Things that might matter for precious metals and commodities as market sentiment gets shaken up.

The precious metals aren’t exactly playing along. I read a report from The Short Side of Long this week that was full of reasons why precious metals may breakout higher soon. And this forecast seems a bit independent of what risk appetite does.

As to the report, I’d already been watching the technical evidence presented, i.e. the moving averages offering support and resistance, the narrowing wedge patterns, Fibonacci retracement levels, three-wave moves, etc. But there were some items in the report I hadn’t considered.

Again, a lot of these indicators can persist for a while before any expected turn in price. But the fact that so many items are coming together at nearly the same time to signal an intermediate-term sentiment extreme, a technical breakout in price could be the catalyst needed to spark some substantial buying ...

Commodities Essential. 8 February 2013

Trade Essentials

No new recommendations or adjustments at this time.

Flash Alert: Time to make some stop-loss adjustments ...

It seems market sentiment is making a shift. While we still may see some risk assets make new highs, we are close to a substantial corrective decline in risk appetite. In fact, it may have already begun this week.

As such, I recommend you reduce the risk in your current open positions.

Trade Essentials.

Make these FOUR stop-loss adjustments as soon as possible:

 

CNX (Last price: $30.71) 

CANCEL AND REPLACE your order to SELL ALL shares of CONSOL Energy Inc, symbol CNX, at $28.27, STOP. New Price: $30.37, STOP; this order is good till cancelled.

 

CCJ (Last price: $21.64)

CANCEL AND REPLACE your order to SELL ALL shares of Cameco Corp, symbol CCJ, at $19.67, STOP. New Price: $21.47, STOP; this order is good till cancelled.
 
UCO (Last price: $31.60)
 
CANCEL AND REPLACE your order to SELL ALL shares of ProShares Ultra DJ-AIG Crude Oil ETF, symbol UCO, at $28.79, STOP. New Price: $31.17, STOP; this order is good till cancelled.
 
JJC (Last price: $47.00)
 
CANCEL AND REPLACE your order to SELL ALL shares of the iPath DJ-UBS Copper Total Return Fund, symbol JJC, at $44.97, STOP. New Price: $46.47, STOP; this order is good till cancelled.
 

What the Federal Reserve means for gold ... now.

Mainstream skepticism over Fed economic efficacy could add a missing element to help gold reconnect with risk appetite correlations.

A breakdown in the US dollar index could be a more likely catalyst for an immediate move higher in gold.

Also noteworthy ...
 
Should skepticism over the Fed's economic efficacy spook investors, it could create a risk off environment that hurts risk appetite and helps the US dollar. In that case, the likely direction for gold is down. But should investors flee other currencies in a risk-off move, namely the euro on renewed Eurozone crisis concerns, that money could seek out gold as an alternative safe-haven to the US dollar, thereby supporting gold prices.

Commodities Essential. 31 January 2013

Trade Essentials.

No new recommendations or adjustments at this time. 

On China: Ignore the risks ... for now.

Last week I turned bullish on some key commodities. While we haven't seen a whole lot of action, some commodities are trying to push higher.

Generally, I tend to think China will be an underlying force for an upside move that carries through much of the first half of 2013.

To be sure, China is facing several legitimate risks. And much of it stems from various reforms China recognizes is necessary towards ensuring sustainable rates of economic growth. 
 
That's why I think China's economic future is a real toss-up ...

Commodities Essential. 24 January 2013

Trade Essentials.

No new recommendations or adjustments at this time. Closely watching for a signal to get long gold and/or silver by using ETFs like IAU, SLV, AGQ and DGP

The fate of key commodities in 2013. PLUS two new trade recommendations.

Two reputable personalities came out towards the end of 2012 with commentary on the commodities supercycle.

One is calling the supercycle dead. The other says no - there are at least a few good years left.

The former is Edward L Morse, global head of Citigroup’s commodity research.

The latter is Ambrose Evans Pritchard, perhaps the poster-child for the finance arm of the British newspaper and website, The Telegraph.

