Commodity ETFs see weakness in underlying products

INTERMEDIATE TERM SIGNALS & MARKET ANALYSIS

IPath DJ-UBS Copper (JJC):
11/16/2012 Closing Price: 43.52
INTERMEDIATE TERM (I.T.) SIGNAL:

Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Target = 44.51
Projected Weekly Range: 1.14
Trading 128,000 Shares
I.T. ANALYSIS:

  • JJC total trade profits since 07/25/2012 equal $379,840 or 0.76%.
  • JJC is an ETN that holds only a single commodity, the Copper High Grade futures contract.
  • After a five-week sell-off, JJC finally found moderate support, keeping prices above the previous week’s low. Although last week’s close was barely below the midrange, it was the first weekly close in six weeks that wasn’t in the bottom quartile. JJC saw a significant change in buying-selling pressure last week as bulls finally began to equalize bears. This resulted in the formation of a Volatility Reduced Compression Bar as trading volume was actually above average. A VRCB at the bottom of a sharp correction normally indicates a reversal is coming. In August, a third VRCB formed right before the previous rally began.

United States Oil (USO):
11/16/2012 Closing Price: 31.93
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bearish.
Current Position: FLAT
Working Order: BUY @ 32.06; STOP @ 30.99

Break-Even Price: 33.13; COVER 20,000 (20%)
Current Upside Target = 35.85 – 37.87*Extended Upside Objective
Projected Weekly Range: 1.25
Trading 100,000 Shares
I.T. ANALYSIS:

  • USO total trade losses since 07/25/2012 equal $160,590 or 0.32%.
  • Initial trade risk is $107,000 or 0.21%.
  • USO seeks to replicate the spot price of WTI light, sweet crude oil and primarily holds futures contracts.
  • Our working order to BUY 100,000 shares of USO was nearly filled last week, falling 21 cents short of our 32.06 limit price. Although we weren’t filled, price action was favorable, closing above the midrange, above the open and above the previous close. Trading volume was average yet still formed a VRCB, indicating a fairly equal amount of buying and selling pressure. The formation of a VRCB, OVB, VRCB is a rare and high quality technical pattern, especially at the bottom of a correction. We have moved our entry price and break-even price down to 32.06 and 33.13, respectively. Our exit price of 30.99 essentially forces an OVB reversal to stop us out, a bar that only forms about 10% of the time.

United States Natural Gas (UNG):
11/16/2012 Closing Price: 22.28
INTERMEDIATE TERM (I.T.) SIGNAL
:
Intermediate Term Trend is bullish.
Current Position: FLAT
Current Downside Target = 18.88
Projected Weekly Range: 1.33
Trading 150,000 Shares
I.T. ANALYSIS:

  • UNG total trade profits since 07/25/2012 equal $353,450 or 0.71%.
  • UNG seeks to replicate the price movement of NYMEX Natural Gas by holding futures contracts.
  • Bearish price action failed to follow through as last week soared to a high of 22.52. The previous week’s close of 20.63 represents an 8% increase in just one week. Tuesday gap higher opened at 22.02 above Monday’s close of 21.01. Price action was decisively bullish and confirmed by the weekly close at 22.28. If this week trades 22.53, the correction will officially end, confirming a higher bottom, and continuing the bullish trend. Be aware though that large daily price gaps are almost always filled in the near future.

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