Commodities Countdown

Nothing Like A Nuclear Echo - Webinar Skim 2017-01-19

Greg Schnell

Greg Schnell

Chief Technical Analyst, Osprey Strategic

The commodities markets have been relatively calm recently with the execption of the Uranium mining stocks. They went on a tilt-a-whirl last week. It wasn't the change in Presidential leadership that caused it. It was Cameco, the large uranium miner, supplying a statement suggesting analyst estimates were way ahead of where Cameco management sees 2017 results. As we have been following the Nuclear ETF (NLR) and the Uranium ETF (URA) on the weekly webinars, the shock move was big on the URA which represents miners, but not on the NLR which is predominantly Utility companies with power plants based on Nuclear energy.


West Texas Oil ($WTIC) continues to try and hold above $50. I placed the red line at last weeks low. We continue to see traders testing this support level with no real progress since early December. On the bottom of the chart is Brent crude pricing ($BRENT) and it looks to be holding on the all important support-resistance line.

Natural Gas has started to cycle lower after the big push up on January 12. We have been unable to make higher highs over the last week on this intraday chart. Using UNG, we can see the downward moves intraday. It doesn't seem to have any steam either way, so I am not looking to trade around it here.

Gold has been inching higher, but the miners have stayed in a range. This is the time of the month we usually see nice moves in Gold and the Gold miners, so we'll be watching for that. It is an important time for the Gold miners. The StockCharts.com Bullish Percent Index (BPI) for the Gold Miners is at a critical point. I have set the red line in the middle of the chart at the current level as of Monday around noon. This BPI level was very difficult to break through during the big bear market in Gold during 2013, 2014, 2015. So my interest is piqued here. The MACD appears to be trying to roll over. Investors looking for direction on Gold should be keenly aware of the potential for another thrust either way from here.

That usually leads us back to the $USD. While there are suggestions and allegations that the dollar is too high, the markets will price the big picture on the dollar. I have made numerous presentations and comments over the month of January about the dollar. For commodity traders, the significance of the dollar from here becomes more important. A higher dollar may slow down the stock market, but there have been periods in the past that commodities continued to surge in the face of the final run in the Dollar. If the Dollar is topping here on a longer term basis (at least 6-9 months), then the commodity move that has been under way for the last year could continue to soar as the Dollar weakens. While many people may tie the dollar weakness to comments from leaders, the chart has been technically setup for the dollar to fall from here. Friday's inauguration day close was right at horizontal support-resistance and it was our second week of lower highs and lows off the first week of January 2017 highs. The MACD rolling over here has had a 4 out of 5 ratio for being a good sell signal. That's not bad odds. The one weak signal moved in May 2013 as it bounced down, tested the 40 WMA (lime green), bounced back up to make a failed test of the previous high and sold off in July.

One more thing on the dollar. Friday's volume on UUP was H-U-U-G-E, about 4 x average, so there is something coming, one way or the other! The previous two events of this size were timed close to the UUP rolling over.

So, I presented a Commodities Countdown webinar on Thursday, January 19th that covered of a lot of the commodities. In one hour I can convey a lot more information than writing it out here. For readers this blog works great. For visual investors, the webinar explains things more thoroughly.

Commodities Countdown LIVE! with Greg Schnell - 2017-01-19 17:00 from StockCharts.com on Vimeo.

I will be presenting three webinars this week. The Canadian Technician Webinar on Tuesday, The Commodities Countdown Webinar on Thursday and the Saturday morning kickoff to Chart Summit 2017 as part of a presentation with 17 other technicians.

My Educational Segment:

For the educational section of my blog, today seems to be lining up as the perfect day to talk about the StockCharts.com Bullish Percent Indexes (BPI). I included the Bullish percent index for Gold miners in the article above, but my Bullish Percent Index chart was recently published as the Market Technician's Association "Chart-Of-The-Month" article. These are solid charts that really help see the underlying strength of the market. By the end of this article, I think you'll be a huge fan of BPI's to help protect your investments. 

