Commodities Countdown

Gold Drizzles, NatGas Pauses, Oil Surges

Greg Schnell

Greg Schnell

Chief Technical Analyst, Osprey Strategic

For Gold traders, GLD is back where it was 10 days ago after shooting higher on Friday morning, then reversing. This frustrating trading action has made it difficult for any trend followers to profit in here. The SCTR continues to show GLD as one of the weakest ETF's out there. The purple Relative Strength compared to the $SPX shows a flat, inline performance. A breakout from this 4 month base would probably attract  lot of buyers, but until they show up for work to push this higher, we seem content to trade just under the long term average. In the zoombox on the right, we can see the price action briefly pushed up on Friday only to close back in the middle of the range. Now it looks like the MACD wants to roll over with lower momentum.


Checking in on the gold mining stocks (GDX), the action is similar. One concern here is that the price action has not been able to get back up to February levels like GLD did, so this is showing some underperformance by the miners. The volume has been light since mid March with only a few days getting average volume. The MACD is finally above zero. We would like to see a boost of encouragement here, but this industry looks weak based on the chart.

Here is the chart of Silver (SLV). It's very similar to GLD. About the only difference is the recent push above the 200 DMA lasted a few days rather than an intraday reversal.

Moving onto Silver miners (SIL), the chart is similar to GDX instead. The SCTR suggests nothing going on. The Relative Strength is diminishing. The price compared to the February high is significantly lower. If the MACD rolls over at zero after testing from the bottom side, this is a particularly ominous message. The one positive force on the chart is the rising lows.

In general, the precious metals look precarious.

Looking in on the oil business, last week gave us a shot of encouragement when we check in on USO. Today, the push above the 200 DMA is helpful but we are still inside a 6-month trading range. Should this breakout to the upside, we'll probably need the purple relative strength break above the downsloping trend. 

However, let's compare the chart above with the oil producers (XOP). We can see the SCTR is barely at 10%. Hardly a resounding buy signal, but an oversold bounce is nice. The relative strength line is anchored near the December 8th high. Perhaps this week we can see a break of the RS trend line and the price trend line. This recent price action is more encouraging. Today is another test of the 200 DMA so that is also positive as the producers are above the 200 DMA for the first time since mid-March. While the average is at one-month highs, some individual stocks are nearing two-month highs. A flat 200 DMA isn't that exciting so this is still an unstable area and should be considered a trade.

The related trade, UNG representing Natural Gas, has been going the other way for the last few days. As it approaches the trend line, we'll have to watch more closely. This looks like an important area on the chart to see resistance form as it is roughly the middle of the range for the last six months. The MACD is trending sideways today so we'll watch this space closely. The price is in the middle of the two week range.

The market has some signals showing up that are not that rosy. A bounce in the commodities might help deflect that pause back to the upside. I am still negative on the long term for the charts above, but if we start to see some relative strength trends break, I would quickly jump on the bandwagon. Until then, it's a swing traders world.

Good trading,
Greg Schnell, CMT, MFTA.

 
Greg Schnell
About the author: , CMT, MFTA is Chief Technical Analyst at Osprey Strategic specializing in intermarket and commodities analysis. He is also the co-author of Stock Charts For Dummies (Wiley, 2018). Based in Calgary, Greg is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is an active member of both the CMT Association and the International Federation of Technical Analysts (IFTA). Learn More