Technicals | Jul 06 2010
By Rudi Filapek-Vandyck
News and data service Reuters, now part of the great ThomsonReuters empire, nowadays employs technical analysts in an effort to provide added-value for its many thousands of clients across the globe.
The latest market update by Wang Tao, technical analyst for commodities and the energy sector, reads like a forgotten chapter to Dante's Inferno, the opener of medieval master poem La Divina Comedia.
In simple terms: the world is going to hell in the next six months.
Short summary of the chartists' analysis: all commodity markets -I repeat: all commodity markets- will decline in the second half of 2010, with one sole exception, and that is sugar. Judging by today's released market update, those declines should be quite pronounced as well.
The Reuters CRB index, widely used as an overall gauge for the sector, is expected to return to levels last seen in March 2009. This time, however, the index might break through this level and revisit lows last seen in October 2001.
For good measure: these are Wang Tao's assessments, not mine. I am merely reporting on this matter.
Crude oil might fall as low as US$57/bbl. Gold should peak shortly, potentially in the vicinity of US$1300/oz. Were gold to fall through US$1180/oz first, then US$1300 will remain out of reach and gold will start a downtrend towards US$1030, but ultimately to US$660/oz.
Gold, reports the chartist, is currently displaying all the signals of rally-exhaustion. This is an argument used by other technical analysts as well. See for instance the story published earlier today on our website:“Gold: No Rally Means Bad News?“
Copper might have a go at US$6,885/tonne first, but should ultimately be on course for US$4,818/t. For aluminium the six month target now sits at US$1,556/t.
Corn peaked at US$7.65 per bushel in June 2008 but the price is likely to fall below US$2 per bushel by December this year, but for sugar the six months ahead could bring a gain as large as 32%.
It is difficult to see how anyone will be able to beat these forecasts, though I am certain some will try.
Extra note: poor quality of the charts included in Wang Tao's latest update prevents us from reproducing any charts to accompany this story.
