Technicals | Apr 16 2010
By Rudi Filapek-Vandyck
Amidst all the market talk about a “wall of worry”, “a sweet spot for global equities” and a potential “blow off top” for risk assets sometime in the months ahead, technical commodity analysts at Barclays Capital have been warming to the idea of ongoing gains for commodity prices, and for base metals in particular.
Part of their growing confidence is the fact that technical indicators have been improving across the complex over the past days and weeks, as well as the fact that gains have been measured, without any signs of a bubble mentality that characterised the oil price run in 2008, for instance, or the gold rush in September-November last year.
In fact, point the analysts out today, one could draw a comparison with how the base metals complex behaved back in 2006, which should bode well for investors sticking to the view that the underlying trend remains upwards.
The analysts have observed prices for base metals, as represented by the broad LMEX Index, have now re-entered the trading range of 2006-08. Despite the short-term overstretched conditions, report the analysts, the “impressive recovery” should have more potential left.
Supporting this view is the observation that LMEX price action remains well maintained within a bullish channel on short- and medium term horizons. In addition, it has caught the analysts' attention that the MACD indicator recently posted a bullish crossover.
Such a signal, note the analysts, often points into the direction of further gains.
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