The top is in for commodities on the weekly basis. The CRB is overbot on the RSI and stochastics agreeable to a pullback. The rising wedge pattern is ominous. All chart indicators are in negative divergence (red lines) forecasting the top. The upper band is violated so the door is open to the middle band support at 194 and potentially the lower band support at 175.
The Aroon is at maximum possible bullishness. The red line is at zero with nowhere to go but up which would be bearish for stocks ahead and ditto the green line that is at one hundo with nowhere to go but down. Traders, investors, Nancy Retail, Joe Sixpack and Ma and Pa Kettle, everyone, is maxed-out on commodity bullishness. Thus, it is time for the slap in the face.
The ADX pink box on the left shows that the collapse in prices when the COVID-19 pandemic started last year was a strong trend lower and had lasting capabilities. But, as usual over the last 12 years, the wealthy elite class in crony America must be protected at all costs so the Federal Reserve jumps into action printing money like madmen buying bonds and other securities. The rich dance with glee as they effortlessly make millions for doing nothing (stocks run higher on central banker easy money but one-half of Americans do not own one single share of stock).
The ADX lost the strong downtrend last summer as the rally started to hit stride. Then, in February this year as the nastiest covid wave passed, stocks took off higher again with non-stop promises of both monetary (Federal Reserve money-printing) and fiscal (Congressional spending) stimulus for as far as the eye can see. The ADX remains in a strong trend, which would be an uptrend, but at 47 it is in the stratosphere and nowhere to go but down. Perhaps the strong uptrend in commodities will be broken in a few weeks time (ADX falls below 27-30). Humorously, the ADX is the only positive thing on the chart and it is nothing to write home about.
The daily chart is also in neggie d so the weakness is underway and should last for a few weeks. A pullback was needed for prices to digest the wild rally and now is the time on the weekly basis. The red lines on the chart show price support levels. On the way up, note how price came back and back-kissed the top trend line at 187 of that long-term red channel through 170-187. That 187 level carries clout and price will likely have to show it respect in the weeks ahead.
The red support lines say a loss of 200 will target 194, then 187, then 170. The lower band is 175. The 200-week MA is flat at 176. The 50-week MA is 170 and climbing. A confluence is building around that 175-187 area which may serve as a target for about 3 to 6 weeks from now. A drop from 210 to 2 hundo is nice since that would be a quick 5% on the short side.
The CRB monthly chart continues hinting at upside. Thus, after a drubbing on the weekly basis and price drops to either 200, 194, 187 or 175 support, it should bounce again for a multi-week rally back up to the current highs.
The Fibonacci retracements are shown and the 38% retracement is at that 170-ish level which is the bottom rail of that red sideways channel. Thus, 170 carries some clout. It looks like some fun is about to begin. The commodity tickers and plays should all trail lower over the next few weeks. Take the profits if you enjoyed the commodity run and flip the position short. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.
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