Tag: Futures

Pendulum Swing #8: Gasoline Vs. Natural Gas

Posted on by Aibek Burabayev

We have passed the middle of the year, so it’s time to announce the result of the 7th Pendulum swing pushed this January. The multiple winner Palladium and the earlier loser Lumber were put on the starting point at the beginning of this year.

Let’s see below which one you favored.

Gasoline Natural Gas

Most of you had bet that the metal would beat the forest product. And it appeared to be the right choice! This option was against the Pendulum effect as the lumber was thought to be the winner. I understand the majority’s decision as palladium was on the news as it hit the all-time high levels to become more precious than the gold amid insatiable demand.

The lumber futures chart implied the upcoming weakness after a retest of the broken support. The price has accurately followed that forecast making a pullback to the broken trendline support and then continued down.

Please look at the chart below, all in all, the invincible metal has scored 29% and hit the top of the chart again in the second place. The lumber futures are also in green as it gained 13%, but it was not enough to beat the palladium. The latter kept resistant to the Pendulum effect this time. Continue reading "Pendulum Swing #8: Gasoline Vs. Natural Gas" →

Pendulum Swing No.6: Input Error

Posted on by Aibek Burabayev

Another half of a year passed with a new year starting its track. It is time to see the result of the 6th Pendulum swing started in the middle of 2018. To remind you, we had pitted the VIX against sugar and below are your bets for that experiment.

Pendulum

You are the best readers I could only dream of as you support my experiment with your real votes for the success of it.

Let’s see which instrument won at the end of the year.

Chart 1. Half Year Futures Performance (Second Half Of 2018)

Pendulum
Chart courtesy of finviz.com

As we can see from this half-year, performance chart sugar couldn’t beat the VIX, which dominated the futures market by a huge margin throughout 2018. One can think that the experiment failed this time, but in my opinion, we have the wrong selection of one input. I am talking about the VIX. The thing is that the underlying asset of these futures is not a commodity, but the “Fear index” or the indicator of the risk approach. Continue reading "Pendulum Swing No.6: Input Error" →

Commodities: Time For A Strategy Shift

Posted on by Lior Alkalay

Lior Alkalay - INO.com Contributor


Commodity prices are facing a shift. As inflation heats up and growth stabilizes, the commodity arena is gradually tilting in favor of growth-oriented commodities such as Oil and Copper Meanwhile, commodities associated with inflation protection, e.g., Gold and Silver, are not only losing their allure but face growing sell pressure.

The thought of selling precious metals just as inflation is showing signs of coming back may sound counter-intuitive. After all, precious metals are one of the more well-known methods of hedging against inflation. So, why are precious metals tanking just as inflation is coming back?

Because the capacity of precious metals as an inflation protection method emerges when investors believe that inflation is understated in the official numbers. When inflation becomes fact, we begin to see the classic, "buy on rumor, sell on fact" response; i.e., investors start selling precious metals. Since Gold and Silver do not pay interest, their investment appeal decreases when rates rise. But, when inflation is under-reported, effective rates are lower and the value of the currency, in our case the Dollar, is eroded. And, in this case, precious metals gain appeal for preserving value and as an alternative investment. That would explain Gold’s price surge from July $1,210 an ounce in July to $1,350 in September, when US headline inflation numbers caught the market off guard with a fall to from 2.7% in February to 1.6% in June, meaning inflation was understated.

This dynamic also explains the fire sale that hit precious metals in the aftermath of the Fed's September rate decision. The Fed signaled a rate hike as soon as December and another three in 2018. Gold responded by shedding 3.6% in two weeks.

Gold
Chart courtesy of MarketClub.com

All the while, the rest of the commodities space was holding rather well in the face of higher rates. In fact, in aggregate, excluding precious metals, commodities prices were gaining. One good example is the iShares S&P GSCI Commodity-Indexed Trust ETF (GSG), which embodies exposure to the broad commodities market from energy and agriculture to precious metals and gained 0.54% during Gold's selloff. Continue reading "Commodities: Time For A Strategy Shift" →

Gold Update: Triangular Consolidation

Posted on by Aibek Burabayev

Aibek Burabayev - INO.com Contributor - Metals


In the previous Gold & Silver update I warned you about the possible correction ahead. Indeed, both top metals showed weakness, but I didn’t think it would be that severe as we quickly reached seemingly distant supports both in gold and silver. Later I shared with you my concerns about golds outlook as the Fed starts cutting its massive balance sheet this month. This could be a real game changer as market wizards call for another perfect storm for the financial markets. In the charts below I try to model this change for you.

I would like to start with the U.S. 10-year Treasury notes (UST) chart as this instrument has a strong relationship with gold, which I already showed you in August.

Chart 1. U.S. 10-year Treasury Notes Daily: Bear Flag Works Out

U.S. 10-year Treasury Notes Daily
Chart courtesy of tradingview.com

Above is an updated and zoomed in chart from my last post. I chose a daily time frame to focus on the tactical move to see how the chart structure of the instrument develops over the time. Continue reading "Gold Update: Triangular Consolidation" →

Fed Takes On Gold Unintentionally

Posted on by Aibek Burabayev

Aibek Burabayev - INO.com Contributor - Metals


In my previous Gold & Silver post published earlier this month, I promised to update a long-term chart of Gold as I observed some interesting price behavior in a related instrument. But before I do that, let me speak about the Fed’s decision last Wednesday and that “related to gold” instrument first.

The positive dynamics of the US economy underpinned the Fed’s decision to finally start to trim its huge balance sheet next month, besides that there is a big chance of another rate hike this December. It wasn’t a shock to the market, and some big players already started their game weeks before the Fed moved from rhetoric to action.

The Fed’s decision could have a double impact on US interest rates as falling US Treasury notes increase the yields, and the impending rate hike could secure that situation. I was writing about the high possibility of this almost a month ago and last Wednesday we received a first-hand confirmation from the Fed. Continue reading "Fed Takes On Gold Unintentionally" →