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The markets witnessed a lower turnover week as traders displayed caution on fresh exposure. The week-on-week market-wide turnover on the MCX fell 12%. The market wide open interest rose by 14%. The MCX turnover gainers during the week were crude palm oil, lead, mentha oil, natural gas, nickel and potato. The open interest gainers were cardamom, cotton, copper, crude palm oil, gold, lead, mentha oil, natural gas, sugar and zinc.

The US non-strategic petroleum reserves were higher by 1.3 million barrels, at the 336.1 million barrel mark. The euro zone continued to prevail on commodity market sentiments, as did the rupee peg versus the US$.

While euro fears may recede this week, the currency factor is expected to exert sizeable influence on the markets. Trade on light exposure and play safe for now.

Agri commodities
Mentha oil has fallen for the third consecutive week and the weekly candle charts indicate a rough and ready dragon fly doji. A sustained trade below the Rs1,300 mark will spell trouble for the bulls as fresh declines may occur. Sustained trade above the Rs1,350 will be a pre-requisite for a bullish breakout. Avoid longs. Market internals indicate 11% increase in turnover and a 3% increase in open interest.

Potato has managed to close with minuscule gains but remains under pressure as the falling trend remains in place. The abundant crop arrivals have exerted downward pressure on prices. Avoid fresh purchases for now. Market internals indicate a 22% increase in turnover and a 2% decrease in open interest.

Sugar M Kol has seen a corrective decline as longs were liquidated after a good run up in the last month. The Rs2,850 level will need monitoring as a short term support as the bulls are likely to hold their positions till this retracement level. Avoid fresh buying for now. Market internals indicate a 29% decrease in turnover and a 4% increase in open interest.

Metals
Aluminium has undergone consolidation after a good up thrust in the prior week. The western weekly chart indicates an inside pattern as the weekly range was contained within the previous week, thereby indicating a short term halt to the up move. Unless the Rs112 resistance is overcome forcefully, fresh longs should be avoided. Market internals indicate a 27% decrease in turnover and a 6% decrease in open interest.

Copper has made an inside pattern on the weekly bar charts as in the case of aluminium. The bearish trend line on the weekly chart indicates resistance at the Rs420 levels in the near term. Unless the same is overcome forcefully, fresh buying is not recommended for medium term players. Market internals indicate a 12% decrease in turnover and a 22% increase in open interest.
Gold has tested fresh highs as safe haven buying emerged on euro zone fears. The upsides are calibrated and lack the range expansion on the bars that indicate an immediate flare up, barring fresh economic bad news. Existing longs maybe held for now. Market internals indicate a 10% decrease in turnover and a 2% increase in open interest.

Nickel has exhibited a contrarian pattern as the metal has rallied, whereas its peers have remained under pressure. As the price approaches the Rs1,000 mark, expect short term selling pressure to accelerate. Hold existing longs on the counter for now. Market internals indicate a 7% increase in turnover and a 24% decrease in open interest.

Silver has rallied in sync with gold and the safe haven buying was coupled with the erosion in the rupee which triggered a minor short squeeze. The Rs58,500 hurdle remains a formidable one as the bulls have been unable to take the price past this threshold on a closing basis. Once a forceful close above the Rs58,500 is seen on high volumes and open interest expansion, initiate fresh buys. Till then, hold existing longs. Market internals indicate a 16% decrease in turnover and a 1% decrease in open interest.

Zinc has shown a spinning top formation on the weekly candle charts and that coincides with a resistance line of a bearish channel. These are signs of caution as the indications are of a consolidation period after a six-week bullish phase. Avoid fresh longs for now and await a confirmed forceful breakout past the Rs106 levels before initiating fresh buys. Market internals indicate an 11% decrease in turnover and a 12% increase in open interest.

Energy
Crude oil has seen a consolidation as the weekly bar chart show an inside formation. The weekly candle chart indicates a spinning top formation as the indecision was evident due to absence of strong follow up buying support. If the bulls fail to overcome the Rs5,275 hurdle, fresh upsides maybe elusive in the near term. Market internals indicate a 15% decrease in turnover and an 11 % decrease in open interest.

Natural gas is precariously poised on the threshold of a critical support which is placed at the Rs170 mark. Should it trade sustain ably below this threshold, the bears may emerge with daggers drawn. The sizable increase in open interest is a cause of concern. Avoid longs for now. Market internals indicate a 3% increase in turnover and a 99% increase in open interest.

— The columnist is the author of A Traders Guide to Indian Commodity Markets and invites feedback at vijay@BSPLindia.com
Fair disclosure: The analyst has no exposure to any commodities recommended above.