Commodity Reversals and Copper Gold Update

Price collapse: who's expecting it?

Gold-copper is at an important juncture. It has been rising, but hasn't broken out yet. However, with recent volatility being what it is, the ratio could break out any day. the breakout delta from the current level is 6 percent. That is, if gold rises by 3 percent and copper falls 3 percent, the ratio breaks out. An upward breakout in gold/copper signals deflation or possible stagflationary recession that is a monetary crisis, hence gold outperforming.

Final Leg of Rally Underway With CPI on Deck

The final leg of the rally got going overnight. Russell 2000 has about 2.4 percent to go, Nasdaq 3.5 perecnt to a corrollary resistance area.

The December CPI report is out tomorrow. Crude oil was flat on the month. Inflation expectations should be forward looking, but most of the market is driving in the rearview mirror. The only part of this report that will matter is the sticky-CPI, subcategories such as rent. If those come in high, then the 20 percent advance in crude this year becomes a catalyst for a much higher CPI in January and February. Otherwise, CPI is aleady priced in.

Coffee broke out. An individual commodity can trade for its own reasons, but I can't ignore the significance if coffee breaks out of a 50-year trading range. If inflation is taking off, individual commodities should break out of their trading ranges.

The 30yr futures (ZB) bounced above major support. That's helping the stock market today, but this could flip on a dime and back again until the next major move reveals itself.

Coffee Topping or Epic Breakout

No position.

Fourth Sunday After Epiphany Charts

I did another volume screen. Note on these screens: I mainly adjust criteria to create a manageable list. Today's list is only 30 stocks. Below are the best looking ones, along with familiar names or interesting charts for one reason or another. Main criteria: market cap above $300 million, average volume above 100k and up 1.5 times on Friday. Price change -10 percent to +5 percent last week, but -10 percent to -5 percent in the past month. Basically, I'm trying to get at some stocks that may be completing tops. Maybe some bounce plays? Let's see, as I've typed this before going through the list. Charts after the jump.

As I'm going through this list, the biggest theme is recent IPOs. I left off a bunch of plunging IPOs because its the same chart and their market caps are in the $1 billion range. Speaking of which:

Verklempt

Coffee looks like it wants to head south for winter.

Santa Arrives on December 26

The term "Santa Claus rally" is tossed around a lot. It is from December 26 until the second trading day in January. That's it. Everything else is normal seasonality.

Checking in on the charts. The S&P 500 is above my bear line. This doesn't mean I'm bullish per se, I'll still be looking to add short positions, but it means the possibility of a plunging drop is off the table for now. Given the strength in Apple, I consider the ES a lagging index that will be the last to signal a bear move is underway. It remains important because it is the most watched index.

The Nasdaq is above its September high, what I dub the first "taper top." It is coming up on its March 2020 trendline. There is an inverted H&S pattern developing. This pattern will complete if it takes out what is now the March 2020 resistance line. Target would be around 16,300, which would reverse almost all of the losses since December 16. If Santa comes early, this breakout should happen quickly. A sideways move could delay Santa until after Christmas. A failure below 15,700 would open a possible retest or breaking of the recent lows.

The Russell 2000 Index is also coming up on a resistance line.

Palladium also moved back above the January 2016 trendline. A cleaner inverse H&S is visible here. I continue to view this as a Nasdaq indicator.

The speculator indicator popped overnight. It will breakout of this mini consolidation pattern if everything else resolves bullishly this morning. For the moment, it is back in the pattern.

Coffee looks like a good short here. Stop would be ultra-tight. Hope would be to catch the start of a larger down move.

Soybeans.

I am bearish on the stock market and I lean towards a deflationary impulse taking it down, but that will be determined by crude oil. If black gold rises, then it could be an inflationary impulse that catches the Fed behind the curve and forces suprise rate hikes, 50 bps moves and balance sheet reduction. There is still an h-pattern forming on CL. This is hell for bears in bull moves and hello bear market if it completes and cracks that trendline I have drawn.

To sum it up, I'm wary of a bullish move because of my positioning, but while it will cost me in the short-term, I see no reason to change my long- or intermediate-term forcast, or even short-term going out a month. Only in the ultra-short term of the next nine trading days, which encompasses the traditional Santa Claus rally period, are potentially bullish to me. What I'm focusing in on is the quality of the rally. If stocks such as ARKK lead, it it increases the likelihood this is a bear market. "I am out of ideas" stocks like Apple are ones to watch. Will staples, utilities and real estate remain strong hinting at continued sector roation?

Coffee

Could be a small top in the making. Target would be around 200.

Coffee

I'm Verklempt

Looking at a possible H&S in coffee. I am bullish on coffee longer-term and looking for an entry.