Are Commodities Ripe?

Last month's comments out of the ECB regarding the potential for some form of QE launched the US Dollar out of a 12 month trading range.

The strength of the move is undeniable, but the indicators are clearly into Overbought territory.  The strong dollar has been weighing on Commodities.

Early this year, Commodities broke out off a 3 year wedge.  DBA is currently backtesting the breakout as the Indy's have reset.  A move up the ma's would represent a new breakout with a first target of 29. 

 

The Daily chart shows the top of the wedge.  It also reveals a smaller wedge that has formed since the US Dollars July low.  The smaller wedge was broken last week.  The Indy's look like the have room, but there needs to be a break of 26.85 for the big move.  

Corn looks interesting.  After getting whacked for 15% in May-June due to bumper crop reports, it got taken for another 15% after the US Dollars low.  Since then Corn has been wallowing between 25 & 26 on somewhat surprising volume.  It seems that the Indicators need more time to reset but Corn looks attractive above 26.5 with an obvious stop at 25.25.  With the first target of 30 a return of 10% would make a punt worth it.

Other non-agricultural commodities are showing potential bottoms including Oil, Copper & Unleaded Gas.  All ears will be on the ECB this Thursday when they announce their monetary plans.  If they announce QE plans, the size & scope will determine the markets moves.  Some QE is already priced into the US Dollar.  No QE, or, smaller than expected might provide the fuel for the commodities markets to make a comeback.

 

 

Atta Boy Junior!

The Juniors have quietly built a nice base.

After setting a potential base top, the junior miners are testing the ma's on declining volume.  Last week's bar shows a decent looking tail.   The last 2 month's pullback might also suggest a backtest of a June Breakout. 

 

A closer look at the Daily chart reveals a wedge breakout on Friday.  The Indy's look favorable, as do the the ma's.  A move up to 45-46 would set a nice looking Cup & Handle opportunity.

 

Zooming in on the Hourly chart shows the potential for another base with the base.  The Indy's are a bit extended short term which may prevent the Juniors from a breakout here.  A further test of the base top back to the ma's may be in order prior to a breakout.

GDXJ  is a long under 42.  A stop at 40 is a little loose, but for the patient holder the weekly target is 53 offering a decent return.  The shorter term target is 45-46.

 

Interest Rate Update

 

The 20yr down trend in Interest Rates continues.  The monthly indicators are pointing south with the MACD crossing down this month.  

 

The 8yr weekly down trend is also intact with rates down nearly 20% in 2014.  Seems like there is still time before rates get oversold.  24-25 continues to be the line in sand.  Until 25 gets taken out the path of least resistance continues to be down.

Relief at the Pump

Unleaded Gas took a tumble this week.

 

Unleaded Gas started the week with a gap down which ought to provide a short term cap on prices.  In the Puget Sound area prices should tumble after Labor Day.  It certainly would be nice to see prices below $3.75/gallon. 

Housing Perks Up

The Homies put in a strong week.

The Builders finished the week with a full candle adding nearly 5% for the week.  The indicators look set to extend the rally with the STOs heading North after showing POS D.  Just need the MACD to cross to confirm the rally.  If confirmed 28 looks like the target.

Likewise, Lumber looks poised for a breakout.

Lumber needs to make the move this week.  If it does the target is in the mid 400s.