Broad-Based Commodities Price Weakness

Today we are seeing very broad-based commodities prices weakness. I wrote a posting last week indicating that volume indicators were showing some weakness, but today, we are seeing not only volume indicators showing selling activity. We are seeing prices fall in crude oil, gold, all the major grains, and most of the major softs, including sugar, cotton, coffee, and cocoa. In addition, I have been observing falling open interest, which is slightly predictive of a sell-off.

This may be significant. To reiterate, we are seeing three phenomenon occur simultaneously in numerous commodities in fuels, metals, grains, and softs:

• Falling prices
• Selling-based volume in the Klinger volume indicator
• Falling Open Interest
  

Often, commodities show price retracements in the face of a recession and growth contraction in the business sector, and demand for many commodities wanes. Is that what we're seeing now? I don't know! Perhaps this is merely a one-day or temporary phenomena that will eventually give way to the continuation of the commodity bull market. But I am certainly beginning to wonder, especially since the volume indicators, which tend to be quite leading and predictive in nature, began falling a week or so ago on the daily charts. Now, we are seeing falling prices across the board joined with falling open interest in addition to volume indicators showing distribution. This is a time for perhaps more short-term trading and greater alertness and caution. Coming days should be interesting for commodities traders. The easy money may be coming to an end for longer-term traders.

Wheat, Please Meet Fibonacci!

Wheat prices today have reached the same Fibonacci level where they have retraced to lower prices in recent days. See here the daily chart, where you can see the Fibonacci levels from the most recent rise in wheat prices. I expect to see wheat prices fall from this level, as they have previously!

Lower daily close for soybeans

Soybeans closed at a new lower daily close today (Dec 3 2007), but just barely. More significantly, perhaps, is that prices spent the entire day below the previous day's close, only rising to nearly reach Friday's closing price just in the closing minutes of today's trading session. Not only that, but soybean prices also reached a new low price (for the day) that was lower than the past few days. Prices haven't been this low since Nov. 20th. Note also that prices are getting quite close to a crossover of the Bollinger Moving Average (a 20-period Simple Moving Average).

Note in the 2nd subgraph that selling activity continues, as soybeans are being distributed. This Klinger+ATR indicator is a wonderful leading indicator for when big money is selling, even before prices themselves reverse.

I included the other subgraphs in this picture because I wanted to show that the Hull Moving Average (2nd subgraph, blue and magenta) has turned negative.

In the third subgraph, note that the Bollinger Squeeze indicator has turned from bright green to dark green, indicating a loss of volatility and momentum. Likewise, the Gaussian indicator (green and red in the same 3rd subgraph) has also turned down.

In the bottom subgraph, the MACD has also turned down! This is all in the daily chart. This is rather strong signaling of more bearish soybean activity to follow.

However:
The weekly chart is still bullish, although the Bollinger Squeeze indicator has just turned from bright green to dark green. I have not posted the weekly chart.