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ShareThe market saw a week of lower turnover as the festive season and profit sales caused a ripple in commodity prices. De-leveraging was evident across the world as risk appetite contracted. At the heart of the matter was dismal US economic data, rising inventory of industrials and the Iran nuke imbroglio that resurfaced after the ugly turn of 2008.
The week-on-week turnover on the MCX declined 8% and the market-wide open interest fell 4%. Part of the unwinding was due to the impeding expiry of the September series in some counters.
This week being holiday-riddled also hurt. Base metals such as nickel and copper fell off a cliff and are likely to face pressure on advances as trapped bulls attempt to beat a retreat. US commercial non-strategic crude inventories rose by 2.8 million barrels to the 335.6-million-barrel mark, putting downward pressure on oil prices. Caution should be the buzzword this week as volatility is likely to be high.
Agri commodities Chana has seen a mild recovery as the weekly range was truncated and the bulls were unable to take the counter past the Rs 2,425 hurdle. The fall in volumes is indicating trader withdrawal and bulls are advised to wait and watch. Market internals indicate a 41% decline in turnover and a 1% increase in open interest.
Mentha oil has seen range-bound trade as the volatility was lower and trader interest was calibrated. Bulls need to clear the Rs 530 hurdle to trigger a fresh buy. Below the Rs 500 mark, expect fresh weakness. Market internals indicate a 6% decline in turnover and a 5% decline in open interest.
Potato has turned on a dime after the authorities issued press statements about abundant stock piles of food grains, thereby discouraging hoarding. The psychological impact on traders was along expected lines as long positions were surrendered. The Rs 1,300 level is now a swing resistance and unless it is overcome forcefully, the upsides will be laboured. Existent shorts may be held with a stop loss at Rs 1,310. Market internals indicate a 34% decline in turnover and an 8% decline in open interest.
Refined soya oil has bounced for the second week in a row as bulls ramped up longs on expectations of lower overseas arrivals. The Rs 418 level will now be a short-term support that needs watching. As long as it holds, expect bulls to attempt gaining fresh ground. Market internals indicate a 27% increase in turnover and a 13% decline in open interest.
Metals
Aluminium has seen a steep decline and unless the Rs 92 level is overcome on upsides, momentum players are unlikely to benefit from fresh long positions. On the downsides, support may be at Rs 80-81, which was a previous low and needs to be watched. Market internals indicate a 25% decline in turnover and a 34% increase in open interest as fresh shorts were initiated.
Copper has turned lower on the weekly charts and a lower tops and bottoms formation is seen for the third week in a row. The rising trendline is likely to offer support at Rs 282 and should that be violated on a consistent closing basis, bears may gain strength.
A reversal in sentiments will come only after the Rs 315 levels are overcome on upsides with forceful volumes and open interest expansion. Till then, momentum traders should abstain from fresh longs. Market internals indicate a 4% decline in turnover and an 18% decline in open interest.
Gold has fallen for the second week in a row even as the US dollar tested the 1.46 mark vis-a-vis the euro. The Rs 15,150 level is a critical support and should it be violated, expect another round of weakness. Market internals indicate a 2% decline in turnover and a 5% decline in open interest as bulls unwound longs.
Nickel is under pressure and has declined past the golden ratio in its current corrective phase. A last mile support is at Rs 770-775 and bulls will need to defend it for a fresh rally. Market internals indicate a 1% increase in turnover and a 12% increase in open interest.
Silver has seen a decline in tandem with gold as the bulls unwound positions and locked in profits. In the near term, resistance will be at Rs 26,500 and support at Rs 24,200. Market internals indicate a 4% decline in turnover and a 36% decline in open interest.
Zinc has seen profit sales in line withthe base metals segment as a whole. The Rs 87 level will be a support, below which the bulls are likely to witness more pain in the near term. Fresh buys maybe considered only above Rs 95. Market internals indicate a 23% decline in turnover and a 4% decline in open interest.
Energy Crude oil has witnessed a steep decline as US inventories rose ahead of the impending winter and a global decline in greenhouse gas emissions, indicating a lower burning of fossil fuels and trader unwinding of longs.
The $62-per-barrel mark needs to be watched for support in the absolute near term. Market internals indicate a 10% decline in turnover and a 103% increase in open interest as bears ramped up fresh shorts.
Natural gas has seen a price rise which is essentially the cost of carry as the contango charges were steep in the recent weeks. The outlook will be that of caution as long as oil prices remain subdued, though gas has been outperforming oil in the last few weeks. Market internals indicate a 22% decline in turnover and a 39% decline in open interest as bulls unwound positions.
The writer is CEO, BSPLindia.com and the author of A Traders Guide to Indian Commodity Markets.Fair disclosure: The analyst has investment in bullion.
