Have we reached bottoms yet?

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Early October, the US non-farm payroll surprised the market with 248,000 new jobs in September.

Unemployment dropped to a five-year low at 5.9 per cent.

Also, gold declined and broke below 1,200 benchmarks.

Subsequently, major stock indexes dropped worldwide due to panic in interest rate tightening.

After mid October, we have seen a turnaround in most markets from bottoms seen earlier in the month.

Some said this is short-recovering from the last drawdown and some said the new buying interest is stepping into market.

So, is this uptrend real or are we still in the doldrums fear of another decline? This year, all commodity prices have been dropping mainly from two reasons: US Federal Reserve is planning to exit the stimulus and this may instigate credit crunch, and rising US dollar index.

In fact, there is a fear of cash shortage in the market by the end of this year and market investors are now anticipating it! From mid-October, we spotted reversals of Dow Jones benchmarks in European stock indexes and most general commodities.

Apart from that, crude prices have plunged below 90 benchmarks and reached 80 low regions with no sign of emerging upwards.

Technically, WTI Crude prices are currently strongly resisted at 86 levels while Brent crude is trading at about US$4 per barrel which is in the higher premium range.

On a fundamental view, we expect the crude to drop further over the end of this year with a possibility of reaching US$65 per barrel, There are market rumors about plunging crude prices driven by joint-forces of US and Saudi Arabia in putting the pressure on demand to affect Russia’s revenue.

Whatever it could be, the downtrend of crude prices to critical levels at US$70 per barrel will be a sign of danger as it could pull all other commodities into a price crisis.

In a broad aspect, there are too many areas that need to be studied besides just looking at the weakness in crude prices.

Personally, I follow the US dollar index (USDX) faithfully long time.

This year, the dollar benchmark instrument has risen from 79 bottoms to 86 highs while hovering at 84.5 areas, now.

The technical strength has the potential to carry through the 90 area after this consolidation.

This is in tandem with the outcome of tightening cashflow over next couple of months.

Hence, we speculate the general commodities will make another plunge very soon due to the influence of the dollar.

From another technical angle, I have always scrutinise the monthly chart of using EMA4 and 20 to hunt for long-term crossings.

We definitely have yet to see the bottoms on the chart pattern now.

Nevertheless, you could easily monitor over the next two quarters on a few essential markets like gold, silver, copper, rubber, barley, wheat, sugar, cocoa, coffee, palm oil, corn, and others.

There is also a potential to find effective crossings of all major commodities in 2015.

Have abundance while planning your wealth in 2015.

 

DAR Wong is a registered fund manager with 25 years of trading experiences in global financial markets. The expressions are solely his own. He can be reached at

[email protected]