By Scott Pluschau
www.scottpluschau.blogspot.com
Source: Continuing relative weakness and divergence (Industrial Metals and US Equities):
I wrote in yesterday's post that focused on the "Softs" in Agriculture that with a raging bull market in equities, particularly the "Small caps", one would think demand for commodities would be elevated around the world as well. The link to that post on the "Softs" is here: http://scottpluschau.blogspot.com/2013/02/what-ought-to-turn-some-heads-is-in.html
There is relative weakness in commodities in relation to equities, and I believe this is a strong signal of bearish negative divergence for equities. I am focused on a short trade in Equities or the Commodities that have been showing relative weakness should there be a "Risk-Off" environment. Traders and investors are rewarded for patience in this business, provided they have the capital and proper trade plan for the current market state.
I believe there are tremendous opportunities to invest for the long term on the horizon in "Hard Assets" such as "industrial metals", the producers of those hard assets, and the currencies of the nations that export the hard assets. However I believe there is potential first for some carnage, and I am "lurking" for the short trades, with the intention of going long what is left of the wreckage in the assets that have inherent value. But that will take the proper patterns of price, volume, and confirmations in the bigger picture to build a position.
Here is a look at the daily chart in Copper.
Notice the break of the significant trendline support came on an increase in volume this week. Also notice how Copper is not quite close to its 52 week highs such as we see in the US Equity Indexes.
Our other favorite industrial metal daily chart is Silver.
And here is a nice look at the Russell 2000 rocket launch.
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