feb 21
S&P 500 Correction Looming, Just as in Gold – Or Not? - 16th Feb 21
Stock Market Last pull-back before intermediate top? - 16th Feb 21
GAMESTOP MANIA BUBBLE BURSTS! Investing Newbs Pump and Dump Roller coaster Ride - 16th Feb 21
Thinking About Starting to Trade This Year? Here Are Some Things to Keep in Mind - 16th Feb 21
US House Prices Real Estate Trend Forecast Review - 15th Feb 21
Will Tesla Charge Gold With Energy? - 15th Feb 21
Feeling the Growing Heat and Tensions in Stocks? - 15th Feb 21
Morgan Stanley Warns Gasoline Industry Is About to Become Totally Worthless - 15th Feb 21
Debts Lift Gold - Precious Metal Prices Will Rise on a Deluge of Red Ink - 15th Feb 21
Platinum Begins Big Breakout Rally - 15th Feb 21
How to Change Car Battery Without Losing Power, Memory, Radio Code Settings - 15th Feb 21
Five reasons why a financial advisor can make a big difference to your small business - 15th Feb 21

Market Oracle FREE Newsletter

FIRST ACCESS to Nadeem Walayat’s Analysis and Trend Forecasts

How Commodity Charts Are Reacting, or Not, to China Currency News

Commodities / Commodities Trading Jun 21, 2010 - 01:25 PM GMT

By: Mike_Paulenoff

Commodities

Best Financial Markets Analysis ArticleNews that China will re-value its yuan currency is viewed positively, of course, by world markets as it lowers inflation risk and exudes confidence about China’s growth picture.

After an initial higher opening on Monday, what can be expected? The daily chart on the Shanghai is hardly a bullish chart, and in fact went down 3% on Friday. Does the news now invalidate this chart? I don’t know, but to even begin to look exciting, the index has to take out 2600, or 3 1/2% from Friday’s close at 2514, and then faces stiff resistance at around 2800.


The S&P 500, meanwhile, needs to get through its 50% Fibonacci retracement of the April-June decline, which comes in at 1130, and then take out its 50-day moving average at 1139-40, or 2% from Friday’s close. If it runs out of gas at the 50% Fib retracement, then it might well test the 200-day moving average at 1110.

One thing for sure is that if the Chinese situation is the bellwether of a start of a new up-cycle in the global economy, or the renewal of an up-cycle, then commodities will have to move. So, let's take a look at the commodities.

Copper and Gold

Looking first at the copper situation, the iPath DJ-UBS Copper TR Sub-Idx ETN (JJC) appears to have a very big distribution top pattern with the resistance level at around 38.56 upwards to about the 42.83-43 zone.

If the market is supposed to be a discounting mechanism, then it would seem as though copper would have made a move near the 40.16-40.86 area. Instead, copper had a very tough Wednesday, Thursday, and Friday of last week, and seems to be struggling. In addition, it’s below its relative moving averages, and in fact, those who watch the 200- and 50-day interaction are seeing a kind of death-cross happening, where the 50-day is about to cross under the 200-day, which is a very tricky situation.

It seems as though copper, as a discounting mechanism, did not see the Chinese situation coming or it would have been prepared, since the Chinese would have been buying up copper before they made the announcement. Copper needs to show some sign that global supply/demand and global growth is improving, and right now that’s not what the chart is showing.

Freeport-McMoRan Copper & Gold Inc. (FCX) shows a very similar picture. In the last couple weeks FCX has pretty much struggled because it’s seen as a copper producer in a sluggish US and global economic environment.

To get any traction on the upside, Freeport will have to take out 71.50, or 8 1/2% above where it closed Friday, at 65.90.

Freeport should have been a lot higher based on the anticipation of the China currency move. As a discounting mechanism both JJC and FCX are giving every indication that the China news is more words than action.

Steel

Steel, as represented by the Market Vectors Steel ETF (SLX), doesn't look much better than copper. It looks to be a distribution top that has tested and so far has held the 52 to 54 area. If there’s an upward move in steel and the SLX, then it will get into the 61 1/2 area and test the declining 50-day, which would be about a 6 1/2% move from its Friday close at 58.09.

