Copper Possible Inside Day?

So much for resistance, huh?  *lol* The gold bugs came in out in force in Asia and European trading.  By the time New York opened, gold futures had already traded as high as $1007.  Good for them.  Unfortunately US traders pummelled the shiny stuff all day but the Bulls remained in control once the dust settled.  Now tonight, it looks like AUD/USD may be putting in an inside day with Stoch %D already turning and MACD showing slight weakness.  That’s alright.  We can handle an inside day.  As long as it doesn’t take out yesterdays low, the uptrend remains intact.  Have your stops in place and add on this weakness if you so choose.

Never Was One To Roll With The Crowd

One of the first things I remember being taught about the market is that it will do everything it can within it’s power to do exactly what you don’t expect it to do.  Case in point the Head & Shoulders bottom we all watched in GLD weekly.  From March ‘09 on we all jumped in any gold stock we could in anticipation of the H&S bottom and gold ringing the $1000 bell.  Same thing with the H&S in SPX earlier this Summer………..but neither came about.  It seems to me over the (admittedly few) years that if the majority of the market expects *it*, the powers that be will do everything within their power to do something else and suck up our money.  We, us, the little guys; we lose and big money gets bigger.

Now everyone has been waiting for AUD/USD to go higher.  After all, China needs Copper, don’t they?  And gold, well everyone loves gold and now seasonality is kicking in, isn’t it?  Then there’s quantitative easing weakening the USD.  Come on – everyone’s waiting for AUD/USD to break resistance and gold shoot to $1000.  It’s got to happen, doesn’t it?

Well, with that in mind, I can’t get this chart out of my head.  In it I’ve got AUD/USD forming a long rising wedge; a reversal pattern, and the thing that haunts me are the lower studies.  Both show negative divergence which fits ideally with a rising wedge.  Other studies show similar traits such as RSI and more.  Now it’s quite possible the Fund Managers will begin trading Tuesday after the Summer hiatus and AUD/USD will skyrocket as many so hope.  But when I remember the first thing I was taught about the market………….I’m watching and waiting with stops firmly in place 

Full disclosure: Long GFI

So What Now? Where’s The Market Headed?

After being away, I prefer to drill down from the longer timeframe to the short, so here goes. 

Coming up to 20month resistance

Here’s what we know:

• Overall short interest (according to the *pundits* on CNBC and Bloomberg) is at the lowest level since January 2009.  How this translates is that most of the shorts have covered their positions and we need shorts to help the Bulls fuel the market higher.  So understand, less shorts means less fuel here.  Doesn’t mean we can’t go higher, sure we can, it’ll just be tougher.  Now the good news….
• Tomorrow is Labor Day.  Tuesday Fund and Money Managers across the nation come back from the Hamptons and many theorize they will unload their longs and take profits.  Hence talk that September is typically a down month.  Unload in Sept/Oct and in Oct
  

  Resistance using fans on the Weekly

  begin loading up for an end of year run up.  At least that’s the theory.  But all of this does mean we’re going to see volume pick back up and that’s a good thing.

• fwiw, poking around shortsqueeze.com I did notice that short interest was down everywhere except the following which I noted.   $SKF +15%  $XLF + 21%  $IYF 92%  $RWR +56% per and  $KRE -21%  $ICF -29%  $RKH -22%  $VNQ -38%.  It would seem the shorts are much less in some financial ETFs but increased in others.  I point out IYF with a 92% increase.  It’s holdings include V (which I am short) GS COF and many more.  Look IYF on your brokers website as those components may be good short candidates in the future.
• 

  Various retracement levels on the Daily

  If you’re Bullish, don’t break out the party hats just yet b/c the shorts are down.  The thing about the market having low short interest is this gives the shorts the ability to pile in whenever and as much as they wish.  In January SPX was down and so were the # of short postitions but then came a whopping 30% drop from January-March so don’t celebrate just yet the shorts are down.  Be cautious.

