Thursday Commodities & Currencies
All charts and comments intended for education and discussion purposes only. No investment recommendations are being offered. Comments below related to this post are encouraged. | MON - Sector Strength | TUE - Interest Rates | WED - Market Sentiment | THU - Commodities & Currencies | FRI - Market Breadth | SAT - Bullish Percents | About | contact: HeadlineCharts@gmail.com |
The general, gradual strength in commodities continues and I believe this points to economic growth and is supportive of equity prices in general. There is some concern though within the commodity trends regarding the headline commodities such as food and gasoline prices. These have been very strong lately and have a large impact on the consumer outlook.
Below are weekly charts of the industrial metals. These are used to help evaluate the world economic strength. All three are moving very nicely in a constructive sideways consolidation pattern. In general, the wider the consolidation, the more powerful the eventual break. Usually prices will break with the pre-existing up trend, but there is always the possibility it is a topping pattern and prices could break below. Shifts above or below the moving average give the first indication regarding the eventual direction of the break. I believe that if these prices break above then it is generally a favorable sign for equities because it indicates worldwide economic growth, and is very helpful to the commodity producing economies such as Canada, Austrialia, Russia and many South American countries. If prices run up too fast and too high, however, it becomes an inflationary problem and eventually will work against equities.
The chart below is showing the gold mining shares are finally starting to show a little performance with the XAU:GOLD ratio turning up. The ratio has a ways to go before it proves much, but this is a good sign for investors interested in the precious metals shares. On Tuesday we showed that the US Dollar dropped below an important support level, and this is helping the precious metals, along with the current speculation that the Fed may be less inclined to raise rates.
