Is the Commodities Correction Ending?
01/19/2007 12:00 am EST
Pamela and Mary Anne Aden of The Aden Forecast say precious metals prices could recover, while weakness in oil prices should continue and the US dollar may test resistance. But they think the Dow will remain strong...
"Recently, gold and silver fell sharply, resulting in a reevaluation of gold's intermediate moves. The current decline (as of 1/10/07) is in its fifth week. Since these declines average six weeks, it could end this month. February gold and March silver will begin to show renewed strength if they can rise and stay above their 15-week moving averages at $616 and $12.56, respectively. Major support is at $585 and $11.
"Platinum rose to a five-week high and may be leading the way for gold and silver. Platinum and palladium are bullish above $1112 and $310, respectively. Copper rose last week, too, but it's still bearish below $2.85.
"The oil price is literally falling out of bed, despite what our leading indicators have been showing. If oil now stays below $60, it could possibly decline to $45. Chevron (CVX NYSE), ConocoPhillips (COP NYSE), and Exxon Mobil (XOM NYSE) are heavily involved in Venezuela, which has started nationalizing key sectors. Combined with a falling oil price, this makes these companies too risky. Continue holding your remaining energy shares as they're oversold.
"Long-term interest rates continue to resist below their key levels. The major trend for bond prices remains up, signaling bonds are bullish and headed higher. That will continue to be the case if the yields stay below 4.74% for the ten-year note and 4.84% on the 30- year bond. (Editor's note: The ten-year note's yield closed last week at 4.77%.)
"Our recommended currencies are bullish, but have broken below short-term support levels, suggesting we could see more downward pressure in the weeks ahead before they resume their rises. The currencies will remain very firm if they stay above the following levels; 1.9175 for the British pound; 1.29 for the euro; 0.7700 Australian dollar, and 0.6750 New Zealand dollar.
"The US dollar index is rising as gold declines, breaking above the 84 and 85 resistance levels. Its next important resistance is at 86, but even if it rises to 87.30, it will still be bearish. Keep your currency positions. The DJIA will remain very strong above 12400. On the other hand, the Dow Jones Utilities and American Stock Exchange declined last week and the Dow Transports don't look good.
"Since several of the international stock markets are also looking toppy and the leading (medium-term) indicators are overbought, the next direction will likely be down in at least a normal correction."