Commodities: darkest just before the dawn?

Many commodities have been savaged over recent months due to the stronger US$ and weakened global demand. In this article I have posted monthly charts of a number of commodities and these reveal almost all of them trading at multi-year lows or near major support as we head into a, potentially, pivotal week for the US$ with the December FOMC meeting scheduled for Wednesday. The outcome of this meeting may launch the US$ on its next lengthy pathway and whether this is up or down remains pure conjecture for now. Either way, any new US$ directional move will most likely impact these commodities and these charts reveal trend lines to watch for either make or break activity. With the wisdom of The Mama and Papas, however, one should keep in mind that it is generally darkest just before the dawn and with many commodities trading at such low and painful levels a bounce to the upside could come sooner than one might expect.  

Darkest before dawn

USDX weekly: this has been range-bound between 100 and 92.50 for the last 12 months but this week’s FOMC might be the economic event to trigger a breakout here. Whether this might be to the upside or downside remains unclear just yet but watch these two boundaries for clues:

USDXweekly

FOMC and the US$: Just how the US$ will react to Wednesday’s FOMC is anyone’s guess but my humble thinking is along the following lines:

  • modest and gradual rate hike with hawkish rhetoric:  bullish for US$.
  • modest and gradual rate hike with dovish rhetoric:  bearish for US$.
  • no rate hike: bearish for US$.

Commodities: I am fully aware that commodities are impacted by seasonal factors as well as the US$. However, this week’s FOMC meeting is a high risk event for the US$ and, hence, is a particularly important economic event for all commodities. The monthly charts below show various trend line levels to monitor on the release of this US interest rate news. You will observe that there is a common theme or pattern running through these charts. Most commodities are trading at extreme low levels and just above key support trend lines making them ideal candidates to watch for either a breakdown or bounce off these levels. The potential for a low risk /high reward trade opportunity looks quite favourable on many commodities.

Oil: The rout on Oil last week captured a lot of attention but there could be a bit more pain yet to come. A test of the 2009 low near $33.50 may evolve if this December candle closes below $40:

CLmonthly

Natural Gas: trading near the base line and 2 handle with a few different trend lines to watch here:

NatGasmonthly

Gold: wedge trend lines to watch:

GCmonthly

Silver: ditto here:

SilverMonthly

Nickel:a baseline at 8,000 to watch:

Nickel monthly

Aluminium: a triangle trend line and the 1,250 level to watch:

AluminiumMonthly

Copper: watch the 2 handle here for any support as this is also the 78.6% fib:

HGmonthly

Zinc: triangle trend lines to watch here:

ZincMonthly

Platinum: a triangle baseline to watch here:

PlatinumMonthly

Palladium: and here too:

PalladiumMonthly

Soybeans: a triangle baseline and the 800 level to watch:

SoybeansMonthly

Wheat: a triangle baseline and the 440 level to monitor:

WheatMonthly

Cocoa: Iv’e posted two views of the monthly chart here so as to fit in the previous highs. There are recent wedge trend lines to watch here:

CocoaMonthly1 CocoaMonthly2

Cotton: the 100 level looks important for Cotton:

CTmonthly

Corn: watch the triangle trend lines and the 320 level:

CornMonthly

Sugar: a bear trend line has been broken but the 20 level looks key here:

SugarMonthly

Coffee: watch the triangle trend lines here:

KCmonthly

Lumber: and here:

LBmonthly

Lean Hogs: and here too…the bear trend line is VERY steep making me rather cautious:

LHmonthly

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