Commodities Rising

Commodities continue to strengthen across the board.  Over 60% of the commodity tracking ETFs below are now in a Stage 1 base or a Stage 2 uptrend.  Precious metals have gold, silver, and platinum all in Stage 1 bases while palladium is in a Stage 2 uptrend.

Stage Analysis

Ticker Stage Weeks
SLV 1 2
PPLT 1 2
SOYB 1 2
GCC 1 3
GLD 1 3
OIL 1 3
PALL 2 2
JO 2 2
UGA 2 2
UNG 2 11
CHOC 2 29
NLR 2 43
JJC 4 5
KOL 4 9
SGG 4 14
REMX 4 18
CORN 4 58
WEAT 4 62
Totals
Stage 1 33.4%
Stage 2 33.4%
Stage 3 0.0%
Stage 4 33.4%

 

Soft commodities have been one of the weaker parts of the commodities complex, but check out what happened to some of the soft commodity tracking ETFs in February.  The corn ETF had a massive increase in volume for the month and has formed a monthly swing low.

corn

The wheat ETF had its biggest monthly volume ever in February.

weat

Sugar formed a monthly swing low and also had a big increase in volume.

sgg

Coffee is one of the hottest markets of 2014.  Coffee has already erased all it’s losses of 2013 in 2 months, and has seen a massive increase in volume coming off of the bear market low.

jo

If sugar, corn, and wheat continue to rally in March, almost the entire commodities complex will be in a bull market.  There’s still a lot of disinterest in this space as well which is the ideal setup for a new bull market to form.

Connect with me on Twitter: @nextbigtrade

The original article and much more can be found at: http://www.nextbigtrade.com

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice. Please see the disclaimer.

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

Key Sectors To Watch In 2014 – Part 2

Junior Gold Miners

If gold miners got destroyed in 2013, junior gold miners got taken to the woodshed, obliterated, then eviscerated.  You really can’t find a more beaten up sector over the past 3 years.  You can’t find a sector that is more hated, where more pessimism and fear reign supreme.  So if you’re a contrarian, you should stand up and take notice.

Here’s something that you need to understand.  Junior gold miners don’t always just go down.  In fact one of the biggest gains in any sector from its 2008 low to 2011 high was in the junior gold mining sector.  The Canadian Venture Exchange gained 256% from its December 2008 bottom to its March 2011 top, a huge gain over a period of 27 months.  The GDXJ junior gold ETF came out in late 2009.  In 2010 it was one of the best performing ETFs in the market gaining about 67%.  From its 2010 low to its 2011 high, a little over a year in duration, GDXJ was up over 100%.  So the junior miners have experienced bull markets in the past.

There’s a saying that bear markets follow bull markets, and bull markets follow bear markets.  For a great example of that checkout the history of the Canadian Venture Exchange.  The chart below shows the major bear markets shaded in red, and the major bull markets shaded in green.  If you notice after the 2008 bear market ended, an increase in buying pressure went on to produce the bull market from 2009-2011.  That’s what is missing currently as the Venture has built a base but buying pressure still hasn’t shown up in full force.

cdnx1

Continue reading “Key Sectors To Watch In 2014 – Part 2”

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

Commodities Weekly Report

Commodities have been mired in a bear market since 2011 and continued to lose ground in 2013.  But bear markets don’t last forever and commodities will eventually enter into another bull market.  Many have given up on the commodity secular bull market that began around the year 2000.  They have been seduced especially by recent stock market gains in 2013 and given up on commodities since they have sustained losses for multiple years.  This is natural human behavior to chase winners and give up on losers.

The commodity sector is something to monitor though in 2014 since it will be a 3-year old bear market for many commodities.  Bear markets typically don’t last for longer than 2 or 3 years.  The continuous commodity index also looks to still be in a structural bull market even though commodities have pulled back for a few years.

Continue reading “Commodities Weekly Report”

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

Coal Stocks Grinding Higher

Coal stocks continue to steadily emerge from a brutal bear market over the past 2 years.  Last week the coal ETF KOL broke above its 30-week moving average for the first time since early 2012.  As you can see on the chart below KOL has been declining below this moving average in a Stage 4 decline since August 2011.  If KOL can continue to move higher above the 30-week moving average it will transition into a Stage 2 uptrend.

