First I'll look at the precious metals, including Platinum and Palladium:
This is another post where I'm going to let the charts do the talking. I'm seeing extremely bullish formations across the commodities complex. While it's taken longer than I ever expected, the Fed's easy money policies of the past 8 years are finally starting to manifest themselves in commodity prices. I don't care if demand is falling off a cliff (which it is in many areas), when you print $Billions ($Trillions?) that money has got to go somewhere.
First I'll look at the precious metals, including Platinum and Palladium:
And now moving on some big-time industrial commodities:
And lastly, Copper has slowly started to turn things around. I assure you this due to central bank policies and NOT a sudden upswing in demand.
Did you know that Palladium jumped over $40/oz yesterday on big volume? Did you also know that it's up 25% from its washout bottom on August 24? That's one heck of a daily chart from the bull's perspective.
Backing out to a weekly view, you can see just how brutal the last year has been for this "other" precious metal. After peaking above $900, it dropped 50% in 12 months, no doubt in sympathy with the global commodity rout. That said, something has clearly changed in the last couple of weeks because palladium is surging on big volume and it looks like it can continue to run before encountering any kind of resistance. I'm a buyer here with a short term target of $700. If it can overcome dual resistance, shown by the green trend lines, then this thing should be off to the races.
Of course this begs a bigger question: If palladium is starting a bull rally, what does that mean for platinum, gold, and silver?
It's been a long time since I last commented on Platinum and Palladium. I know you've been just dying for an update, so here you go!
I'll jump right into a long-term chart of Platinum going back to the financial crisis of 2008. You can see that after the sharp rebound in 2009 and into 2010, it has moved sideways and down for the past four years. The sell-off has intensified over the past 8 months with price now at 6-year lows. As far as I can tell, there's nothing stopping it from dropping all the way back down to $800/oz. There's a bit of support at current levels ($1100), but this should prove inconsequential as the bigger trend is clearly down. Volume during the sell-off has been elevated lending credence to the trend.
Zooming out, an even more concerning picture emerges. Here we have a 20 year monthly chart showing the entire bull market in platinum going back to the year 2000.
I've drawn a long-term trend line which was clearly violated to the downside in late 2014. I'm not sure how meaningful that trend line is because it only saw three or four touches over a 15 year period. That being said, it's hard to argue that platinum is still in an uptrend. It's certainly not on a short and mid-term basis, and with every passing day, the long-term bull market looks to be dying (if it's not already dead). Like I said above, there looks to be another 25% downside coming with a price target of $800. From there, I would expect a meaningful rally - possibly back to the green trend line. As always, time will tell.
Palladium, however, is a totally different story. Here I'm showing a 6 year weekly chart which also takes us back to the 2008 crisis.
Palladium, a precious metal primarily used in catalytic converters, has held its ground incredibly well in the face of US Dollar strength and the general collapse in commodity prices. Unlike platinum, palladium sits within 15% of all-time highs and is still very much within its long term uptrend. That being said, it continues to hug that trend line which it's done now for the better part of 6 months. Its momentum indicators are both right at their respective mid-lines, suggesting neither strength nor weakness. Volume has been neutral as well.
Palladium has been an outlier of late, especially when compared to gold, silver, and platinum. Regardless of the reasons, the chart is worth noting. If, god-willing, commodities ever catch a bid, then I would expect palladium to skyrocket. I'm a buyer on a breakout over $900.
I can't let today pass by without a comment on the dollar. This is going to crazy town and bad things are going to start happening. Below is a weekly chart of the US Dollar - otherwise known as the world's reserve currency. Does this look healthy?
These parabolic-shaped chart patterns are HUGELY unstable. Parabolic patterns, often called "blow off tops," very often end in equal but opposite fashions. Investopedia explains that a blow off top is "a chart pattern that indicates a steep and rapid increase in a security's price and trading volume followed by a steep and rapid drop in price and volume. The rapid changes indicated by a blow-off top, also called a blow-off move or exhaustion move, can be the result of actual news or pure speculation."
