Commodities Countdown

Copper Breaks From The Base - A Relative Strength Lesson Article

Copper has been frustratingly resilient to any of the 2016 bullish sentiment since the US Equity markets bottomed in January / February. Monday marked a new shine for $COPPER as it finally moved above the base.

A few things have been working on this chart. The price action shows Copper pushing higher each day of the last 10 with steadily increasing volume. The Relative Strength line in purple broke to fresh 6-month highs. That definitely makes it more interesting. As a footnote, the MACD is not really showing us anything that jumps out as extremely bullish yet. However, a more engaged look will see a series of higher lows on the MACD with this recent bottom being very close to zero. If momentum can start oscillating above zero, expect a steady rise to continue. We can see the 200 DMA in green finally turned up creating a positive upsloping long term trend. This is also a nice example of a base being built and breaking out this week. We can see how the price action is changing relative to the long term moving average in green. It used to be below it, now it is mostly above it.

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The US Dollar's ($USD) Knife Edge

Sometimes you have to dive deeper to understand the short-term and long-term setups for a particular chart. This week's webinar went into a deep dive on the knife edge that is the US Dollar ($USD).

Why so focused on the US Dollar? It is so important for the macro direction over the year end. If we are about to substantially rotate into a new bull market, I think the direction of the $USD will be key. Which side of the knife edge it sits on in the upcoming weeks will be a major date with destiny based on my chart work. 

If you like to invest in commodities, this will be an important week for you to examine the charts. I worked through an hour on my webinar that went by like minutes as I tried to explain the $USD /$CRB charts. We didn't get any time to review indexes or bonds which are equally exciting here.

Here is a direct link to the webinar if you can spare the time.

Commodities Countdown LIVE! with Greg Schnell - 2016-11-03 17:00 from on Vimeo.

Webinar Skim // US Dollar 0:00 // $CRB 26:00 // $CRB Components 38:00 // Energy 47:00 // Gold 53:00 //

So I won't rehash the US Dollar in another chart parade here. I would encourage you to roll through the webinar and make your own conclusions.

On the back of that, I will cover off that Copper has broken out of a pennant, and is trying to move higher.

If the Commodity demand in Asia is starting to pick up, let's look to Asia and see what is happening. 

Here is the Shanghai A-Shares Tracking ETF (PEK). While it has not broken out yet in $USD, it is starting to outperform the $SPX. We can see that the SCTR shows PEK to be one of the top performing SCTR's right now which it has not been for over a year. Perhaps this is the reason for Copper's breakout.

Hong Kong ($HSI)and Vietnam (VNM) disagree with the PEK chart but I'll leave it there.

The news that oil is dropping lower, not dripping lower is not news. The energy sector is getting renewed attention to the downside which is also covered in the webinar.

Stay tuned for the outcome of the US Dollar. I think it is the trade or the trigger to the best trade of the fourth quarter. 

Good trading,
Greg Schnell, CMT, MFTA.

Bullish Percent Indexes Can Be Your Best Friend, Webinar Skim 2016-10-27

Wow, that was a webinar! Commodities Countdown Webinar 2016-10-27. I spent a lot of time explaining breadth measurements. If you have not used the Bullish Percent Indexes (BPI's) to help understand market breadth this will be an important webinar to review. For more information on the background of BPI's check out this great article written by Arthur Hill.

Here is a good example. The Bullish Percent Index for the Nasdaq 100 ($BPNDX) is usually one of the strongest BPI's. Notice the note that I wrote in the callout box in May 2015. The market was hitting new highs but the Bullish Percent Index had dropped to 63. After the $NDX made new highs earlier this week in October (Gray shaded area with a black line on top), the $BPNDX (Blue line) is at 63% after being at 79% in July. The lime green horizontal line reflects the current level for the $BPNDX. The market is bullish when it can get above the red lines and cautious when it stalls below the lower red line. One has to be aware of the precarious level. 

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My Chartlist Reads Like A Mystery Novel

Each week I roll through my charts preparing for my Commodities Countdown Webinar. For this week's webinar, I could not be more pulled in different directions.

Which bookshelf should I be staring at? Below we can see The Time Thief, evermore, blue moon, Marked, Betrayed, Chosen, Ink Exchange, The Longing, and Change of Heart. Those titles represent the emotional swings we experienced this week! They make pretty strong Stock Market references for traders being whipsawed daily and weekly.

