When I wrote the title for the article, I started with "3 Reasons To Watch Commodities Now" and realized most people would add "Go Down, Go Down More, And Go Down A Lot More" on to the end. So I amended the title. How crazy is it to expect commodities to rally here? Well, one of the nice things about commodities is they can rally in the face of a weak market so you can find something going up.
The $USD closed Friday at the same level it was at in Mid January so the dialogue of the recent strength in the $USD by the Fed is confusing. Looking at the chart tells us something else. First of all, we are in a down trend of lower highs and lower lows. Recently we broke below the 200 DMA and the bounce up was uninspiring. Friday was the first weekly close below the 200 DMA since July of 2014. The major commodities are very sensitive to the direction of the US Dollar ($USD).
So if the $USD is going to stay below its 200 DMA, then commodities could be a great place to find some upward trends. Industrial metals have not moved much, so I would not be focused in that area. Gold and Silver look nice here. Here is an example of the weekly gold chart and it looks ready to turn up here.
Lastly, some commodities like Cocoa have been performing well. Here are two ETF's from the home page of StockCharts.com showing the SCTR rankings for ETFs. The Cocoa ETF's are doing very well.
Here is the weekly chart of NIB, the Cocoa tracking ETF. This looks poised to break to the upside.
If you would like to see more on commodities, please check into the Commodities Countdown blog. You may also want to catch the webinars. Here is a link to the last Commodities Countdown Webinar. Yes, there may be light in the end of the Commodities tunnel!
Good trading,
Greg Schnell, CMT