While the headlines seem to conflict, there is a bit of overlap in their thinking, I think ...

Commodities Essential. 16 January 2013

Trade Essentials.

Add shares of two energy producers - CONSOL Energy Inc (CNX) and Cameco Corp (CCJ).

CONSOL is primarily a producer of steam and metallurgical coal, but also produces natural gas. Cameco is in the uranium business. 

Each company has been beaten down over the past two years and represents an appealing long-term play. Initially, I am going to recommend stop-loss levels to keep immediate risk in check. But as these positions start moving I intend to give them plenty of room to breathe.

CNX (Last price: $30.36)

Buy shares of CONSOL Energy Inc, symbol CNX, at the market. Then place an order to SELL ALL shares of CONSOL Energy Inc, symbol CNX, at $28.27, STOP; this order is good till cancelled.

 

CCJ (Last price: $21.27)

Buy shares of Cameco Corp, symbol CCJ, at the market. Then place an order to SELL ALL shares of Cameco Corp, symbol CCJ, at $19.67, STOP; this order is good till cancelled.

Flash Alert: commodities due for a risk-on bid. Take these actions now ...

Let's add two new positions AND adjust stops on current positions.

Commodities have mostly been under-performing other risk assets. It's allowed you to see some nice open gains on a short position in silver and corn. I think you should adjust those stops today (details below). 

I am also seeing some respectable set-ups on charts of crude oil and copper. 

To be sure, I am not long-term bullish on crude oil -- but I see a technical opportunity to grab a decent gain on an extension higher here. 

As for copper, supplies remain relatively tight and sentiment regarding China has stabilized. And based on the intent of China's leaders, I expect commentators, those predicting a stabilization of China's economy, will be validated in the near-term. That should support the price of copper.

Let's use the ProShares Ultra DJ-UBS Crude Oil ETN (UCO) and the iPath DJ-UBS Copper ETN (JJC).

Trade Essentials.

Here is what I suggest you consider doing now ...

First, add two new positions:

 

UCO (Last price: $30.88)

Buy shares of ProShares Ultra DJ-UBS Crude Oil ETN, symbol UCO, at the market. Then place an order to SELL ALL shares of ProShares Ultra DJ-UBS Crude Oil ETN, symbol UCO, at $28.79, STOP; this order is good till cancelled.

 

JJC (Last price: $46.66)

Buy shares of iPath DJ-UBS Copper ETN, symbol JJC, at the market. Then place an order to SELL ALL shares of iPath DJ-UBS Copper ETN, symbol JJC, at $44.97, STOP; this order is good till cancelled.

 

Then adjust stop-loss levels on your current positions:

 

CORN (Last price: $43.52)

CANCEL AND REPLACE your order to BUY-TO-COVER all shares of Teucrium Corn Fund, symbol CORN, at $48.57, STOP. New Price: $44.57, STOP; this order is good till cancelled.

 

ZSL (Last price: $48.06)

CANCEL AND REPLACE your order to SELL ALL shares of ProShares UltraShort Silver, symbol ZSL, at $41.47, STOP. New Price: $47.87, STOP; this order is good till cancelled.

 

Will investors begin to worry about commodity under-performance?

As of right now, there are two things I'm watching that could cause global markets to decline:

1)      A fiscal cliff disappointment. As much as I'm sick of the fiscal cliff, there are risks things don't play out as expected in the immediate future. I believe, though, any tumble over the cliff will be short-lived.

2)      The underperformance of commodities.

I think the lack of enthusiasm in the commodities markets, relative to global stocks and European-bloc currencies, is due to growth expectations; they have been tempered and seem to be keeping commodity prices contained.

Now, will this create investor anxiety? Will watching commodities wallow around cause investors to second-guess the foundation from which other markets are bouncing higher? It's possible.

But it's also possible that investors are content with this dichotomy ...

Commodities Essential. 21 December 2012

The Fed and the Kneejerk; plus new recommendations on BOM and ZSL!