Looking at a daily chart of KOL a couple of things stand out.  First, the RSI has consistently stayed above 40 since September, even during pullbacks.  This is typically the sign of an emerging uptrend since KOL is failing to get too oversold when it pulls back.  Next the action in October was encouraging as volume started to increase as KOL started to approach resistance around the 25-26 area.  Things changed quickly though after the re-election of President Obama, which was perceived to be a negative for the coal market.  A wave of selling hit the coal sector right after the election and caused a big gap down in KOL.  It continued to sell down to about 23, but instead of continuing lower found support there that has held since June 2012.  Then KOL started to move higher once again in December.   KOL gapped higher to start 2013 and each of the 3 trading days in 2013 have seen above average volume, which is a good sign for a breakout.

Next let’s look at some individual coal stocks.  Most coal stocks are lacking one key ingredient for a breakout, which is an increase in volume.  Just like the KOL ETF, individual coal stocks saw increasing volume in October, but have seen limited buying pressure since the gap down after the presidential election.  These stocks need to see buying pressure to overcome the gap down resistance and to transition into sustained uptrends.

BTU and ACI are two examples of coal stocks below their election gap downs.  Both have established a pattern of higher lows and have bullish RSI readings, but need volume to move past their gap down levels.

ANR has overcome its gap down from the election, and has seen a little more buying pressure than BTU and ACI.

As 2012 came to a close and during the start of 2013 the market has seen some sectors that were crushed over the past 2 years move substantially higher.  This includes solar stocks, steel stocks, and some major commodity producers.  The coal sector looks poised to continue rallying but needs more volume to come into the sector, otherwise the chances of the rally continuing are diminished.  In particular watch how the sector trades as a whole as time moves forward.  The best scenario for a sustained uptrend would be to see increased volume across the board in individual coal stocks as well as the KOL ETF.

Disclosure: Long ANR

Connect with me on Twitter: @nextbigtrade

The original article and much more can be found at: http://www.nextbigtrade.com

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice.  Please see the disclaimer.

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS

Gold Miners Looking For A Major Turnaround

Gold stocks are about as contrarian a sector that exists in the market right now.  Even though gold hasn’t had a down year in 12 years, gold stocks have now recorded 2 straight down years, the first time that has happened during this gold bull market.  Shown below is the performance of the HUI Gold Miners Index since 2003:

Relative to gold, gold stocks have had about the same amount of underperformance that they had from 2006-2008.  This ended up leading to two years of outperformance by gold stocks over gold in 2009 and 2010.

Relative to the S&P 500 gold stocks did horribly last year, recording their worst performance since 2003.  And this is the first time since 2003 gold stocks have underperformed the S&P 500 2 years in a row.  Notice that before the last 2 years, gold stocks had outperformed the S&P 500 by double digits almost every year, except for a down year against the S&P 500 in 2004.  Even with 2 down years in a row though gold stocks are still outperforming the S&P 500 over the long term.

Compared against 52 exchange traded funds tracking various sectors, countries, and commodities, gold stocks were close to the bottom of the barrel both during 2011 and 2012.  First shown is the ETFs sorted according to their performance in 2012.  In 2012 a lot of markets that performed poorly in 2011 had big turnarounds, most notably many European markets.  Fading the negativity towards these markets in the middle of the year turned out to be the major trading opportunity of 2012.

Next is the list of ETFs sorted according to their performance in 2011.  In 2011 the worst performing markets were basically foreign stocks and commodities.  In 2012 foreign stocks had a big turnaround, but commodities didn’t and lagged the rest of the market.

So the key thing to note coming into 2013 is commodities are one of the only sectors with 2 years of negative returns coming into the year.  There’s no doubt value investors and contrarians will be taking notice.  There’s research that shows that assets that have negative returns for 2 and 3 years in a row tend to outperform on the upside when they eventually mean revert.

Within the commodities sector gold miners are overdue for mean reversion not only against gold but against the stock market in general. Three years of negative returns in a row is pretty rare, so there’s a good chance the mean reversion for gold stocks will start this year.  Especially considering gold likely put in a major bottom last summer, and could be coming off of a successful retest of that bottom to start the year.

Connect with me on Twitter: @nextbigtrade

The original article and much more can be found at: http://www.nextbigtrade.com

The views and opinions expressed are for informational purposes only, and should not be considered as investment advice.  Please see the disclaimer.

Share and Enjoy

  • Facebook
  • Twitter
  • Delicious
  • LinkedIn
  • StumbleUpon
  • Add to favorites
  • Email
  • RSS