I got home from work today and naturally gravitated toward my computer–as I usually do–for a 3 hour equities research session, after which, I felt the undying urge to release the pent up energy from a day of sitting at multiple desks (doing audit work) and stuffing my face with bananas and Chinese food. I decide to go to the gym.
I hit chest. Played ball. And, I got inspired to check out how the commodities market was doing. Don’t ask me how but you’d be surprised how much a good lift and a couple games of basketball can do for your market perspective. So I came home and hopped back onto my computer, feeling twice as smart as my Chinese takeout-filled previous self. Here’s what I saw on the weekly charts:
GLD, SLV, Copper, Platinum have formed or are forming inverted head and shoulders or the falling wedge patterns reversal patterns (follow through needed, of course). Steel and Aluminum had broken above longstanding falling trendlines. Natural Gas had broken above two years of resistance and Sugar, Corn, Wheat, Soybean, Cocoa, and Coffee had all also broken above multi-year falling trendlines. Interest rates (TNX) have broken along standing falling trendline.
After making the above observations, I came to the realization that the market is setting up for a possible fall in the dollar.
But wait.. do commodities affect the dollar or is the dollar supposed affect commodities? We don’t live in some sort of fantasy world where commodity stock charts can affect the value of the dollar, do we? My gut tells me we do. The way I see it is that charts are the culmination of almost all of the information available in the investing world and almost all of the thoughts turned into actions by banks, hedge fund managers, mutual funds, options hawks, and Joe Schmoe investors. The only things charts don’t represent is what has not been thought of, or what HAS been thought of but NOT yet put into action (which is probably quite little considering 95% of Wall Street is of the “buy-only” fundamental analysis mentality).
So what am I predicting?
Well, nothing. I have learned over the years that making money by predicting the market is only for Jedis and Ben Affleck in Paycheck. Most others tend to not do so well. However, I do have a hunch the dollar may begin to trend lower and, just maybe, the bottom is finally in for commodities. Whether inflation and higher rates– aka the financial world’s worst nightmare–or a continued market rally will follow any rise in commodities and dip in the dollar is yet to be seen.