One asset that kept its post-FOMC momentum was US Treasuries. Price moved relatively sharply lower on Wednesday; and somewhat on Thursday too.

Why, after the Fed promised to purchase Treasuries to keep long-term interest rates low, would Treasury prices decline and yields go up? It is quite perverse, but it's not a complete surprise.

Announcements of QE1 and QE2 were not kind to Treasuries either. But the kneejerk slump in Treasuries after Q3 was soon reversed, and the price of the 30-year bond is still higher than it was at the QE announcement three months ago.

So why this action?

Well, it would seem the driver is a fresh rethink of inflation expectations. But ...

Commodities Essential. 14 December 2012

Trade Essentials.

I think copper is set-up for a short-term pullback. I think using the PowerShares DB Base Metals Double Short ETN (BOM) is a way to play for such a move. Here are the specifics of what I recommend you do now.

BOM (Last price: $11.80)

Buy shares of PowerShares DB Base Metals Double Short ETN, symbol BOM, at $11.80 or better, to open. Then place an order to SELL ALL your shares of  PowerShares DB Base Metals Double Short ETN, symbol BOM, at $11.40, STOP; this order is good till cancelled.

Then, use the ProShares UltraShort Silver Fund (ZSL) to play for a breakdown in silver:

ZSL (Last price: $44.42)

Buy shares of ProShares UltraShort Silver ETF, symbol ZSL, at the market. Then place an order to SELL ALL shares of ProShares UltraShort Silver ETF, symbol ZSL, at $41.47, STOP; this order is good till cancelled.

If you prefer to steer clear of leveraged ETFs, you can substitute the iPath DJ-UBS Copper ETN (JJC) and the iShares Silver Trust (SLV), respectively, by selling short. This assumes, of course, you have the ability to 'sell short' in your trading account.

Goldman a gold bear? Plus, the US energy front ...

The US economy added more jobs in November than expected. But the government shed 51,000 jobs in October, sparking a substantial revision to that month's payrolls number. Nevertheless, all is good in the world and the US economy is on its way.

Though it seems if you're a gold bull you'd better hope that's not the case ...

Goldman Sachs, everyone's favorite financial everything, just made a new forecast. Are you ready for it?

They said ...

Commodities Essential. 7 December 2012

Trade Essentials.

No new recommendations or adjustments at this time.

Update: Silver is having a bad day.

Will it be meaningful?

Last week I noted the price action in gold and silver. The patterns were mostly similar, but the technical indicators and oscillators suggested different outlooks for each precious metal. I asked if silver's relative strength bode well for gold, or if gold's relative weakness bode ill for silver.

After today, it seems gold's bearish tilt is weighing on silver. Click on the link below for a chart and additional commentary.

Commodities Essential. UPDATE 4 December 2012

 

Trade Essentials.

No new recommendations or adjustments at this time.

Charting it up: moving averages show commodities at key inflection points

I could argue the optimistic outlook for the global economy; or I could list the pessimistic views. But since market sentiment seems to be moving on the former, I think it makes sense to watch key technical levels for gold, silver, copper, crude, natural gas and corn.

I want to see another day or so of price action since so many commodities are trading at key inflection points. But I imagine we'll see some resolution and the opportunity to add new positions. Stay tuned.

Commodities Essential. 30 November 2012

Trade Essentials.

No new recommendations or adjustments at this time.

It's starting to get interesting, I think. Bottom line: watch volatility for clues ...

It is mostly agreed that QE1 and QE2 did little, if anything, to bolster the real economy. The Fed even acknowledged that they very much relied on the wealth effect of rising stock markets to support the habits of consumers and businesses. But some analysts have predicted QE3 could actually workfor the real economy by shoring up sentiment of businesses and consumers.

That certainly might help. The difference between this time and previous periods of monetary accommodation is the open-endedness. If the Fed effectively closes the open-endedness of QE3, they risk shooting themselves in the foot by undermining their support measures before they finally might work as hoped.