• In the USD there are numerous Bullish divergences on indicators and the  Commitment of Traders shows that Commerical net positions (usually shorts) are almost totally out of the USD.  That doesn’t prove that the dollar will go higher, but again, they’re warning signs and a reason to be cautious.  A higher buck is going to hurt commodities, including metals and crude.
• AUD/USD (my copper indicator) and USD/CAD (my crude indicator) are both at extreme support/resistance levels that they’ve been unable to break.
• Then there’s good old gold that’s caught a bid partially I believe as a flight to safety in an uncertain market, and partially because its coming into seasonal demand.   Click here to view a seasonal chart on gold.

Bottomline is no one knows for certain that the market will fall off a cliff here.  Those money managers could let us go higher, say to $1121, and then slam us down, or they could play cat-n-mouse going up and down.  No one really knows.  The Contrarian in me shorted an ES mini @ $1016 and will short again at $1037  (I’ll hold em short with a long leash),  I bought a little 100 TZA (whoopee) and am short V which I found funny that somebody couldn’t get shares of V to short last week.  Guess I’m not the only one waiting for that bad boy to fall. *lol*  I am long GFI (gold play) SYNA (yes, bottomfished) and PGF adn will day trade a little if we head higher, but nothing insane.  The big boys are back in town and they have a much deeper pocket than I.

FCX and Copper

AUD/USD has achieved the target off its double bottom  and retraced 61.8% of its ‘08 highs which bodes for a rest; a pullback in the Copper trade.  FCX chart at right confirms that its come into tough resistance.  While I can make no guess on the movement of Gold due its safe haven status when some worry on inflation, it would definitely appear our favorite Copper stocks will be pulling back here.

Copper (AUD/USD)

AUD/USD traded just beneath its short term resistance of 0.8456 all night long waiting for US Retail Sales and Continuining Unemployment Claims.  Both #s were tepid or worse and the USD immediately strengthened, price quickly rejected by that resistance area.  In order for Copper, Gold and other metals to catch a decent trend, AUD/USD needs to penetrate and trade above that 0.8456 level which will then, serve as good support in a long trade going forward.

Currency Pairs

AUD/USD and USD/CAD have now clawed back into their prior channels of last week.  If if if if they hold that, we could see a resurgence in copper & crude that I’ve been waiting for.  If you’ve been reading here the last few weeks, I posted that you should start homework looking for copper/gold/metal plays you’d like to be in.  While its too soon to tell, we *might* get our chance soon.   Watching AUD/USD closely.

Is There a Storm Brewing?

Everyone’s been so jubuliant lately; it seems many have forgotten we trade in shark-fested waters and those bad boys are always hungry for our money in the market.  There’s a reason stocks move in waves.  It’s a psychological thing; to reap the most rewards from reversals and traps which is why market tops and bottoms come at the highest points of exhilaration and despair/capitulation.  That’s probably my alltime favorite saying “The market will do everything it possibly can within it’s power to do exactly what you don’t expect“.  Today will be a rorschak test in trading with many economic reports and FOMC minutes being released.   Big money has a plan, I hope you have one as well.  What’s my plan?  Well, here’s my morning plan.  I want to be out of the market b4 the FOMC minutes come out:

1. USD is still strong over AUD CAD so there’ll still be pressure on metals and oil.   I’m staying away from volatility with crude but will trade in/out of SMN and short GDX (miners) but I am only going to daytrade these inbetween their pivot/support points.  In and out - not hold.
2. LIZ posted a wider-than-expected loss and since XRT lead the rally, this should encourage further profit taking in the sector so I’ll short that retail ETF if I can get shares.  If not – pick a weak retailer below a 50d MA to short.
3. China home sales are skyrocketing but here in the US mortgage applications dropped amid higher rates so I’m I’m thinking some volatility there; going to trade in/out of SRS.  This one, again, I’ll daytrade inbetween pivot/support/resistance points.  Won’t let it ride because of its volatility.
4. My *scary play of the day* is to short BIDU and its descending triangle with a $15 stop.  I know, painful, but it’ll  keep my heart pumping.

