Last night, the Dow again escaped heavy losses on hope that the Europe will get its act together. Commodities, however told a different story. There were across the board losses and it is looking increasingly like the strongest of the global markets is inexorably, if slowly, breaking down on waning global growth. Barring full blown QE3 in two days, the commodities coplex looks headed lower.
First up, the commodity indices. Both the CRB and CCI are showing nasty descending triangles:
So is oil:
Dr copper, the bellwether commodity for growth, last night cracked its downside trading range and looks set for more:
As predicted, gold has put in a double top and looks to have plenty more downside on a panic-driven run to the $US:
Even some of the key grains are looking shaky. Wheat has a head and shoulders top in:
We are also starting to see rumblings of weakness in the iron ore market. From Reuters:
The most-traded January rebar contract on the Shanghai Futures Exchange slid 2.3 percent to close at 4,622 yuan. It dropped to as low as 4,614 yuan earlier, its weakest since Aug. 9.
Monday’s percentage fall was the steepest since Aug. 5 when the contract dropped nearly 2.4 percent.
The weakness in steel prices has weighed on iron ore, with index-based spot prices easing to or holding at levels last seen in mid to late August.
Platts’ 62-percent grade iron ore index IODBZ00-PLT slipped 50 cents to $179.50 a tonne on Friday and a similar gauge by the Steel Index .IO62-CNI=SI steadied at $177.90.
Metal Bulletin’s iron ore index .IO62-CNO=MB dropped 80 cents to $177.04 a tonne.
Tight supplies from India, the world’s No. 3 iron ore supplier which sells most of its material via the spot market, should keep losses in iron ore prices in check.
“I don’t think they’ll collapse, but maybe prices will range from the low $170s to low $180s,” said a Singapore-based trader.
No doubt, prices have been very strong. But if the weakness in global growth continues, the ore market looks to have only one way to go.
Commodities prices are signaling weakness across the board. Some of it is no doubt QE jitters and some growth worries. Either way, without full blown intervention form the Fed, we look to be going lower.
