Wednesday, August 5, 2009

Wednesday Commodities Round-Up

Industrial metals are in a clear and strong uptrend that started in early March. the MACD is rising as is the RSI. The RSI is just starting to approach overbought territory. However -- the RSI can stay pegged over 70 for quite some time. Notice the 10 and 20 week EMA are moving higher and the 10 week EMA has crossed over the 50 week EMA.

The daily chart shows a good advance. First notice along the way we've seen consolidation in the form of pennant and flag patterns. Also notice the very bullish orientation of prices the EMAs -- prices are above all the EMAs, the shorter EMAs are above the longer EMAs and all the EMAs are rising. Prices recently broke through areas of key resistance and are moving higher.

This is fascinating chart. First, prices broke below the lower trend line a few weeks ago. Then they consolidated below this level. This led me to thing prices were going lower. However -- and here's the key point: that was based only on the information available from the chart; it did not take the fundamental backdrop into consideration. And that is what has moved the market higher. Commodities rallied earlier this week in anticipation of a recovery.

And that increase is seen very clearly on this chart -- notice the upward gap accompanied by the rising MACD and RSI. In short, earlier this week traders saw the economy improving.