Then we have the books I've come to rely on in my career. Those all seem to be fighting this sideways market. The $TSX is breaking out to new highs. The US market is making a series of lower highs. The Summation Indexes are breaking down. The Bullish Percent Indexes are positioned for a breakdown. The % of stocks above the 200 DMA are breaking below the levels that usually mark a significant pullback for equities. Commodity charts are ripe for big moves, but the US Dollar Chart looks like they are about to be crushed.

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Fence Sitting - Webinar Skim 2016-10-21

When we read about the stock market, Jesse Livermore has some of the more memorable quotes. "It was never my thinking that made the big money for me. It was always my sitting."

Well, here we are fence sitting but I am positive that is not what he meant. The market is making small losses but no real sell off. Recently we made three-month lows but no real follow through. Crude is hovering at $50 whereas Gold is trading between $1250-$1270.

Earnings pops-and-drops seem particularly acute this time around. However, the big names like Microsoft, Alphabet, and Facebook are doing well and pushing to new all-time highs.

For the Commodities, there was no real strong directional change this week. Below is the West Texas Crude chart ($WTIC). It stayed above $50 for the second week in a row.

Gold fired up on Tuesday, only to retreat by Friday. It closed the week $10 higher. We do have a positive MACD crossover from a low level. We could see a rally from here as the gold miners briefly started to outperform the metal. It is something to watch.

I spent a good portion of the webinar renewing the Solar stocks. Here is an example of First Solar (FSLR). These stocks are tremendously volatile both directions. Note how well they respond when the SCTR has given them up for dead and then they start to re-emerge. For those that like to bottom fish, there may be an opportunity on some of the solar names.

The webinar lays out the broader perspective on more of the solar stocks. Here is the Commodities Countdown webinar recording from Thursday, October 20th. 

Commodities Countdown LIVE! with Greg Schnell - 2016-10-20 17:00 from on Vimeo.

Webinar // $CRB Commodities 0:00 // Energy 15:00 // Industrial Metals 20:00 // Precious Metals 24:00 // Ag 31:00 //Autos 37:00 // Foreign Indexes 38:00 // Solar Stocks 42:00 // Q&A 52:00//

 You can click on this link to watch it in a new browser window. Commodities Countdown Webinar 2016-10-21.

Enjoy your weekend.

Good trading,
Greg Schnell, CMT, MFTA.

Dollar And Yen Snap Trend Lines - Webinar Skim 2016-10-06

There is a general theme this week that I want to tie a bunch of charts together with. A lot of the charts from today started their rally with the lows of late January and early February. Now it seems like this uptrend is being threatened on many of the charts. Even if they don't all change direction on the same day, it is important to note that we could be looking at a major investor rotation away from some of the trends that have been with us most of the year. Two of the most notable trend lines that snapped this week were the British Pound and the Japanese Yen. However, Gold, Oil, Natural Gas, the US Ten Year bond, and many other charts are changing or testing meaningful 6-month trend lines.

I'll start with the Yen ($XJY). The Yen has been tucked in a trading range for the last two months. While this week's action was still within the trading range, a couple of technical signals fired. First, the uptrend line was broken. Secondly, the 65 SMA in green was also broken. Both had been meaningful support for the currency. Looking at the zoom box, this week's price action actually rolled the 65 SMA over and it now is sloping down. Typically the Nikkei ($NIKK) strengthens when the Yen weakens. This may cause the Nikkei to move higher out of the trading range it has been in for the last two months and it could break out meaningfully from the 8 months of resistance around the 17000 level shown in blue.  Notice the Nikkei changed trend around the end of January. I have placed two circles on the currency chart. The Yen broke out above the trend line in December, pulled back and then started to move higher. That major change in the Yen happened while the US market came under heavy selling pressure from the end of December to February 10. Now we are on the other end of the trend. 

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The Bank Review Three Months After Brexit - Part 2

This is a continuation of the article: "The Bank Review Three Months After Brexit"  Click on the link to read it first.

In hindsight, Brexit injected fear into the market and the market has rallied hard for three months. Let's zoom in on some of the banks close to the issue.

HSBC is one of the world's largest banks residing in the UK. With an SCTR ranking of 86.7, it is in the top quartile for large-cap price performance now. We can see the highs of $49 and $48 in 2013 and 2014 have created a ceiling for the stock but this level is a long way away from the current price. HSBC really jumped off the 4-year lows. As the stock is at a major resistance level, this is an important test for the stock. So far the stock broke out to a new high above $38.24 but then failed to hold it. That is not a positive. 

Continue reading "The Bank Review Three Months After Brexit - Part 2" »