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The markets witnessed a lower turnover week, though the pro-rata figures indicate an even turnover on a week-on-week basis. The weakness in the hard assets space witnessed opportunities for short-term players. The dollar firmed up vis-a-vis the global basket, which led to unwinding in bullion, base metals and energy counters.

The MCX logged a 9% decline in open interest as many base metals saw expiry in the January series. The US non strategic petroleum reserves fell by 3.9 million barrels to the 326.7 million-barrel mark as the economic recovery boosted demand.

This week is likely to witness unwinding on advances in the metals space and unless the dollar weakens significantly, the bias is towards weakness.

Agri commodities
Chana has closed at its lowest after the week ended June 20 2009, which is a signal of weakness in the near term. Unless the bulls manage to take the closing above the Rs 2,240 levels on forceful volumes and higher open interest, fresh longs must be avoided. Declines may test the Rs 2090-2100 level in the short / medium term. Market internals indicate a 82% decline in turnover and a 7% fall in open interest.

Mentha oil has seen an inside pattern as the weekly range was within the previous week’s range. Though the week-on-week closing was higher, the outlook remains under pressure. The Rs582 level will be a near-term support, which, if violated, will see lower levels being tested. Avoid longs as of now. Market internals indicate a 25% decline in turnover and a 17% increase in open interest.

Refined soya oil has witnessed a fourth consecutive weekly decline, and that too on higher open interest, which implies fresh shorts being opened. The possibility of Rs 425 levels cannot be ruled out in the coming weeks. The medium term trend remains weak. Market internals indicate a 27% decline in turnover and a 15% increase in open interest.

Metals
Aluminium has witnessed attrition as the lower tops and bottoms formation remains in force. The Rs 100 level will be a resistance in the near term. Market internals indicate a 9% decline in turnover and a 37% decline in open interest due to the expiry of the January series.

Copper has recorded the lowest weekly close after the week ended November 14 and that is a cause for concern. The short-term bullish trendline has been violated and the outlook is weak. Bottom-fishing should not be attempted and, unless the Rs 324 level is overcome, do not form a bullish opinion. Market internals indicate a 1% decline in turnover and a 16% slide in open interest.

Gold has seen a lower tops and bottoms formation as the selling pressure continued unabated. The rising dollar triggered bull unwinding as the lower open interest figure indicates. The Rs 15,950 level will be a technical support as the weekly close is at its lowest after the week ended October 31 2009. Market internals indicate a 7% decline in turnover and a 19% fall in open interest.

Nickel has witnessed a bullish weekly pattern that will need follow-up buying support to extend the upthrust. The counter is displaying two bullish patterns simultaneously - a flag and an inverse head and shoulders formation. The Rs 890 level will be a resistance. A forceful trade above this threshold will see the Rs 1040 levels as a target objective over the next few weeks. Market internals indicate a 18% decline in turnover and a 32% decline in open interest.

Silver has logged the lowest weekly close after the week ended September 05 2009 and that is a sign of weakness. Unless the Rs 25,700 level is overcome on the upside with higher volumes and open interest expansion, fresh buys should be avoided. This counter is now weakening in tandem with gold and the outperformance is easing. Market internals indicate a 22% decline in turnover and a 3% increase in open interest.

Zinc has witnessed a lower tops and bottoms formation as the counter fell for the fourth week in a row. The weekly close has been the lowest after the week ended October 17 2009, which is a sign of weakness in the near term. Mark-to-market margins and the systems based stop losses will ensure pressure on advances and selling on rallies. Market internals indicate a 11% decline in turnover and a 19% fall in open interest.

Energy
Crude oil remained under pressure as the Rs 3,800 double top remains in place. The Rs 3,300 level needs to be watched for signs of buying support, failing which further downsides may occur. Market internals indicate a 21% decline in turnover and a 17% increase in open interest as bears ramped up shorts.

Natural gas has witnessed a lowest weekly close after week ended December 12, 2009, which shows some pressure at higher levels. A consistent trade above the Rs 255 level is needed to indicate a fresh upthrust. This commodity is likely to outperform crude oil in the absolute near term. Market internals indicate a 19% decline in turnover and a 27% decline 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 exposure to Nickel futures.