John Roque is a technician who I first encountered when he wrote for TheStreet.com many moons ago.
With so many institutional (and retail) investors absolutely married to the (very crowded but eventually correct) commodities trade, Roque has some interesting views ... of course using charts as his tells. Judging from what I see on the charts in this space, it looks like a lot of broken down stocks whose rallies are going to be short and sweet - and need to be sold. This also infers the US dollar has more to go to the upside, as the inverse correlation trade is the only thing HAL9000 seems to know how to execute.
I will repeat my view that I think commodity prices have become bastardized by "financial innovation" and the dominance of China as the world's marginal buyer. But, in overall theme, I agree with much of what Roque says, as outlined by recent posts on copper the past few weeks. As always, this is all about time frame; over the very long run, commodities are going to be the place to be for quite a while.
Roque's latest from Yahoo TechTicker:
Generally speaking, commodities have been rallying since 2002 and many investors are betting on continued gains as demand grows globally and the dollar weakens.
That long-term outlook remains intact but "the commodity complex is acting poorly here," says Roque, technical analyst at WJB Capital Group, who makes the following observations in the accompanying clip:
-- After rallying above $80 in late 2009 and again in early 2010, oil appeared poised to make a run at $90, if not triple digits. It's failure to "continue that breakout" and subsequent sharp pullback is a warning sign, Roque says. "It wouldn't surprise us to see oil back at $60," if support at $70 breaks.
-- A longtime bull on gold, Roque turned short-term cautious in early December, shortly after the metal peaked at $1227 per ounce. The technician says gold will likely stabilize around $1000 per ounce but has "no base" to sustain a rally from current levels.
-- Weakness prior to Tuesday's rally suggests copper could test $3 per pound, Roque says. "And if copper does have an economics degree...its weakness is also a concern" for the broader economy.
The recent action in copper, oil and base metals such as zinc and lead -- plus strength in Treasury prices -- "would suggest economies are likely to weaken here, not strengthen," Roque says.
Roque's overall view on the market is interesting; similar to what I've been stating, he is concerned about the lack of leadership from the "generals." He has a slightly different list of bellweather stocks than I do, but all the institutional world looks at Goldman Sachs (NYSE:GS), Freeport McMoran Copper & Gold (NYSE:FCX) and Apple (NASDAQ:AAPL). I'm surprised he doesn't have the 2 mega tech stocks (Apple & Google (NASDAQ:GOOG)) as his bellweathers.
Whatever the outcome of Europe's debt crisis, "we don't think this bounce is going to be long lived," says Roque.
....signs the corrective phase isn't over: Roque's list of bellwether stocks -- Goldman Sachs, Morgan Stanley (NYSE:MS), Freeport McMoran, Monsanto (NYSE:MON) and Mosaic (NYSE:MOS) are all showing signs of technical weakness. A self-admitted omission -- a tech name such as Apple -- would be a neutral at best, he says.