Again, when the FOMC minutes are released, I want to be out/flat and will not jump into anything for at least 30min or an hour as I monitor the currency pairs for a hint of direction.  Remember the sharks are circling and they’re hungry.

Ringing The Register

Call it profit taking.  Call it apprehension over tomorrows FOMC minutes.  Call it the end of the rally.  Who cares; it’s all conjecture.  We, as traders, just need to put emotion aside and trade the chart.  So what do we know?
1.  USD/CAD broke above what everyone thought was a Bearish flag, putting pressure on crude (now $68.90)  That $70 level was tough resistance and now becomes solid support with more next support at $66 and $63.  (click the tickers above for chart)

2.  AUD/USD did the exact opposite, falling out of bed and its channel.  Again, that prior support is now resistance.  Bad for copper & gold **unless** some fear comes into the market and gold stocks themselves catch a bid.  As long as these two currency pairs hold their breakout/down levels, I believe we will begin to retrace (not reverse) the rally.

3.  The pundits on TV are doing their best to reassure everyone it’s only profit taking.  They need to keep markets calm b/c we’re only now seeing new $ coming in from the sidelines and any market panic will cause them to pull out.

4.  Productivity costs were up and the Redbook #s didn’t surprise but no one paid any attention.  The market had already turned. 

5.  Tomorrow – FOMC minutes.  The treasury market seems to be moving USD higher anticipating that Bernanke will announce a lessening or ending of buying US treasuries as scheduled in Sept. – but that selling of Bonds would continue as usual.  **If** this is the case, I don’t expect a huge plummet in the market b/c a lot of this is being baked in right here with the sell off. 

What I think we need to watch for going forward is #1 where *could* we bounce, are we going to bounce, is the rally truly over and are commodities dead.  fwiw commodities are not dead.  Don’t even worry about that.   The strength in commodities was, to a great extend, b/c of the weakened dollar but what we’ll eventually see (hopefully sooner and not later) is a shift from trading on a maco-economic level to a fundamental level based on true supply and demand.   Remember that?  Supply & demand?  What a concept.  With this, we would return to a stronger USD trading in tandem with a stronger USD – not opposite as it has been lately.  At least that’s my hope but the 800lb Gorilla in the room that remains is unemployment.   Toxic assets will fester further until *that* problem is rectified and I’ve heard zip on that lately.

Crude, Copper & Gold Update

The charts say it all. I personally am out of commodity-related stocks for the time being partially because of the overall markets uncertainty right now, partially waiting for the FOMC minutes and partially (I’ll admit it) because I’d rather bank the profits.  I’m not saying *you* should exit your commodity stocks.  I’m no guru giving buy/sell signs.  My goal here is more to inform on what I’m seeing and you make your own choices.  Both have support/resistance to protect you and only you can decide what your tolerance is.  If you’ve been in the trade for a while, you can probably afford to let price chop around with stops in place.  If you just got in the trade, then its essential to understand we will most likely see some rangebound trading for a few days.  Its all a matter of personal preference.  Tune in on Wed. for FOMC

Copper & Gold

Image via Wikipedia

While still unable to post a chart (hacker fucks die!), thought I’d at least post what I see for your consideration.  AUD/USD formed a nice base and headed upwards but is coming into some pretty tough ‘07-08 resistance.  The factors that *generally* affect copper & gold prices are inflation, USD strength/weakness, investment demand and jewelry demand.  The Fed has re-stated their commitment to QE as long as necessary so I don’t see the USD substantially strengthening here with a major economic event.  Jewelry & investment demand; take a look at the economy.  Don’t see a major shift there and inflation; well that goes hand in hand with the buck right now so barring any major event (war, major corporate or bank failure, etc) I believe gold & copper will be rangebound for a while as those shares at the resistance level are gradually gone through.  If you’re long, you could take profits or just sit tight and hold.  Again, there should be a good base below you but patience is the word of the day here.  Ultimately I believe that AUD/USD will head higher and so will your shares of the shiny stuff :)