First of all, background information on the BPI calculation can be found here. Bullish Percent Index. The Bullish Percent Index tells you what percentage of stocks in a group are on a buy signal. If they are not on a buy signal, they are on a sell signal. When the market is raging forward, lots of stocks participate. As the market gets weaker, more and more stocks go onto a sell signal until there is not enough breadth to hold the market up. 

What is key to understand is that Bullish Percent Charts don't flip from buy to sell easily. They stay on a buy signal until a lower low is made. They stay on a sell signal until a higher high is made. You need a group of stocks to work with like the S&P 500 ($BPSPX) or Energy stocks ($BPENER) as examples. This allows you to understand the strength of broad spectrum of stocks within a group. When everything is rising, it is nice to be part of the big momentum.

You can also use line charts to display the Bullish Percent Index information. 

On the center panel below, each thrust since the summer has had fewer stocks participating so the breadth is getting narrower but is still in a bullish range. That does not mean sell. The fact that the market is holding above the two red lines I have put on the chart suggests the market still has broad participation. The other thing about the Bullish percent indexes is that the spike lows help you invest when everything is out of favor. So when everyone is getting grouchy about the market, and this alerts you that you are near a level that the market historically bounces from. This helps make you aware of likely areas for a rally to start. The January 2016 lows were a fantastic place to start getting long the market.

I like to pair my Bullish Percent Index charts with another chart, the percentage of stocks above the 200 Daily Moving Average ($SPXA200R) in the lower panel. As you can see, the percentage of stocks above the 200 DMA is lower than it was in the summer. This is concerning as the market is higher and we had a lot of euphoria around the election but not as much participation in the market. Looking left on the chart, the 70% level is very important. When the market has that level of participation, it is usually ok. However, failure to hold above the 200 DMA starts a relatively quick drop in the number of stocks participating. If the market starts to lose strength, we would expect this 200 DMA indicator to start weakening first as weak stocks fall below the 200 DMA. As the $SPXA200R weakens and the bullish percent index holds up, this gives investors advance notice to some potential weakness so they can protect profits gained in the recent market push higher. 

As a StockCharts.com member, you can keep these charts in a chartlist for yourself and you can examine the market health with this custom indicator provided by StockCharts.com. These unique indicators and unique display methods are designed to help our members make money and keep profits in the market.

At StockCharts.com, everything we do is to help you understand the markets. I want to thank you for subscribing to the StockCharts service to empower yourself in the market to make and keep profits.

We have millions of page hits every month from investors who are not aware of StockCharts value proposition for subscribers. I've made it a goal this year to at least make every subscriber and visiting investor understand some of that unique value. 

Let me make an offer that I have not done before. I will personally send every new member to StockCharts.com who joined in January a direct link with instructions for saving the chart complete with my annotations. Those existing members who would like to have this chart in their chartlist, I will make it really easy for them as well. If you overwhelm me I'll send out a Member's only email with the link! The link will only work if you are a member or sign up for our 10 day free trial by clicking on this link. My email is gregs -at- stockcharts.com. The next component to this is that you will be able to follow along as this chart changes through my blog where I'll share my interpretation of the information on the chart. To keep up with the updates, please click the Notify me button below this article.

So four things to do:

Register for all of the upcoming webinars:

Lastly, send me an email to get all 20 of my BPI charts into your StockCharts.com account as a chartlist. The only criteria is that it has to be the email you subscribe to StockCharts.com with. Easy enough. Send me an email using the @sign > gregs -at- stockcharts.com with the Subject line: Greg's 20 BPI charts please.

Yes, you can share this email with your family and friends.

Good trading,
Greg Schnell, CMT, MFTA

 
Greg Schnell
About the author: , CMT, MFTA is Chief Technical Analyst at Osprey Strategic specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is an active member of both the CMT Association and the International Federation of Technical Analysts (IFTA). Learn More