A Brief Look at Commodities: Oil, Copper

Excerpted from the March 7th edition of Notes From the Rabbit Hole

The chart of WTI crude oil is very interesting to we bottom feeders. WTIC is on the verge of confirming a new uptrend and in fact, the break above the moving averages (green box) has held for three days. This is bullish. Next resistance levels are noted.

Interestingly, the XOI oil index is not leading and could be considered a bearish divergence. Either that or the oil stocks are in the process of holding support for a double bottom. Despite the bearish divergence, energy stocks could prove to be leaders at whatever point the broad market bottoms. NFTRH is only interested in relative strength leaders at whatever point the time is right to become temporarily bullish.

click to enlarge images

Copper has bottomed and is attempting to hold a break above resistance. Again, this is a very delectable chart to the bottom feeder. These bullish sentinels argue that there may be life yet in an inflationary world, although right now we cannot read anything more into these bottoms than temporary relief.

In what is likely to one day degenerate into a global war for resources and capital, the time has come to begin watching these commodities closely, now that the former commodity bull herd is obsessed with deflation. This is how the markets work my friends.

Comments

[BxCapricorn]

You have the AROON there as a joke right? The RSI is staring right at you and you did not mention it at all. You also failed to mention the Chinese deciding not to go forward with their stimulus plan, the glut of oil in Oklahoma tanks and offshore tankers, nor did you cite the EIA projections put out yesterday. There are quite a few oil ETF holders that have been duped by the vehicle they bought, hoping to actually track oil gains, only to find themselves "gamed" by the traders.

2009 Mar 11 05:35 AM

[BxCapricorn]

Disclosure: I've been buying SCO below $40 because the technicals for oil have completely broken down, so I really have no idea what kind of technical system or model you are using. This arrived 43 minutes ago:

news.yahoo.com/s/ap/20...

Update: I'm still laughing over the AROON. You've got over 147 technical indicators to work with....choose wisely.

2009 Mar 11 05:40 AM

[Gary Tanashian]

Hi BxC, no I never joke about charts. The AROON was used for Copper, not oil. If you want to know about copper's MACD and RSI, they are supportive as well. As you can see on the chart for oil, the MACD and RSI are both supportive there as well. This is contrary to your ultrashort stance, so I understand your response. It's what makes a market I guess.

As for China stimulus, well, in the big picture I am likely as bearish as you are on most things. But consider this news out of China's central bank. Sure, it's all a pump, but markets need relief - including energy. This could be a trigger for both oil and copper. This is just out this morning:

"BEIJING (Reuters) – Chinese businesses are slightly less worried about the economic outlook and their prospects than they were three months ago, according to a quarterly survey by the central bank.
The survey of more than 5,500 firms showed that, while businesses saw the economy as being significantly worse in the first quarter than the final three months of 2008, their expectations about growth in the second quarter improved somewhat.

They also saw their own businesses improving in the April-June period, the People's Bank of China said on its website."

Regards.

2009 Mar 11 08:16 AM

[BxCapricorn]

You took that well. Cramer would have thrown a fit and sulked. I'll visit your site and see what else you know. Maybe we can trade secrets.

2009 Mar 11 10:10 AM

[Gary Tanashian]

Hey, no harm no foul BxC. This is a tough racket and there is advice and analysis all over the internet. When the day comes that I am always right, then I will bristle at criticism. :-) Check out the site and let me know what you think.

2009 Mar 11 02:07 PM

[ValueInvestor]

You should also be looking at aluminum. Its at all all-time inflation adjusted low. You don't need technical or fundamental indicators to tell you its a no brainer. It doesn't get any easier than that.

2009 Mar 11 02:12 PM

[BxCapricorn]

As a follow up, my model has SCO running out of gas at $43, but UCO/USO etc. are not yet a buy. I had DGP a buy yesterday, but the entire deflationary atmosphere has me locked up on that trade, despite $18.50 being a beautiful buy point. I thought Deron, ova' hear (oops, my NYC is showing...), did a perfect piece on this at...

TheMoneyBlogs.com.

I added your site, and look forward to future posts.

2009 Mar 11 06:13 PM

[BxCapricorn]

Hey Gary, you contribute to TheMoneyBlogs.com site as well...I just noticed that. Coincidence? Seems you guys are all on the right wavelength right now. Well done.

2009 Mar 11 06:16 PM

[Fighting Yoda]

We are heading towards defaltion, commodities will be under pressure for some time - at least a few years.

Don't chase them - let them come to you, FCX and POT etc will all come back and test their lows.

2009 Mar 12 12:34 AM

[Mad Hedge Fund Trader]

This is clearly the place to be. Traders looking for the Next Big Play are keeping a laser like focus on two key commodities. Chinese stockpiling prompted copper to break out of its recent trading range to the upside to $1.70, taking lead producer Freeport McMoran (FCX) up 30% on the week. Crude rose 15% to a high of $46. These impressive moves happened during a week when global equity markets were in complete freefall. This suggests that the bulk of the world’s growth will be in emerging economies, and that the next round of commodity buying will be even more ferocious than the last. Since I believe that the future is all about the ascent of hard assets over paper ones, this is music to my ears.

2009 Mar 12 06:13 PM