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ShareThe markets witnessed resurgence in industrial commodities as well precious metals as the equity markets took a breather. The US dollar easing to 1.43 levels vis-a-vis the euro made it relatively cheaper for commodity buyers, thereby pushing up prices.
On the MCX, the week-on-week turnover fell by 2%, whereas the market wide open interest rose by 4%. The turnover gainers were almond, crude palm oil, gold, heating oil, lead, mentha oil and zinc. Open interest gainers were almond, copper, crude palm oil, gold, lead, natural gas, potato, refined soya oil, silver, steel and zinc. This week will see extension in the trader activity in bullion and select industrials, as long as the US dollar stays below the 1.42 versus the Euro.
Agri-commodities
Chana has witnessed an "inside" formation on the weekly charts, as last week's trading range was within the previous week's range. That is a routine phenomenon after a big move, which was seen on week ended August 22, 2009. Bulls may enhance exposure above the Rs 2,425 levels only. Market internals indicate a 16% drop in turnover and a 1% decline in open interest.
Mentha oil has witnessed a third consecutive week of lower closes and that is a bearish indicator. Bulls are unlikely to witness a reprieve unless the price manages to stay above the Rs 525 levels. Avoid buys till that event occurs. Market internals indicate a 2% increase in turnover and a 1% decline in open interest.
Refined soya oil has established and activated a top at the Rs 485 levels and unless the same is overcome, expect fresh upmoves to be elusive. Watch the Rs 450-455 band as a near-term support for now. Market internals indicate a 13% decline in turnover and a 24% increase in open interest as bears pressed fresh shorts.
Metals
Aluminium has shown a lower top and bottom formation for the second week in a row as the profit sales continued on this counter. The impeding expiry of the August series also hampered buying interest. Should the Rs 90 level be violated, expect the bulls to bear some more hammering in the near term. Market internals indicate a 17% decline in turnover and a 22% decline in open interest.
Copper is trading at its highest weekly levels in 2009, and that is a sign of optimism. As long as the Rs 300 level holds, expect bullishness to persist. Chinese data will remain the key driver for prices in the near term. US home sales / employment data will be the next big triggers. Market internals indicate a 7% decline in turnover and a 4% increase in open interest as players resorted to a buy-and-hold strategy.
Gold has closed at its highest weekly close after week ended March 21, 2009 and that is a bullish indicator. That open interest has rallied, is a bullish trigger, and if prices stay above the Rs 15,000 psychological threshold, expect the upticks to persist. Market internals indicate a 8% increase in turnover and a 14% increase in open interest as bulls enhanced commitments.
Nickel is consolidating for the third week in a row as the big run up in the last quarter is witnessing profit sales from the near-term traders. Upward momentum is likely to emerge above the Rs 1,000 magic mark only. Bulls may defer big purchases till a convincing price rise occurs. Market internals indicate a 17% decline in turnover and a 16% decline in open interest.
Silver is exhibiting a power 'cup-and-handle' formation that is likely to culminate into a power upthrust as long as the bulls manage to keep the prices above the Rs 24,100 levels with higher volumes and increase open interest. The Rs 23,000 level will be a short-term support that needs watching. Market internals indicate a 10% decline in turnover and a 33% increase in open interest as bulls enhanced commitments.
Zinc is perched at the threshold of a resistance of a weekly key reversal/ swing high at the Rs 92.50 levels, above which the bears are likely to get squeezed. The upward momentum in that event will be aided by fresh buying and traders must watch the volumes and open interest keenly before initiating fresh buys. The highest weekly close of 2009 is a welcome signal for the bulls. Market internals indicate a 13% increase in turnover and a 10% increase in open interest as bulls resorted to fresh buy-and-hold trades.
Energy
Crude oil has seen some profit sales as the Rs 3,650 hurdle is proving to be a significant short-term inflection point. Unless a breakout occurs above this threshold, hold back fresh buys. Market internals indicate a 4% decline in turnover and a 2% decline in open interest.
Natural gas has closed at it's this year and the lower tops and bottoms formation continues unabated. The biggest stumbling block seems to be the Rs 50 (33%) cost of carry from the September-October series that is putting the bulls off. Traders are advised to wait and watch for now. Market internals indicate a 24% decline in turnover and a 6% increase in open interest.
The columnist is the author of the book - "A Traders Guide to Indian Commodity Markets" and invites feedback at vijay@BSPLindia.com or (022) 23438482.
Fair disclosure the analyst has exposure to bullion recommended above
