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Tuesday, August 28, 2012

Industrial commodities

Yesterday I took a look at China and things did not look all that good.  Is there any message in the commodity space?  Here is a look at JJM an ETF for industrial metals.

There is kind of a head and shoulder looking pattern to this weekly chart.  The right shoulder is a bit droopy. Price has already broken the neck line and appears to be testing it from the bottom.  This looks like an important juncture in this chart.  Will it turn back confirming the H&S top pattern, or break back up through the neck line?

Here is an ETF for steel SLX.

This is somewhat similar to JJM.  It is not really a head and shoulder pattern.  It broke its 2010 low and it also has a lower high in place.  It is consolidating near the lows of what could end up being a double bottom.  I would want it to break that down trend line before saying it has made a bottom.  This could just as easily break down.

Here is one for aluminum ALUM.

There is not as much data for this ETF yet.  However, the last few months look very similar to steel.  Is it making a bottom, or just consolidating before another break down?  It is not clear yet to me.

Last but not least is old Dr. Copper JJC.

This one is a little head and shoulder looking like JJM was.  However, it is still above the neck line.  I find it interesting that every single one of these ETFs rallied to start the year.  My guess is on optimism that things were going to get better.  However, the better never materialized and now they are back testing lows.

Clearly the situation is unclear, LOL.  Are these charts making bottoms, or consolidating to break down again?  They all seem to be in holding patterns.  I guess traders are waiting for new information before deciding whether to take them higher or lower.  They clearly did not perform as well as stocks since the June low.  In 2010, they rallied very strongly along with stocks.  They all topped out before stocks did in 2011.  That makes a lot of sense since these metals are at the bottom of the food chain when it comes to manufacturing.  There is no clear sign the global economy is getting better yet.  Since they did not confirm the rally in stocks, there is the possibility that stocks end up coming back down to earth.  If these metals end up breaking down to new lows it could signal a lot more problems for the global economy.  If they start breaking up through their down trend lines it should mean things are turning around.  We will just have to wait and see which way they go.


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