Most Commodities Currently Overbought, Led By Gold

While the new year has not been good to stocks, it has been good to commodities, and our trading range charts highlight their gains. The green shading represents two standard deviations above and below the commodity's 50-day moving average. When the price moves above or below this shading, it is considered overbought or oversold.

As shown, oil's most recent rally to $100 has put it in overbought territory. Gold's rally has been even stronger than oil's, and the metal is currently trading above its trading range. Silver, platinum, corn and coffee are also trading in overbought territory, while copper, orange juice and natural gas are trading in the neutral zone.

While commodities in general are in a solid uptrend, it wouldn't be surprising to see some of them stall in the short term.

Comments

[Hugh:]

Before something can be bought it must be sold. If it is overbought it must therefore be oversold at the same time. The two concepts negate each other.

The concept of 'overbought' is therefore spurious. How this phrase crept into the investment world is unknown by me, but I would like to see it creep out.

2008 Jan 07 02:45 PM

[misterchan:]

Preceding comment is very well-written and also very true. I will add another thought. It is O.K. for the stock market to be "overbought" for many months, but gold becomes "overbought" after one week. As does oil. I think not.

2008 Jan 07 07:25 PM

[Hugh:]

Also consider this: When something is bought, it is owned. Over bought then equals over owned. The only cure for this situation would be to toss some gold in the ocean or eject some into space in order to reduce ownership levels. When one thinks it over, the whole idea is terribly absurd.

Also notice these charts are worthless drivel. The truth is that the shaded areas are drawn in after the market has determined the price. To assume prices ought to somehow stay in the shaded areas, that these charts determine how everyone on the planet who buys coffee or gold ought to act is insane.

2008 Jan 07 09:30 PM

[LJ:]

I think you are wasting your time to use your TA to analyze platinum. There simply isn't enough platinum available.

If you said tofu is overbought, then I won't argue with you.

2008 Jan 09 03:08 AM