Commodities got crushed with the overall market dropping back. The size of the moves in just about everything has surprised everyone. The people who were bearish finally got their pullback convincing them they were right. Part of getting pullbacks right is timeliness. We had noticed some softness as the previous headlines of the videos demonstrated, but sometimes the drop is a long drawn out affair, other times, not so much. I think the current pullback (gulp) qualifies as a not-so-gentle pullback.
In the video I cover off a lot of issues. On the equity indexes, there is a great reason to expect a bounce from around this area. The second thing is the major shift in the currencies. There is a potential setup where the US Dollar explodes higher catching all the dollar bears on the wrong side. I don't know if it is catching me on the wrong side, but it is definitely not what I was expecting at the turn of the year. This would also lead to great pain in the Commodity related charts. The next few weeks will need even more attention on the dollar.
So far, since the Fed meeting, it's been a one way street lower. The market has been going down a little faster than traffic on Lombard street in San Francisco. More like an Olympic Ski jump!
The real turning point was the Fed meeting date so far. Just before the US Presidential Election, the Federal reserve held a meeting that was actually the turning point to start the move up. The election built on the start of the move. Now it seems it has started the move down after the Fed meeting. Could the change of Chairperson be the reason, or the rate of change on the Fed balance sheet? In the background is the US Dollar. It made it's final high a few days after the Fed meeting in December 2016. Could it be that the dollar is now going to turn higher on the Fed meeting of January 2018?
It's too early to call, but the webinar spends a ton of time covering the major impact a currency turn could have here for the commodities. Just when it looked like we were about to get a green light breakout on the commodities, they break down again. The $CRB has already moved lower than last months low after breaking out to a new two year high. Making lower lows is not a bullish characteristic.
I was choking when I saw the Copper chart this week. It has some serious concerns!! First of all, the two year trend on the MACD is breaking down. When a weekly momentum trend cracks, that is a huge signal for me. The testing of the red line on the MACD has to be watched closely. The second major concern is the stalling of Copper at this horizontal level. We have been monitoring this every week for 8 weeks and it is unable to get through. The third major concern is the green trend line on the price chart is being tested/broken. By itself, there is some hope of finding support. With the other two issues mentioned here, and all the other commodities going in to a tail spin, its a big concern.
The Rare Earth Metals ETF was featured on the ChartWatchers Newsletter on the weekend. It is breaking down in concert with the Lithium ETF. Lithium and Rare Earth Metals Need Attention.
Below is the release of my new book. I was on the MarketWatchersLive internet show and recorded this segment on Thursday February 8th. You'll need to watch this and act fast if I can help you out with this special offer. Perhaps a Valentine's gift! Seriously, we have discussed it for a couple of days, but you have to act early Friday or it won't happen! Hundreds have responded, so time is tight.
Now Steel (SLX) and Coal (KOL) are losing steam. These charts are too early to declare broken. However, the massive setup in the US Dollar, the Trend line on the Euro, the Canadian Dollar data, the commodities across the board rolling over suggests this is a very big move that is building inertia. It's too early to call it, but it is not too early to discuss why the signals are so strong showing the potential for a big dose of pain.
Oil continues to hold up, but the related stocks are not holding up. When this chart moves below the 50 DMA as a group, thats a good signal. We have been monitoring the problem for two weeks. We are there today.
The Commodities Countdown video below has a lot more information. I strongly encourage you to check it out if you are interested in the overall indexes, the currencies, the bonds and the commodities. It was fast moving. You might need to rewind a bit to capture all the thoughts!
While the video covered a hundred or so charts, the big issue is the commodities as a group are getting thumped.
Stay tuned for more! I will be on the Market Outlook Saturday at 11 ET for those that would like a high level view. As well, we will do a question and answer for the second half of the show. Click here for a link to the show or go to the Webinars tab and select the show on the right, Saturday morning just before 11 ET.
PS. Don't forget to buy the book Friday morning if you want the special offer and special price.
Greg Schnell, CMT, MFTA