It's been said only a major market meltdown will bring about needed action on the fiscal front. After all, that's what happened in 2008 to necessitate stimulus measures. Might the Federal Reserve "inadvertently" create the conditions for a market meltdown as they flirt with increased transparency? It may be a round-about way to get lawmakers to perpetuate the status quo and delay the inevitable yet again.

So ...

 

Commodities Essential. 21 November 2012

Trade Essentials.

No new recommendations or adjustments at this time.

Australia, Metals News and Weekly Charts ...

I talk about China a lot. But the other side of that coin is Australia (among others.) If China is going to enter (or already has) an extended period of sub-par growth, then China's trading partners are probably vulnerable, namely those providing the natural resources so highly demanded in China. 

Interestingly, Australia reported some decent economic numbers this week. But all kinds of periphery news suggest the environment isn't very rosy.

Commodities Essential. 15 November 2012

Trade Essentials.

No new recommendations or adjustments at this time.

 

Flash Alert: Time for a bounce? Adjust stops now ...

Let's adjust stop-loss levels to lock in profit.

It seems to me like risk appetite is due for a bounce, assuming commodities play along with the broader market. I think it makes sense to lock-in some open gains now ... 

Trade Essentials.

Here is what I suggest you consider doing now:

 

CORN (Last price: $45.99)

CANCEL AND REPLACE your order to BUY-TO-COVER all shares of Teucrium Corn Fund, symbol CORN, at $50.79, STOP. New Price: $48.57, STOP; this order is good till cancelled.

  

ZSL (Last price: $44.44) 

CANCEL AND REPLACE your order to SELL all shares of the ProShares UltraShort Silver Fund, symbol ZSL, at $36.89, STOP. New Price: $43.19, STOP; this order is good till cancelled.

 

DTO (Last price: $50.69)

CANCEL AND REPLACE your order to SELL all shares of the PowerShares DB Crude Oil Double Short ETN, symbol DTO, at $39.49, STOP. New Price: $48.49, STOP; this order is good till cancelled.

 

BOM (Last price: $13.40) 

CANCEL AND REPLACE your order to SELL all shares of the PowerShares DB Base Metals ETN, symbol BOM, at $11.09, STOP. New Price: $13.19, STOP; this order is good till cancelled.  

Sentiment and price action bode ill for commodities ...

What the improved payrolls number does is haunt the QE lovers. That is: improvement in the employment situation causes investors to second-guess the duration of the Federal Reserve's open-ended quantitative easing. Improved economic fundamentals, particularly employment, are what the Federal Reserve is looking to in making any decisions to rein in the liquidity their providing to markets.

In the long-run, however, if the US economy truly is recovering, then it might begin to support global demand and, in turn, commodity prices. But that day is still a long way off.

The downdraft in the markets today is happening after a new surge to borrow several billion euros from the ECB's marginal lending facility suggests eurozone banks are worried about funding ... still. In other words, banking system insolvency lingers on in Europe. As to what this means for the markets, consider previous instances of heavy facility usage ...

 

Commodities Essential. 2 November 2012

Trade Essentials.

No new recommendations or adjustments at this time.

Flash Alert: Short CORN on a technical set-up targeting corn prices.

Let's sell short CORN.

We're getting a couple technical indicators lining up with a generally sour mood in the market today. Together, it looks like corn's price is vulnerable to a sharp move lower.

I'll include a chart in the regular issue to be delivered later today. But I think it makes sense to make a move now. I recommend using the Teucrium Corn Fund (CORN)

 

Trade Essentials.

Here is what I suggest you consider doing now:

CORN (Last price: $47.47)

SELL SHORT shares of Teucrium Corn Fund, symbol CORN, at the market. Then place an order to BUY-TO-COVER all shares of Teucrium Corn Fund, symbol CORN, at $50.79, STOP; this order is good till cancelled.

