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Commodities


theflasherman

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On a day-to-day scale, and with regard to Australian stocks, any speculation about USD and US-internal discord is meaningless.

For Australian materials and oil market sectors, the only meaningful gauge is the relevant Australian index. And both point :thumbdown:

 

Energy:

 

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Materials:

 

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Axeman--no surprises! IMO the USD is all that matters today, want to take a bet with me that if the USD has topped,

and drops meaningfully for a week or so, both these indexes wont reverse directions, and that will start tomorrow PROVIDING what the FOMC have to say tonight drives the USD lower.

 

Very very brave man who calls a CERTAIN drop in USD Gold and USD Copper!

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Well i hope I'm wrong, the market has now priced in a rate rise here next month, and that is keeping the AUS dollar afloat ATM, that may make the US dollar AUS dollar debate a little more complicated IMO. In my experience, when we see gold and copper shares sell off hard, as we did today, that signals a future sell off in the physical commodity market/s, so that's what I'm expecting.

 

My personal belief is that we are seeing a market correction and an ABC type correction in the US dollar. Of course what i believe and what is reality is two different things, but we will soon find out. IMO the gold price has been holding up well so far, and copper also, but i don't think the correction is over yet.

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A: IMO --when looking at commodities the only currency the world watches is the USD, all commodity prices are in USD's anyway, since all commodities are actually originally SOLD in USD only. (some companies will convert those sales back into AUD for simplicities sake--I much prefer it when they stick to USD's for sales reporting as many still do, (all analysts fastidiously use the original sales in USD's and then give various USD/AUD fluctuation probability outcomes)

 

The AUD only comes into it importantly when you consider the profitability of nearly all ASX commodity companies, since the PRODUCTION costs of those companies is mainly priced in AUD's.

 

As proof of my arguament, the enclosed clip comes straight from the LME ten minutes ago via base metals.com and is London's take on the tonight's overall metals situation, the dollar referred to is of course the USD. (note especially the final phrase of the clip)

---------------------------------------------------------------------------------------------------------------

 

"On balance the metals are still broadly consolidating near, or at recent lows, so further weakness can not be ruled out. This is especially so as compared to recent pull-backs this one does not yet seem to be attracting sufficient bargain hunting to signal a sustainable rebound. As such you have to wonder whether the buyers are now more nervous in which case the pull backs could deepen. That said, given that the 'buy the dip' mantra has worked well over the past year, bullish sentiment could no doubt return quickly, so one needs to keep an open mind and trade nimbly. >>>>>>>Going forward we feel the direction of the dollar will now call the tune for the metals.<<<<<<<<<<"

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Yes, understood, no problem. This is the risk IMHO, the reserve (here) dose not raise rates, even though it's now priced in, and we also see a further US dollar rally brought about by the federal reserve meeting making a decision of some type affecting the US dollar.

 

I find it hard to justify a further rise in rates here, the last three raises are yet to take full effect, i think it's a mistake to raise the 4th time. I'm still sticking with the correction scenario though, but longer than this week. The price action in mining shares tells me this from what I'm seeing.

 

Im going off on tangents here BTW, but it's nothing to analyse though as I'm just questioning everything, as i always do.

 

My excuse for being wrong or right is my signature!

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Of course what i believe and what is reality is two different things
Congrats, axeman;

that acknowledgement separates you from, and places you way ahead of, many (if not most) retail traders. Being a self-assured and confident trader or investor is one thing. Knowing that markets don't necessarily have to play by my rules makes all the difference. Adjusting to adverse events; having a Plan B; and knowing there may be a need for it: If that insight is metabolised and acted upon with discipline, you will at the very least retain your trading capital to invest another day; you will also retain most of your profits gained that far. In stark contrast to those index-linked or advisor-led experts, whose funds dropped more than 54% between November 2007 and March 2009, and who are now crowing they've regained almost 60% off those March Lows.

Pure spin-doctoring: 58% of the March Low is less than half as much as the initial drop off the 2007 High. Compared to where the XJO used to be, it (and every market-linked fund) is still more than a quarter down.

 

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And if the trend continues, as numerous indicators suggest, the only safe place is cash - again. Or, if you just have to be Long something, pick the ones whose charts support a Long position, and use your Plan B as soon as the "reality" changes that picture.

 

PS: About the AUD and its alleged unimportance wrt ASX shares, it's the same thing. We may consider the RBA's decision wise or not. The RBA has more than shareprices to consider. If the consumers spend too much, if demand increases against limited supply, the RBA will have no choice but to tweak the interest rates and force the consumers to be sensible. It's hubris and stupidity if a young family must have a 5-bed 6-bath mansion with home theatre and 50 Foxtel channels on a single income and 90% mortgage.

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Commodities Index:

Unless the commodities find support right here, they're likely to drop by a further 2-3% into the low $260s.

Which doesn't bode well for our materials and energy sectors.

 

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As Juliana suggested this morning, it may well have to be the banks, maybe assisted by Tech stocks, to pull our Market higher.

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Lets revisit the index early next week, when what the FOMC didnt say, and what Obama is about to say in his first State of the Union adress has had time to sink in,,for the moment this index will be driven by the USD, which as predicted moved violently (upwards) as the FOMC finished, given they--- in effect said nothing new reiterating low US rates (effectively MINUS) are here to stay for the forseeable future.

 

Lets see what happens to the USD with continuing effective minus rates of 2.75%. USD should be gowing DOWN--not UP, commodities should be going UP not DOWN!

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