Larry Baer's Technicals: Slowing World Economy May Point To Downturn For Commodities

October 31, 2012

Oil, gold, S&P 500 and copper charts are downtrending, but too early to tell if sliding prices will continue.


Slumping economic data from China, eurozone debt worries and a U.S. economy that can’t seem to gather steam has analysts around the globe worrying about a double-dip recession. While talk is just talk, so far the charts seem to be agreeing to these speculations, with lower price action across the commodity board.

WTI Crude Oil

WTI crude oil futures issued a fresh sell signal Monday (10/29) as it made new recent lows. On the weekly chart, WTI issued a king’s cross counter-trend sell signal the third week of September (weekly bar ending 9/21) and has now fallen below major support levels. The king’s cross is my attempt to account for why, shortly after a change in trend, a market often puts in its extreme. What I discovered is that the trend had not actually changed; rather, it was just an event—a news event, short or long covering, etc.—that caused a correction. After this “event,” the market would often turn around and resume its previous trend.

On the monthly chart, WTI is showing a sell signal so far in October, which suggests that crude may have significant follow-through to the downside. Falling crude oil prices can often be traced back to declining demand for the commodity, which may be interpreted as a result from a weakening global economy.


Crude Oil Monthly Chart



For gold futures, the trend is down on the daily chart, and it has shown several sell signals falling below major support. The trend remains up on the weekly chart, but gold gave a king’s cross counter-trend sell signal the second week of October. Gold on the monthly chart seemingly has been trading sideways for over a year now.


Gold Weekly Chart



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