November 2013 – Andrew Thrasher

What The Chart Says About Cotton

Posted on November 26, 2013 by Andrew Thrasher, CMT

While commodities have had an awful year compared to other asset categories, cotton ($CT_F) is currently flat YTD. In my commentary for TraderPlanet this week I dig into the latest price action of the cotton ETN ($BAL) as well as the seasonality characteristics and extreme in sentiment for the cotton market.

Here’s a piece:

Seasonality can be a big factor when it comes to commodities, and cotton doesn’t escape this. When looking at the average price action over the last 5 years, 10 years, 15 years, and even 20 years, its low point for cotton is often found in November with prices rising on average until March.

Go read the rest: What The Chart Says About Cotton (TraderPlanet)

Disclaimer: Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this post is meant for educational and entertainment purposes only. I or my affiliates may hold positions in securities mentioned in the blog. Please see my Disclosure page for full disclaimer. Connect with Andrew on Google+, Twitter, and StockTwits.

Can Long-Term Support Hold Up For Silver?

Posted on November 20, 2013 by Andrew Thrasher, CMT

Like gold, silver hasn’t had a great 2013, really it hasn’t a great last three years. What is now, in my opinion, a long-term down trend, its good to look at the historical price action of a market to see if there are any levels of support that might come into play.

Today’s chart is a monthly view of the spot silver ($SI_V) market going back to 2002. The trend line on the chart below looks at the lows off 2003 and 2008. This line has provided pretty good support this year, acting as a base for the nearly 25% advance in August.

We are now back this long-term trend line as well as the 100-month Moving Average. There’s no doubt that the bears are currently in control of silver as shown by the significantly lower lows from the 2011 high. Will this trend line off the 2003 low and 100-MA act as support? So far sellers haven’t eased off the gas or given any hints to the end of their conviction, but we’ll see what happens if we do in fact get a break or if the selling subsides.

Are Aussie Dollar Bulls Waving A Flag Pattern?

Posted on November 19, 2013 by Andrew Thrasher, CMT

The Aussie Dollar appears to have created a flag pattern with the potential for an upside breakout to continue the trend that began a few months ago. This is the topic of my TraderPlanet article for this week.

Here’s a piece:

The most recent price action in $FXA is what I’d like to focus on today. We have what’s called a flag pattern, which is often considered a pattern of continuation for the previous trend. The short-term up trend in FXA from September to late-October acts as the flagpole and helps create an estimated target if the flag pattern breaks to the upside. The flag itself is created in the narrow channel that’s taken place over the last month.

Read the rest: Are Aussie Bulls Waving A Flag Pattern? (TraderPlanet)

A Few Bright Spots in Crude Oil

Posted on November 15, 2013 by Andrew Thrasher, CMT

Crude oil ($CL_F) has been on a slide for the last two months. In August and September I highlighted the breakdown that had been taking place, which eventually lead to 15+% drop in value for the Oil ETF ($USO).

Today I want to take another look at the price action in $USO and some of the bright spots that might be developing. First up we have the narrow trading range that $USO has been in for the last couple of weeks. However, this consolidation could be viewed as bearish by some traders, making the assumption crude oil bears are just catching their breath before starting the next leg lower.

While $USO has been flat with a slightly negative bias, we’ve seen a positive divergence created in the Relative Strength Index (RSI) indicator, which is in the top panel of the chart below. Momentum has been increasing while price has gone practically no where. I’d like to see the RSI indicator break above the down trend created off the July and August/September highs as a sign of strength to the upside. But the first sign we have is the positive divergence, it would be constructive if RSI worked its way back above 40, we’ll see what it does in the coming days/weeks.

On the bottom panel we have On Balance Volume. This indicator simply adds the volume on up days and subtracts volume on down days, attempting to give an idea of buying and selling pressure. This has also created a positive divergence as volume has been stronger on positive days than it has on days $USO has been in the red.

Looking at sentiment for crude oil ($CL_F) we have the Public Opinion data from SentimenTrader. As the chart below shows, there’s been a strong increase in bearishness for oil. Going back to 2009, the only previous time were sentiment was lower than it is today was in 2012. It appears no one wants to own oil right now, which is exactly what contrarians like to see.

One bearish argument that can be made for oil is based on seasonality, November isn’t a great month for oil. Since 1983, November has been the worst performing month seconded by October, which as we know, was also not a great month this year for crude.

Going forward I’ll be watching for a breakout of the current range in $USO. If we see a break to the upside, confirming what we is taking place momentum and volume, then maybe we’ll start seeing signs of a change in trend. As always, I like to see confirmation before my bias shifts, and there’s no exception here. We’ll see what happens.

Gold’s Relationship With Stocks

Posted on November 14, 2013 by Andrew Thrasher, CMT

Last week I looked at some charts of gold ($GC_F) and the levels of support and resistance I’ve been keeping an eye on. This week we had broken through support but with yesterday’s bullish move and today’s strength it looks like we are back above the trend line I discussed. Today I want to dive into the relationship between gold and the S&P 500 ($SPX).

Below we have a chart of the ratio between gold and the S&P going back to 2004. When the green line is rising, that tells us that gold is outpacing the performance of stocks (via the S&P 500) and vica versa when it’s falling. You’ll notice that we started off 2013 with a break of the orange dotted line, which had been support off the 2007, 2008, and 2012 lows. This told us that we should expect stocks to outperform gold going forward, which is indeed what’s taken place.

With the strong relative performance in equities in relation to gold, we are now approaching another long-term trend line in the ratio of the two markets. The sold blue line is a trend line off the 2005 and 2007 lows. If gold continues to weaken against the equity market, then we could eventually see a test of the 2008 low, shown with the dotted blue line.