Technicals | Sep 12 2012
By Rudi Filapek-Vandyck
As far as technical signals are concerned, chartists at Barclays Capital in London abandoned their bearish view on industrial metals at the end of last week and given they had been so persistent in their view prior to the switch, this becomes a noteworthy event in itself.
Economists and the more fundamentally oriented investment specialists may not be prepared to buy into the Great Asset Rotation Switch just yet, it has become obvious in recent sessions the global herd is willing to make a bet on the more cyclical, risky assets and the improving technical picture is simply a direct result of where the "smart money" is moving right now.
Mind you, the same "smart money" has tried to do this before and failed miserably. Resources analysts at Standard Chartered, to name but one, decided to go long resources in May, only to be confronted with the cold hard reality their timing was too early. (See also this week's Weekly Insights "Required: A Leap Of Faith").
This time around it's all about additional liquidity from central banks in major economic zones, of course, and investors/traders are willing to bet that Bernanke and Draghi will simply "do the right thing" and reflate risk assets into 2013. Those technical analysts at Barclays mentioned above are now reporting the surge witnessed in commodities this year is as fierce as it was back in 2010. Back then the surge proved stronger for longer and traders jumping on board the commodities train this time around will be hoping for a carbon copy repeat.
As things stand right now, Barclays charts are suggesting crude oil is likely to rise, but within the well-defined trading range. It's natural gas that is presently displaying signals that a break-out to the upside might be next.
Among industrial metals, copper is thought heading for US$8160/t first, then US$8225 while aluminium is seen targeting US$2100/t and then US$2135.
The Big Anticipation, however, lives in precious metals markets were a supportive seasonal pattern is underpinning expectations for much stronger rises than most investors are commentators are currently anticipating.
Technical limitations
If you are reading this story through a third party distribution channel and you cannot see charts included, we apologise, but technical limitations are to blame.
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