Comment

The markets witnessed a higher turnover week, as the MCX logged a rise in turnover of 12%, on a week-on-week basis.

The US economy provided a booster shot for industrials as the unemployment rate slid lower and the banking sector started repaying TARP monies to the US Treasury.

That buoyed global sentiments and caused a flurry of profit sales on bullion and buying on the dollar. Risk appetite expanded and the buying re-emerged on industrials. Should the upward momentum be sustained, base metals and energy prices may witness buying at lower levels.

Turnover gainers during the week were aluminium, cardamom, copper, crude oil, gold, lead, and mentha oil, nickel, platinum, silver, tin and zinc. The open interest gainers were cardamom, copper, crude oil, mentha oil, natural gas, tin and wheat.

Agri-commodities
Chana has witnessed profit sales after a robust upthrust and indicated a Gann swing reversal on the charts. As long as the commodity stays below the Rs 2,625 levels, the outlook will be weak.

The decline has been less than forceful and turnover and open interest will need monitoring for signs of fresh trends emerging. Market internals indicate a 60% decline in turnover and a 10% decline in open interest.

Mentha oil has witnessed a bullish pattern for the fifth week in a row as the winter demand spiked higher due to cyclical considerations and the supply-side fears in agri commodities space added to the trader optimism. The Rs 600 level will be a swing support and any sustained trade below this support will mean some profit sales. Market internals indicate an 11% increase in turnover and a 12% increase in open interest.

Refined soya oil has witnessed a bullish close but an inside formation, as weekly range was within the previous week’s range and the volumes were marginally lower. A support base is now made at the Rs 482 level and a sustained trade above the Rs 510 levels will mean a fresh buy trigger. Market internals indicate a 29% decline in turnover and a 3% decline in open interest.

Metals
Aluminium is proceeding on a cup and saucer formation that has bullishimplications. The improved traded volumes are indicating an optimistic undertone. A sustained trade above theRs 100 levels will be a confirmation of a breakout. The extent of the move after this breakout will depend on the traded volumes and open interest on this breakout.

Market internals indicate a 27% increase in turnover and a 2% decline in open interest.
Copper has witnessed a new 2009 high as the industrial outlook perked up in the US after the unemployment rate contracted. The decline in bullion saw a bullishness in the red metal as the same is known as the tin roof of the economy. As long as the metal stays above the Rs 322 levels, the bulls will remain in charge. Market internals indicate an 8% increase in turnover and a 4% increase in open interest.

Gold has witnessed a sharp correction from higher levels as safe haven buying was reversed after the US economy indicated a revival due to slowing unemployment. As long as the precious metal remains below the Rs 17,400 levels this week, the bears may re-emerge.

The bulls have a fighting chance above the Rs 17,500 levels only. Traders should trade this counter on lower exposure due to the increased volatility. Market internals indicate a 14% increase in turnover and a 24% decline in open interest as the December series drew to a close.

Nickel has seen a marginal rally after a prolonged weakness and also an inside formation as last week’s range was within the previous week’s range. The Rs 800 level will be a crucial level to watch as a sustained trade above this hurdle will be needed if a sustainable upthrust is to be witnessed. The Rs 730 levelwill be a support to watch as a decline below this threshold will mean a return of the bears. Market internals indicate a 2% increase in turnover and a 9% decline in open interest.

Silver has seen a positive closing but the metal has ended way below its weekly highs. A consistent trade above the Rs 28,875 levels will be needed to indicate fresh buys in this counter.

Silver has been indicating a higher relative strength as compared to gold and can outperform returns offered by gold in the near term. Market internals indicate a 14% rise in turnover and a 6% decline in open interest as the December series drew to a close.

Zinc has surged as compared to its peers in the industrial metals space, to match the performance of copper. Asustained trade above the Rs 110 levels will trigger short covering cum freshbuying that will take the metal significantly higher from current levels in the coming weeks. The metal must stay above the Rs 103 levels in case of corrective declines. Market internals indicate a 26% increase in turnover and a 1 decrease in open interest.

Energy
Crude oil has witnessed a decline as the week-on-week closing indicates pressure. The weekly range is within the previous week’s range and implies an inside formation. A larger move is in theoffing, as these patterns are followed by big price action in either direction.

The increase in the US non-strategic reserves by 2.1 million barrels to the 339.9 million barrels mark also resulted inprofit sales on longs. Bulls may add longs only after the Rs 3,750 resistance is overcome. Market internals indicate a 2% increase in turnover and a
14% increase in open interest.

Natural gas has seen a profit bias as the weekly range saw an inside formation and a lower weekly close. The traded volumes indicate a vigorous profit taking bias and the 200 level will be a support to watch out for. Only a sustained and forceful trade above the Rs 250 levels will see a resumption in the upthrust. Market internals indicate a 1% decline in turnover and a 64% increase in open interest.

The columnist is the author of A Traders Guide to Indian Commodity Markets and invites feedback at vijay@BSPLindia.com