A reader recently sent me a request to do another post on Palladium so I thought today would be a good time to do so, along with its PGM bedfellow Platinum. For both metals, I'm going to analyze a 5 year weekly chart and pay good consideration to the long-term trends in place.
So first up we have Palladium. Beginning in early 2011, the metal started correcting sideways in what became a 3-year pennant consolidation. In March 2014, it broke up and out of the pennant on its way to a fairly quick 20% gain, peaking slightly above $900/oz.
In early September, however, it reversed course and began correcting with all of the other precious metals. While the correction was significant in percentage terms (approximately 20%), from a technical standpoint the chart still looks pretty good. For the last two weeks, palladium has found support at its 200 week moving average which, coincidentally, coincides with the top line of the previously mentioned pennant formation. In addition, the last two weeks formed "long tails" on the candle chart meaning that after touching the 200 week moving average, it reversed higher and closed in the mid-to-upper part of its weekly range. Lastly, the decline over the past 6 weeks has come on weakening volume suggesting that sellers are becoming exhausted.
Looking ahead, this is probably a good entry point to initiate or add to your position as it's sitting right on support. Set a tight stop, just below the 200 week moving average to protect yourself.
While palladium is sporting a bullish 5-year chart, platinum has exactly the opposite. Platinum, unlike palladium, is trading at the lower end of its multi-year range and all indications suggest it has lower yet to go. In late September it broke below 5-year support on big volume. Its 50 week moving average has now been below its 200 week moving average for the better part of two years and its MACD and RSI continue to show nothing but weakness.
Regardless of the fundamental argument for owning platinum, you have to respect what the charts are telling us. And right now, the charts suggest further weakness ahead.
As noted in this Bloomberg article from today, Palladium posted a significant breakout on Friday rallying to 13-year highs. While Palladium certainly has unique supply and demand factors, it tends to move in sympathy with other precious metals. Let's quickly analyze the breakout and see what it means for gold and silver.
After a strong rally in late June, palladium corrected in late July and early August - the same as gold and silver. A few days into August, however, Palladium diverged from the other PMs and started rallying as can be seen by the 9 consecutive white candlesticks on the chart. This past Friday, Palladium blasted through overhead resistance on significant volume on its way to a 13-year high. (As a side note, its all-time high was established in early 2001 and lasted only a couple months before crashing down in the dot-com bubble burst) Its MACD just made a bullish cross and its RSI remains solidly above the center line - two positive indicators confirming the breakout. Also, note the bullish hammer formation on the Friday candlestick. This means that after an early drop, price recovered and closed in the upper half of the day's trading range.
So why is this significant?
If palladium trades in concert with gold and silver, then we have a major divergence that needs to be resolved. As I showed a couple days ago, gold and silver have really languished since they started correcting in mid-July. If PMs move together, then one of two things needs to happen. Either 1) Palladium needs to be sold down or 2) gold and silver need to rise to close the performance gap. Given all of the bullish chart setups and breakouts in the miners, my money is on gold and silver will rally from here.
I'm not sure you can get more bullish than this monthly chart of Palladium. Fundamentals aside, this chart is a screaming buy. You can see the sharp correction in 2008 followed by an almost equally sharp advance spanning 2009-2010. Beginning in 2011, the metal began a four-year sideways consolidation that never corrected more than 35% (compare that to silver which corrected almost 65% from its 2011 peak).
Taking a step back, one can see the massive cup-with-handle formation spanning almost 7 years. While not exactly a textbook formation (see William O'Neil's How to Make Money in Stocks), it still exhibits the bullish technical characteristics that chartists look for.
Palladium reached a high of $862/oz. in February 2011 and consolidated under that level for four years. Just a few weeks ago, in the same mid-June rush that saw gold and silver break out, palladium broke above the $862 resistance level. As of today, palladium is still within 3% of its breakout price so I believe this is a very good point of entry. To limit your risk, you could consider a placing a stop around the $820 level. In terms of a price target, it's blue skies above. I'm thinking $1,000/oz. is a no-brainer with a real chance of reaching $1,400/oz before the next meaningful consolidation. Just keep in mind that this is a monthly long-term chart so be prepared for daily swings that test your resolve.