Looking at United States Steel Corporation (X), we can see a troubled situation. If it pops, it could get back to 49, but it has a bigger top than the top on the SLX, and between the two, it doesn’t appear as though China's situation is the solution for either one or the steel sector in general.

Nucor Corporation (NUE), also in the steel sector, has a suspect-looking chart. Can it rally to 43 1/2 - 44 from 41, or 8% to 10%. Possibly. Whether or not it can get through that level is another thing. If it breaks 40, down to 39, it’s going to be a dicey situation for Nucor. So, that's another suspect, discounting chart mechanism for what may be considered the start of another bull move triggered by the China news.

Cliffs Natural Resources Inc. (CLF) had some big swings as of late. But as long as the 200-day holds any weakness, which it has done so far, it could be an indication that something is going on that could drive it higher. Right now it has a sharply declining 50-day moving average at 59.48, which it could test on a reaction rally to the China news.

But if these commodities do gap up, can we afford to chase them? Cliffs has a better looking chart than the previous ones, but it, too, looks like it has limited upside.

Silver

The chart on silver is more compelling than copper and steel, as the iShares Silver Trust (SLV) is still trying to make new highs. The SLV looks strong, with rising lows and higher highs. If it can take out 20, then it may have some momentum on the upside, and the gold- silver ratio will start to move in favor of silver -- that is, it will narrow.

If that happens, we must seriously consider that the China news as being embraced by the commodity sector, and silver is the beneficiary of that even if copper doesn’t look so hot.

Pan American Silver Corp. (PAAS) is very volatile. I got out of it, as the market was buying gold rather than silver in its flight to safety. But right now, with silver appearing to be back on the upside, we’ll have to see if PAAS can get through the 28 1/2 area to the top of the channel at 32.50 or so. That could be a good move.

Australia

If China is coming back strong, or perceived to be rekindled in a big way, you would think Australia would be one of the first places to rocket because Australia sells so much into China.

The iShares MSCI Australia Index (EWA) doesn't look that bad, though needs to do some work. It has some serious resistance between 22 and 24, which we need to watch closely as the Australian market responds to the China news.

BHP Billiton Ltd. (BHP), a representative of this market, too, has strong resistance at the 50-day at 69 1/2 and then at 70 3/4 to 71 that we’ll be watching.

Aluminum, Fertilizer, Heavy Equipment, Materials

Alcoa, Inc. (AA), representing the aluminum side of things, is hardly a picture where anyone is buying this as a discounting mechanism for China. This is one sorry-looking chart, consolidating under the neckline for yet another breakdown at 8 or 9, and, of course, the next round of earnings is already approaching, due to come out July 12th.

Potash Corp. of Saskatchewan, Inc. (POT), procurers of fertilizer, is hardly the kind of chart that is inspiring either. It needs to get over the 106-106.50 area.

Bucyrus International Inc. (BUCY), a company that manufactures equipment, is impacted by China since China needs their product. This is another uninspiring picture, with a big distribution top, and it had better rally through the declining 50-day at 57.80 and 200-day at 51 and change, which would be a 13% -14% range. It looks like it has a bearish consolidation and if it can’t get over 55, it’s actually telling us that it has another down leg off the distribution top.

Finally, the Materials Select Sector ETF (XLB) has been in a top or trading range between 29.30 and 35. A break of 32 could be an indication that some dynamic things are happening as a result of the Chinese decision on the currency.

So, the China story is an important one, either because it helps inspire some of these charts, or because it inspires volatility, causing upgaps that only lead to downside reversals. We’ll certainly know soon.

Sign up for a free 15-day trial to Mike's ETF & Stock Trading Diary today.

By Mike Paulenoff

Mike Paulenoff is author of MPTrader.com (www.mptrader.com), a real-time diary of his technical analysis and trading alerts on ETFs covering metals, energy, equity indices, currencies, Treasuries, and specific industries and international regions.

© 2002-2010 MPTrader.com, an AdviceTrade publication.  All rights reserved. Any publication, distribution, retransmission or reproduction of information or data contained on this Web site without written consent from MPTrader is prohibited. See our disclaimer.

Mike Paulenoff Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules