Turn-around Tuesday was an interesting day. The US Dollar ($USD) moved higher, but there were all kinds of interesting technicals. The RSI touched 30 and bounced so perhaps we can expect a rally for a few days from here. The price box is loaded with technical signals. First of all, a bounce off the 200 DMA is a logical place for some bounce. The last time the $USD tested the 200 DMA was the overnight low on the US Election results. One of the concerns for technicians expecting the dollar to go higher, would have been the break below 99.19 at the horizontal support level. But breaking below support for one day, then reversing and closing back above support is very bullish. Next, we have a three wave correction off the high. I am not a big Elliott Wave technician, but that looks to be a nice wave pattern. Now the 100 level is back in play as we watch to see if the Dollar can get back above. We can also see an excellent Head/Shoulders pattern with the highest momentum on the left shoulder on the MACD, then lowering levels on each subsequent peak. So far, the break below the neckline and a reversal back above has to be considered a whipsaw. We would normally associate that with an above average move in the opposite direction which is higher from here. Lastly, a chartist could draw an extremely obvious trend line of rising lows on the $USD here. So the Dollar's big move back up on Tuesday suggests the bulls haven't dropped the dollar. It does suggest a massive tug-of-war as to where this is going to go directionally. At this point, tread carefully!
Here is the link to Commodities Countdown 2017-03-23 Video Recording.
Greg Schnell, CMT, MFTA.
The foreign markets have been breaking out this week while the Commodity markets are trying to find direction. After making a new 3-month low, it is hard to be bullish. Even after the Commodity rally off the lows last year, we were unable to trigger a bull market signal on the weekly RSI chart. For a bull market to be starting we want it to rally up to the 70 level. Even then the RSI signal can fail, like in 2014, but we can see between 2002 and 2008 the RSI hit 70 and stayed above 40 for most of the 7 years. It never got down to 30 for those 7 years to trigger a bear market signal. Currently our last signal was a bear market signal (hitting 30 in 2014) and has not been able to rally to 70 to make a bull market signal.
Here is the link to the Commodities Countdown video for the week of 2017-03-16.
Greg Schnell, CMT, MFTA
In a bombshell press release this morning, Royal Dutch Shell (RDS/A) announced it was selling all of its oilsands mining operations in Canada. On the other side of the agreement, was Canadian Natural Resources (CNQ.TO, CNQ). The size of this deal is not portrayed in the price. The assets changing hands are massive. Just the 100,000 barrel Expansion 1 back in 2011 was huge.
A snippet of the size of these assets. The Expansion 1 project, at one point employed 10,000 people and was the largest construction project in Canada. That project was $14.3 Billion! That was only 40% of the production from AOSP. The existing Muskeg River mine was 155,000 barrels per day. This is a massive, massive project. As a comparison, about 5 new car factories could be built if they had to replace all 255,000 barrels with new capital.
Part of the $14.3 Billion for Expansion 1 was the Scotford upgrader which was included in this deal so without question, it's a massive win for CNQ. There is so much to this deal.
Lots of weakness in Commodities. I discussed the breakdown in Crude below the uptrend and below the horizontal support level.
Greg Schnell, CMT, MFTA.
For such an outstanding broad based rally by the overall market, I found the rally size was pretty small in the Commodities pillar of the market.
The Gold stocks (GDX) rallied 1/2%. While a rally is great, when it underperforms the broad index rally by less than 1/2 the size, it is a bit underwhelming. The 50 DMA has been nice support and resistance for the Gold Miners for over a year. Today was a bounce off the 50 DMA. Perhaps its the start of a new rally. If it had led the market today, that would have been a little better clue. At this point, it looks more like it got dragged upward with the market.
Commodity related stocks had a ridiculously bad day by any sort of measure. Gold was up $18 and the GDX hardly budged. Oil stocks have been unable to rally this week with crude oil testing a small breakout, only to reverse. The Metals ETF broke a year long trend line today. The Uranium related ETF broke the 2017 trend line. The Copper ETF broke its trend line. The Steel ETF keeps struggling at resistance.
The big picture question for me: If Commodities can't get any love in a big roaring bull market, when are they going to get some? Based on today's failures across the board, soon doesn't appear to be one of the options.
In the primary pane below, the Gold stocks:Gold ratio (GDX:GLD) has broken its trend line and was a pretty good sell signal in August. Today's action is easy to see in the zoom panel. Gold up sharply, no response from the miners. Extreme caution is warranted.
Here is today's Commodities Countdown Video.
I'll have more commentary in a separate blog.
Greg Schnell, CMT, MFTA