A Time to Sell, A Time to Buy

24 October 2012

We have to ask if consumer deleveraging is over? Maybe it is, for now. But what does the action in commercial and industrial loans tell us? We get some very good private research from Leto Market Insight - here is an excerpt from a commentary last week:

Total outstanding C&I loans by domestically chartered commercial banks today are $1.21 trillion or 5% below the pre-October 2008 crisis level. Of these loans, 4,455 small banks extended $418 billion (34% of all C&I loans), even though these banks account for only 16% of all banking assets. The large banks extended the remaining $793 billion (66% of C&I loans) although they account for 84% of all banking assets.

...

The Federal Reserve designates as "large banks" those that have over $300 million in assets, and there are 1,700 such banks. Fed reports also show that the "top 100" of these banks account for all the C&I loans outstanding in all "large banks," suggesting that the remaining 1,600 US "large banks" with assets ranging from $300 million to $6.7 billion are essentially out of the C&I business!

Some might say the following chart means good things in that C&I loans are actually trending higher. But the dynamic described in the above research is not healthy for the system. Will it matter? It certainly will if the Too-Big-to-Fail banks aren't nurtured ad infinitum. But if they are, then confidence in an unsustainable system could be restored in the coming months.

Commodities Essential. 25 October 2012

 

Trade Essentials.

No new recommendations or adjustments at this time.

Why the global growth slump is not going away anytime soon.

The need for deleveraging means, at best, a stagnant Europe. And a stagnant Europe threatens to undermine all the agreements and backstops that have been duct-taped around the zone so far. Internally, it is a vicious cycle. Externally, it has additional consequences, namely for China.

Chinese investment is tapped out. It's not a viable substitute for a still soft Chinese export sector. What's worse: overcapacity from overinvestment is weighing on exporters who lose pricing power as natural resource and commodity prices remain bogged down by supply builds.

Why can't the consumer pick up the slack?

China has acknowledged the need to rebalance to a more domestically driven demand economy. They just haven't been able to make much progress.  

Commodities Essential. 15 October 2012


Trade Essentials.

No new recommendations or adjustments at this time.

The Case for Natural Gas. AND a new trade with BOM ...

5 October 2012

The Case for Natural Gas. AND a new trade with BOM ...

Most energy market analysts agree that the bottom is in for natural gas prices (at about $1.90). But anyone not talking specifically at the long-term potential (a few years down the road) seems a bit hesitant to predict significantly more upside for the price.

If natural gas is seen to be the non-alternative energy of the future, why not get onboard now with an investment?

For starters, increased natural gas production is only part of the problem. Domestic demand is slow to increase due to lengthy periods required to bring new infrastructure online. But that is in the process. And then consider the rest of the world ...

 

US natural gas supplies are pretty much locked in the US - there is not yet a readily accessible process for exporting the gas. The reason is partly technological and partly political.

Commodities Essential. 5 October 2012

Trade Essentials.

Targeting a short-term downside move in copper and base metals by using the PowerShares DB Base Metals Double Short ETN (BOM). Here is what I suggest you consider doing now:

 

BOM (Last price: $11.80)

Buy shares of PowerShares DB Base Metals Double Short ETN, symbol BOM, at the market. Then place an order to SELL ALL your shares of DB PowerShares Base Metals Double Short ETN, symbol BOM, at $11.09, STOP; this order is good till cancelled.

 

Hedge funds are all over silver.

28 September 2012

Basically, funds haven't been doing so hot. It's no wonder hedge funds are closing up shop - liquidations were up by 14% yoy in the first half. And fewer new funds are being launched.

I came across a Bloomberg article today with more discussion on hedge funds and silver:

Hedge funds are the most bullish on silver in seven months and investors' holdings are expanding toward a record on speculation the metal will outperform gold as central banks seek to boost growth.

Wagers on rising prices jumped 10-fold since June, U.S. Commodity Futures Trading Commission data show.

I expect the hedge funds to be wrong on this ... at least for the next few weeks. Silver has likely put in a short-term top.

 

Commodities Essential. 28 September 2012

Trade Essentials.

No new recommendations or adjustments at this time.