The Big Picture … In Futures

Sometimes it just makes sense to step back and take a look at the bigger picture. If you’ve read  The Trend Beacon your familiar with  our proprietary Overbought vs Oversold Indicator which is applied to fifteen specific futures contracts. This week we take a snapshot of these indicators as of 27Feb15, placing them side-by-side on the same chart.

OBvOS Summary, 27Feb15

The Buy and Sell Zones are statistically computed and are intended to convey an opportunity to enter or exit a position or sector. Several conclusions can be drawn from this Big Picture view:

  • Both the metals and agricultural sectors are centrally located on the chart, representing transition. In general, neither sector is strongly oriented for position entry or exit.
  • The US Dollar Index is solidly in the Sell Zone, representing an opportunity to exit or reduce a long position.
  • The energy complex, especially Crude Oil, is in or near the Buy Zone. This represents an opportunity to increase a long position OR exit or reduce a short position.
  • The S&P 500 Index has been hovering just below the Sell Zone, and has consistently held this location on the chart for the last nine months. This is an unusual and unprecedented profile for any futures contract for as long as we have been tracking our proprietary indicator. The extended consolidation of this indicator leaves us to believe the breakout, when it does occur, could be extremely volatile.

Checkout  The Commodity Beacon today.

Murphy & Co’s position models have recommended positions in place for some of the futures contracts mentioned above.  To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/.

Posted in Ag/Softs, Coffee C, Copper, Corn, Crude Oil, Energy, Equities, Gold, Metals, NASDAQ 100, Natural Gas, NY Harbor ULSD, Palladium, Platinum, RBOB Gasoline, Renewables, Rice, S&P 500, Silver, Soybean, Sugar No.11, Uncategorized, Wheat Tagged with: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Crude Oil … Due for a Bounce

Crude Oil futures (symbol: CL) are due for a bounce. All petroleum markets are in deeply oversold condition. We’re targeting the $64-75/bbl range.

Crude Oil, 01Feb15

The aggressive selling in Crude Oil during the second half of 2014 is part of the final leg of the correction from the all-time high in Jul08. This leg of the correction should take us near, or below, the low of $32.48/bbl established in Dec08. But first a bounce, followed by more selling. Again, we’re targeting $64-75/bbl on the bounce.

Murphy & Co’s Crude Oil model is currently flat, holding no position.  To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/

Posted in Ag/Softs, Corn, Crude Oil, Energy, Equities, Natural Gas, NY Harbor ULSD, RBOB Gasoline, Renewables, S&P 500, Uncategorized Tagged with: , , , , , , , , , , , , , , , , , , , , ,

Lithium: The Key Ingredient Powering Today’s Technology

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Courtesy of: Visual Capitalist
Posted in Copper, Crude Oil, Energy, Equities, Gold, Metals, NASDAQ 100, Natural Gas, NY Harbor ULSD, Palladium, Platinum, RBOB Gasoline, Renewables, S&P 500, Silver, Uncategorized Tagged with: , , , , , , , , , , , , , , , , , , , , , , , , , , ,

Palladium … Culled From The Herd

So what’s going on with Palladium? Looking back at history, all major metals hit an intermediate peak in the first half of 2008, followed by an intermediate bottom in late 2008, most moving to new highs into 2011. Palladium’s ability to maintain its strength, achieving a new high in Sep14, separates it form the herd. Gold, Silver, Copper, and Platinum have each been in correction mode for the last four years.

Palladium Chart, 28Dec14A look into Palladium’s supply/demand situation reveals a view of concentrated supply with geopolitical risk, reduced inventories, and growing demand. The following global balance is presented courtesy of Johnson Matthey (all volumes are in metric tonnes).

Nearly 80% of Palladium mined production is sourced from South Africa and Russia. To date, US and European sanctions related to the Ukraine situation have avoided action on Palladium exports from Russia. It is also widely held in the industry that Russia has nearly exhausted its above ground Palladium inventories.

Demand is largely driven by growing automobile catalyst requirements which are influenced by a) emerging market automobile demand, and b) increasing emissions regulations. Ford Motor Company pioneered the use of Palladium in catalytic converters over 20 years back, creating a substitute for Platinum. Auto manufacturers are increasingly favoring Palladium, especially in the Chinese market.

A special thanks to Johnson Matthey for including a recycling component to the numbers. In 2013, recycled Palladium met over 25% of global demand.

JM Palladium Supply Demand BalanceThe strength in Palladium appears to be fundamentally and geopolitically backed. Key drivers include the potential for restrictions on Russian exports and continued growth in global automotive demand.

From a technical perspective, the pullback from $912/oz in Sep14 to $729.95/oz in Oct14 has relieved the overbought condition. The $730 level now becomes critical support.

Murphy & Co’s position model focuses on commodity and equity futures markets, and does not currently recommend positions in Palladium.  To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/

Posted in Copper, Gold, Metals, Palladium, Platinum, Silver, Uncategorized Tagged with: , , , , , , , , ,

US Dollar Index … Approaching A Crossroad

We seldom comment on the US Dollar Index (symbol: DX), however we do track the index closely to understand the potential influence on US Dollar denominated commodity prices. The US Dollar Index is approaching a crossroad in the $89.71 to $92.41 range. These levels represent strong resistance to the upward movement in prices dating back to May11.

US Dollar Index Chart, 21Dec14

The US Dollar Index has reached an overbought condition based on the stochastic and RSI indicators. The rally during the second half of 2014 occurred on strong volume.  A drop in volume on continued strong index values would be another sign of impending price reversal.

Why is this a critical juncture in the US Dollar Index price structure? If the resistance in the $89.71-$92.41 range holds, this will likely complete a correction from the $71.05 low achieved in Apr08, AND a resumption in lower price action to levels below $71.05. The impact on internationally traded, US Dollar denominated commodity prices would likely be extreme.

Murphy & Co’s position model focuses on commodity and equity futures markets, and does not currently recommend positions in currency markets.  To learn more about Murphy & Co’s position models, visit http://murphycofutures.com/position-models/

Posted in Ag/Softs, Coffee C, Copper, Corn, Crude Oil, Energy, Equities, Gold, Metals, NASDAQ 100, Natural Gas, NY Harbor ULSD, Platinum, RBOB Gasoline, Renewables, Rice, S&P 500, Silver, Soybean, Sugar No.11, Uncategorized, Wheat Tagged with: , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , , ,