Buy the Commodity Dip, Or Wave Goodbye?

Global commodity markets are trading in very disjointed fashion, with huge divergence within the soft commodity markets, some precious metals easily holding higher while others are testing support, and resource commodities now starting to look overweight on speculative interest.

Unlike the regular use of commodity markets, that historically hedge forward commitments on global growth or contraction, the increase in speculative use of commodity markets to hedge dollar manipulation and regional civil unrest will now start to create volatility on an intraday basis. Tests of upside resistance are now weak and are not holding as easily as they have done previously.

Gold bullion futures trade continues its 12-session sideways crawl, that has main support at 1400 and major resistance at 1450. Trend, momentum, sentiment, and price action reads are all confirming that fair value has been found on gold, with one or two 30-minute periods of trade each day containing most of the 24-hour session moves. There are no new signals forming at this point in time, either long or short, on gold bullion.

Silver bullion trade is holding a long trend, although in recent trade the Momentum and Sentiment Indicator signals have started to show the potential for moves to test support. The 20-day simple moving average at 33.50 would seem to be a likely downside target; that, from a technical perspective, would very likely be where algorithms would step in to buy the dip. Now may not be the time to be looking to build a new long position in silver, as intra-day price action has become sporadic, and is starting to be impacted by sound-bite headlines that until recently had been ignored to the greater extent.

West Texas intermediate oil futures trade, the most liquid of global oil contracts, have held an initial test of support at 102.50, which has very bullish mid-term charts that are starting to signal that a period of consolidation will be expected, and at worst that a test of 100.00 may be coming. There are more than enough fundamental reasons for speculative traders to be on the long side of crude oil trade, but without good reason, and actually being able to continually break upside resistance that history tells us is something that could be short-lived. It looks as though dips to test support will be bought on WTI, but traders may be well advised to wait for the big dip, and at that point gauge the strength of the momentum if 101.50 as broken of support.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.