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ShareThe former has seen short-covering, while market internals indicate fresh shorts being taken on the later
The markets witnessed improved traded volumes on the MCX on a week-on-week basis due to the volatility in hard assets -- base metals, energy and bullion. Amongst agri-commodities, mentha oil was the volume topper of the week.
The outlook in the commodities markets was (and will continue to be) influenced by the anticipation on the US Fed's decision on interest rates on December 11.
Base metals are witnessing a pullback based on these expectations as any interest rate cut is deemed to be good for corporate productivity and in turn results in higher consumption of base metals.
For these reasons, bullion eased as the bias towards lower risk was seen easing as energy prices too dived on profit taking.
The week/s ahead will continue to favour select base metals and energy and bullion may just witness some buying on major declines.
Agri-commodities
Chana has shown weakness for the fifth week in a row as the lower tops and bottoms formation continues.
Market internals indicate a 1% decline in net positions as bulls surrendered longs. The 2,200 support needs watching and a forceful decline below this level will be a negative sign for the near term. Avoid buying for now.
Guar seeds has shown resilience at the 1,500 support and the 1,775 resistance too was tested -- both in the same week.
Though the base has been established and activated at the 1,500 mark, the weekly chart does not signal a buy yet. Avoid longs for now.
Mentha oil has seen a pullback after a prolonged decline and that shows some evidence of short covering. Bulls need to wait till a breakout above the 455 level on high volumes and increased open interest.
Even then, upmoves will encounter selling from overhead supply from weaker bulls who exit at break-even levels. Market internals indicate 30% rise in turnover and 29% fall in open positions.
Refined soya oil is showing signs of profit sales at higher levels as the charts indicates a bar reversal (close is lower than the open and the intra week high is a significant high of the entire move).
The 540 level will now be a formidable near-term hurdle for the bulls. Market internals indicate 14% increase in turnover and 1% decline in open interest, which indicates marginal profit taking.
Metals
Aluminium has shown resilience as the 94-95 band will be a base. The 100-threshold needs to be overcome forcefully if an upmove is to be sustained.
The logical upmove can extend up to the 103-104 levels. Market internals indicate 65% decline in turnover and 29% decline in open interest, routine numbers due to the expiry process.
Copper has shown a pullback rally as interest rate-cut anticipation has seen a bear squeeze at lower levels. The upmove could see targets of 285/292 if it extends.
The 245-250 levels will be a base this fortnight. Market internals indicate 17% drop in turnover and 50% decline in open interest. These are figures consistent with the expiry process.
Gold is showing signs of profit sales at higher levels as the bulls lock in gains in the near term. The previous top at the 10,750 levels will act as a critical resistance and unless it is overcome, a fresh upmove is unlikely.
Watch the 9,700 level, which is a crucial short term threshold. Market internals indicate 42% increase in turnover and 24% decline in open interest.
Nickel is showing signs of weakness, which was anticipated after the 1,090 support was violated. The 1,020 area will be the next support level. Bulls should desist from initiating fresh longs and await a clear buy mandate from the charts.
Market internals indicate 16% increase in turnover and 32% increase in open interest which indicate fresh shorts being added.
Silver is showing signs of weakness as profit sales triggered by lower crude prices and interest rate cut hopes exerted downward pressure.
This week may witness some more pressure before buying emerges at lower levels. The 17,600-17,800 levels may see some buying from short-term players.
Wait and watch that level for signs of buying commitments. Market internals indicate 34% increase in turnover and 16% increase in open interest. Fresh short build up seems to have been initiated.
Zinc has seen a pullback rally as the 86 level will now be the de facto support for short-term players. The worst may be over on the downsides and fresh shorts must be avoided for now.
Zinc is likely to trail copper and market internals indicate 1% increase in turnover and 38% decline in open interest which indicates short covering. Expect fresh upmoves.
Energy
Crude Oil has seen profit sales in the same magnitude as the buying in recent weeks. The chart pattern indicated is an "outside" pattern as per western charts and a "daki" pattern on the Japanese charts.
Both are bearish indicators and near-term support is likely at the 3,460 levels and traders will need to keep a hawk's eye on prices/volumes/open interest to gauge market trends.
Market internals indicate 78% increase in turnover and a 23% decline in open interest which suggests profit sales.
Natural gas has seen a decline in tandem with crude after the upmove ran into a wall of resistance. Immediate support will be at the 280-285 levels and unless the 345 hurdle is crossed over, fresh longs are not advised in the near term.
Market internals indicate 6% decline in turnover and 74% increase open interest, signs of fresh short build up. Avoid buying for now.
Mandatory disclosure - the analyst has no exposure to any commodity recommended above vijay@BSPLindia.com
