Commodities Countdown

Commodity Companies Are Showing Signs Of Stress

Greg Schnell

Greg Schnell

Chief Technical Analyst, Osprey Strategic

$COPPER bounced a little last week, but we continue to see some weakness in the big miners. All of these commodity companies are below the 10-week moving average. Most of the charts would suggest a trend of lower highs and lower lows. TECK has lower highs and even lows. This is concerning.


This weakness in the miners is not at all comforting. The Shanghai market ($SSEC) also closed the month breaking the year long up trend. The Shanghai market broke to new lows in relative strength. Looking at the chart, the Shanghai dropped below the 10 WMA and is trying to find support around the 40 WMA. The MACD went on the first sell signal since December.

Looking at the neighbor in Hong Kong, the Hang Seng Index ($HSI) looks significantly better. This week saw a soaring Hang Seng to new 52-week highs. This divergence is puzzling. Is the trend higher or lower in China? We don't have an answer.

While the commodities space continues to be significantly weaker than the Technology or Industrial sectors, it is far from clear how this resolves.

Australia ($AORD) closed the month at new 52-week highs. There was a brief breakout in Relative Strength(RS) (shown in purple) a few weeks ago but the market has underperformed the last two weeks.

The Russian market ($RTSI) flashed some significant positive technical signals this week. It moved back above the 40 WMA, it broke out of a three-month down trend and the RS broke a short down trend as well. 

The Brazilian market ($BVSP) is very similar to Russia. Both are maintaining their year long uptrends.

The Canadian Market ($TSX) is the weakest chart of all the Commodity related markets.

Interestingly, the Canadian market has had weak commodity related charts, but the banks have held up the overall index. This week, a mortgage company plummeted (HCG.TO) which pulled down the index so this might not be linked to Commodities. It shook the financial sector a little.

So perhaps these commodity related markets are going to make the turn and the commodities will start to run. The weak currency charts for both Canada and Australia are not comforting for that outcome.

The Aussie Dollar ($AUDUSD) is drifting lower, but not as bad as Canada.

The Mexican Peso ($MXNUSD) also had a bad week, wiping out four weeks of gains. Was it all the sabre rattling around NAFTA?

The chart that looks terrible is the $CRB. It closed lower again this week as you can see in the zoom box. A close below 180 would break the uptrend. A close below that level would be new 52-week closing lows. Yuck.

Oil is a big part of the picture. $WTIC is struggling to get through the $55 level. We closed the month back below $50. It also closed below the 40 WMA but let's call it a check of support at the 40 WMA. It is also testing the trend line. A gulpable week ahead.

Looking for more clues, I'll choose $BRENT for a more global perspective on oil. It has broken a trend line that uses the February low as an anchor point. There is a more shallow trend that I have posted as a dotted line and this dotted trend line has similar dates to the points I used on the $WTIC chart above. The bottom line is the 40 WMA has been support for the last four lows. Will it hold?

The Oil and Gas Exploration ETF (XOP) does not look any better than the miners in the top chart. Actually new 52 week lows in RS and a break of the trend line is even uglier! The good news is that it did not accelerate lower after breaking last week. Whether we look for support at $34.60 or $33.97, this chart is weak. 

This is where the technical focus kicks in. Everything commodity related is sitting on a knife edge. Position size is probably the most important trade over the next few weeks. I'll be talking about Gold on the Canadian Technician Video recording on Tuesday as well as the Commodities Countdown recording on Thursday. To catch any of the recordings, please visit my Video Archives. Follow me on twitter @Schnellinvestor. Lastly, there is a new link on my Blog header. 

That connects you to a group of 30 charts that I try to keep up. Enjoy the hockey! It's been fun to watch.

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