The global expansion has been tepid at best. One of the indicators I like to look at is the commodities demand.
The easiest way to check that is to compare the commodities to the 10 Week MA.
Here is the Commodities Dashboard I like to scan. Click here for a live version.You can see we had a nice uptrend since the June lows.
One of the most difficult parts of this market has been the continuous start stop of the commodities cycle.
Here we see gold and $WTIC (West Texas Crude) falling below the 10 week. Lumber and Copper remain above as does the $TSX.
We need to see renewed strength in the commodities complex to push the $TSX higher. This would also signal an improvement in global demand.
The different benchmarks continue to oscillate, and the global test at resistance has stalled for now.
I am encouraged by a few of the indicators and discouraged by a few as well. As you can see on the top of this chart, the $USD has traded within a $0.05 range for 2 years.
Compare that to the massive swings in the Yen and the Pound. The Yen moved almost 30% to the dollar, and the Pound has moved $0.14 in 4 months.
$GOLD and oil appear to be expecting the $USD to strengthen here while Copper and Lumber are still above the 10 week. Copper has solid resistance at $3.36. A break above that would be bullish with a measurement into the $3.75 level.
The commodities markets usually do well in the 4th quarter, so we'll stay optimistic. If Copper and Lumber fail the 10 week test, I'll have to pause my optimism on the $TSX as well.
Good trading,
Greg Schnell, CMT
