Saturday, November 7, 2015

Precious Metals Sector Due for Bounce but… $GOLD, $GDX

The precious metals sector has declined sharply in recent weeks with no pause or intermittent breaks in the decline. Including today, Gold is down eight consecutive days and 16 of the past 18 days. The gold miners (GDX) have lost roughly 20% in the past seven days. The sector is extremely oversold in the short term and a reflex rally could begin in the next few days. While Gold and gold bugs should get temporary relief, the larger picture remains quite bearish. 

The daily candle charts of Gold and GDX are included in the image below. (Note that Gold is not updated today). Gold which has traded as low as $1084/oz today, has support in the $1080/oz to $1100/oz zone. Meanwhile, GDX after gapping lower today found support around $13.50. GDX has good support in the $13.00 to $13.50 area. Gold and gold stocks are very oversold and have reached levels at which a bounce could begin.  (more)

Top Picks from Greg Newman: Norbord $NBD, Manulife $MFC, and Hudson’s Bay Co. $HBC

Markets are only easy when looking backwards and this period is certainly no exception. Most of the “bad parts” of the market - resources and energy - still have not bottomed and most of the “good” parts are getting crowded in my opinion. The U.S. markets have everything going for them (relative to everyone else) except valuation. Europe is less expensive and China is cheaper still. While a December Fed rate hike might be a “live” possibility, in my opinion, falling global bond yields are still the greater concern. I believe a global recession will likely be averted given the policy firepower that China has and their motivation to act. As such I am constructive on stocks as they are still far cheaper than bonds. For Canadian dollar accounts, buy Europe, Global Technology and the U.S. on a currency hedged basis and buy Canadian dividend stocks that have catalysts to go higher. (more)

Timkensteel Corp (NYSE: TMST)

Timken Steel Corporation manufactures and sells alloy steel, and carbon and micro-alloy steel products. It operates in two segments, Industrial & Mobile, and Energy & Distribution. The company provides air-melted alloy steel bars, seamless tubes, and precision components, as well as value-added services, including thermal treatment and machining. Its products are used in engines, transmission and driveline components, hydraulic system components, military ordnance, mining and construction drilling applications, and other types of equipment, as well as offshore and land-based drilling rig activities.
Take a look at the 1-year chart of Timken (NYSE: TMST) below with added notations:
1-year chart of Timken (NYSE: TMST)
After declining steadily over the course of the past year, TMST seems to have started to trade in a sideways move. While in this sideways move, the stock formed two important price levels to be aware of. The first level worth noting is the resistance at $15 (red), which was also a prior support. The other level TMST has created would be the $10 support (green).

The Tale of the Tape: TMST is trading between two key price levels. The possible long positions on the stock would be either on a pullback to $10 or on a breakout above $15. The ideal short opportunity would be on a break below $10.

Cotton Looking More Bearish

Cotton Futures--- Cotton futures in the December contract settled last Friday in New York at 63.32 while currently trading at 62.00 as I’m now recommending a short position while placing your stop loss above the 10 day high which currently stands at 63.85 risking about 200 points or $1,000 per contract plus slippage and commission. Prices are trading below their 20 and 100 day moving average telling you that the short-term trend is to the downside as excellent weather in the southern part of the United States is increasing harvest activity bringing in ample supplies coupled with weak demand continuing to hamper prices.
The U.S dollar is up sharply this afternoon continuing its bullish momentum which is a negative towards commodity and cotton prices as the agricultural markets look very weak presently so continue to play this to the downside while taking advantage of any rallies as the risk/reward is highly your favor as excellent chart structure is allowing you to lower monetary risk.
The next major level of support is between 60/61 and if that is broken look out to the downside in my opinion as I tried shorting cotton several times over the last several months and have been unsuccessful so maybe the third time is the charm. TREND: LOWER–CHART STRUCTURE: EXCELLENT