Commodities Countdown

Commodities Pause 2018-01-18 Recording

  • Oil Natural Gas, Gold, Silver flat week to week
  • Two down days in one week!
  • Breadth is still broad
  • Recording available

Here's West Texas Crude ($WTIC). After a run like oil has had, it is not a surprise to see a pause in the bullish run higher. The MACD logged a higher high matching the higher high in price. So there is no divergence yet. There does not have to be divergence in price and momentum, but in something as largely traded as crude oil, the chart is more likely to display some divergence.

Here is crude oil weekly. No divergence at this time either. 

Natural Gas ($NATGAS) has been wild for the last month. Today, the inventory withdrawal number was only 159 so that was very light. $NATGAS sold off slightly on the news. There is a trend line break in play this week. Natural Gas is slightly higher than last Thursday's close but we need to see follow through on the breakout.

Gold had pushed higher but has since returned to week ago levels. It is about $3 higher on the chart below. A closeup in the zoom box shows the subtle change.

$SILVER looks about the same, but it is back to unchanged over the last three weeks or since 2018 started.Perhaps this indicates some attempt at a bottom in the US Dollar. There is no indication of divergence showing up on $USD daily chart so this seems more like a pause than an intermediate change in direction. With the RSI below 30 again and the price near former support, it is a reasonable place to expect a bounce. But guessing when a bounce will occur in a bear market is very hard work. Even Wednesday's outside bar (last bar shown on the chart below) only kept 1/2 the intraday range off the low. That's a rather weak reversal bar. Especially as it tested below the former low. 

On a weekly chart, the Dollar looks well into a bear market swoon. There are a couple of reasons to watch this chart closely. It has now made new lows, and it has also completed 5 waves down. The RSI is just touching the 30 level which would be a divergence if it turned here. It would also be a small divergence on the weekly MACD. The next week is pretty important to see what signals we get. If the dollar was to start a multi-month corrective rally, this would be the type of signals we could expect. However, not having any divergence on the daily chart above suggests a low likelihood of being able to reverse higher right now. 

I covered off some of the breadth indicators on the recording, but they are all in great shape. It is not like this market is achieving these highs on just a few stocks.

The New York Stock Exchange Net New Highs indicator ($HYHL), which is new highs minus new lows, just hit a significant high. The most concerning part is the recent surge in the $SPX makes this look like a potential blow off high. It is something to watch when the euphoria gets extremely optimistic. 

Here is a link to this week's video recording.

Commodities Pause 2018-01-18 from on Vimeo.

Good trading,
Greg Schnell, CMT, MFTA

Greg Schnell
About the author: , CMT, is a Senior Technical Analyst at specializing in intermarket and commodities analysis. Based in Calgary, he is a board member of the Canadian Society of Technical Analysts (CSTA) and the chairman of the CSTA Calgary chapter. He is also the author of Stock Charts for Dummies (Wiley, 2018). Learn More
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