The markets witnessed a higher turnover last week as traders displayed higher risk appetite for industrial commodity trades. The week-on-week market-wide turnover on the MCX rose 23%. The market-wide open interest rose 2%. The MCX turnover gainers were aluminium, cardamom, copper, cotton, crude oil, crude palm oil, gold, lead, mentha oil, nickel, potato, silver and zinc. The open interest gainers were cardamom, cotton, copper, crude oil, gold, lead, natural gas, potato and silver. The US non-strategic petroleum reserves were lower by 2 million barrels at 373.10 million barrels. With the US presidential election being the big event this week, markets will seek triggers in the coming near-term. Initiate all fresh trades on lower volumes only.

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Agri commoditiesMentha oil has been rising in anticipation of winter (a demand expansion period) and has been heading towards the breakout level of Rs1,220, above which the bulls will have the initiative in the market. A breakout, when it does occur, must be on forceful volumes and open interest expansion to rope in the fence-sitters on the long side. Market internals indicate a 36% increase in turnover and a 18% decrease in open interest.

Potato is showing signs of seeking a bottom and the Rs700 psychological threshold is likely to hold for now. Await signs of accumulation on declines and initiate fresh longs later. Internals indicate a 162% increase in turnover and a 5% increase / decrease in open interest.

MetalsAluminium has attempted to rally higher as the prices neared the marginal costs of production and value buyers stepped in to lend support. The Rs102 swing low remains important, so watch out for it; the bulls must defend this threshold actively, if the trend is to reverse. A breakout confirmation will be received only above Rs107. Market internals indicate a 64% increase in turnover and a 25% decrease in open interest.

Copper has been declining after breaching the previous swing low at Rs430. The fortnight-old downtrend can witness some support at Rs410 where a temporary bounce may occur. In case this support is violated forcefully, expect further downsides. Avoid bargain-buying for now. Market internals indicate a 32% increase in turnover and a 2% increase in open interest.

Gold has been declining in a lower tops-and-bottoms formation for three weeks in a row and that indicates an easing in the safe-haven buying support in the near term. Watch the Rs30,100 level as a near-term support from where a minor pullback can occur. The impending Diwali season buying and the rupee can be factors that may cushion the declines partially this week. Market internals indicate a 40% increase in turnover and a 16% increase in open interest.

Silver has recorded lower tops-and-bottoms formation for seven consecutive weeks in a row and that underscores the weakness in the sentiment. That, and the US jobs data, triggered an unwinding bias as the US dollar remained steady ahead of the US presidential elections. Upward momentum will return only above Rs60,400 and unless the price breaks out above this threshold, fresh buys are ruled out for now. Market internals indicate a 25% increase in turnover and a 24% increase in open interest.

EnergyCrude oil has been cushioned from steep declines due to the declining non-strategic commercial reserves in the US, Hurricane Sandy and geopolitical concerns. The Rs4,600 level does offer a feeble support, though the Rs4,550 level would be a better support and offer a lower probability for decline as compared to the Rs4,600 mark. The pullback, if any, can be brief and reverse abruptly, so fresh longs if any, should be on very small volumes only. Market internals indicate a 1% increase in turnover and a 12% increase in open interest.

Natural gas has seen a bearish engulfing pattern as the bears overpowered the bulls in the near term. The bulls are likely to return to a dominating position only above Rs205 and a consistent close below Rs186 may trigger further declines. Market internals indicate a 15% decrease in turnover and a 10% increase in open interest.

The columnist is the author of A Trader’s Guide to Indian Commodity Markets and invites feedback at vijay@BSPLindia.comFair disclosure: the analyst has no exposure to any of the commodities discussed above