Global Commodity Market Wrap-Up

Last week, the metals market faced a notable bearish trend. Gold demonstrated some resilience, with a slight decline of -0.69%, while silver saw a more substantial drop of -3.65%. Base metals also experienced declines, with copper and zinc falling by -0.73% and -0.74%, respectively. Lead, however, was hit harder, registering a significant drop of -3.29%. This varied performance marks a stark contrast to the previous week's stability, indicating a shift towards more bearish sentiment in the market.

Last week, Natural Gas prices stayed mostly stable with a slight decline of -2.66%, likely due to supply changes or seasonal factors. Crude Oil prices also fell by -1.86%, reflecting growing market confidence. In contrast, US Sugar prices in the agricultural sector rose by 5.38%, contributing to a positive trend in agricultural commodities amid the varied performance across different sectors.

Global commodities have recently corrected from their peak amid various global influences. Precious metals are maintaining their positions above key support levels, displaying a modest bullish trend. In the energy sector, Natural Gas is showing neutral momentum, whereas Crude Oil prices are struggling to hold above crucial support levels. Meanwhile, agricultural commodities are experiencing a sideways trend, indicating a period of stability without significant movement in either direction.

The upcoming Micro and Macroeconomic events that may impact market sentiments include an update on the JOLTs Job Openings, ADP Nonfarm Employment Change, ISM Non-Manufacturing PMI, Nonfarm Payrolls.

Having understood the global commodities performance over the past week, taking cues from major global economic events, and based on technical analysis, noted below is the recommendation with the generic insights, entry price, target prices, and stop-loss for Aluminium October Future (LME: CMALV24) for the next 2-4 weeks duration:

Aluminium October Future (LME: CMALV24)

Price Action and Technical Indicator Analysis:

In October, Aluminium futures exhibited a bullish trend, driving a positive shift in the base metal prices index. This upward movement comes as global tensions ease, fostering a more favorable trading environment. Technically, Aluminium prices are positioned above a key horizontal support line, indicating a potential trend reversal. The Relative Strength Index (RSI) at 45.38 supports the likelihood of this reversal from the current level. While prices are presently below both the 21-period and 50-period Simple Moving Averages (SMA), these moving averages may soon act near-term resistance, further fueling the bullish momentum.

Now the next crucial Resistance levels appear to be at USD 2570.00 and USD 2600.00, and prices may test these levels in the coming sessions (2-4 weeks).

As per the above-mentioned price action and technical indicators analysis, Aluminium October Future (LME: CMALV24) is looking technically well-placed for a ‘Buy’ rating. Investment decisions should be made depending on an individual’s appetite for downside potential, risks, and any previous holdings. This recommendation is purely based on technical analysis, and fundamental analysis has not been considered in this report. Technical summary of the ‘Buy’ recommendation is as follows:

Upcoming Major Global Economic Events

Market events occur on a day-to-day basis depending on the frequency of the data and generally include an update on employment, inflation, GDP, WASDE report, consumer sentiments, etc. Noted below are the upcoming week's major global economic events that could impact the commodities prices:

Futures Contract Specifications

Disclaimers 

Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within a 2-4 weeks’ time frame. This may be looked at by Individuals with sufficient risk appetite looking for returns within short investment duration. The investment recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the commodities has not been considered in the decision-making process. Other factors which could impact commodity prices include market risks, regulatory risks, interest rates risk, currency risks, and social and political instability risks etc.

Note 1: Past performance is not a reliable indicator of future performance.

Note 2: Individuals can consider exiting from the commodity if the Target Price mentioned as per the Technical Analysis has been achieved and subject to the factors discussed above.

Note 3: How to Read the Charts?

The Green colour line reflects the 21-period moving average while the red line indicates the 50- period moving average. SMA helps to identify existing price trend. If the prices are trading above the 21-period and 50-period moving average, then it shows prices are currently trading in a bullish trend.

The Black colour line in the chart’s lower segment reflects the Relative Strength Index (14-Period) which indicates price momentum and signals momentum in trend. A reading of 70 or above suggests overbought status while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the commodity. Commodity with high volumes is more liquid compared to the lesser ones. Liquidity in commodity helps in easier and faster execution of the order. 

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the stock prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the stock and if the price breaches the level, then Support 2 may act as the crucial support level for the stock. 

Resistance: A level at which the stock prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the stock and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the stock. 

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the stock prices. 

Risk Reward Ratio: The risk reward ratio is the difference between an entry point to a stop loss and profit level. This report is based on ~80% Stop Loss of the Target 1 from the entry point.

The reference date for all price data, volumes, technical indicators, support, and resistance levels is September 04, 2024 (Chicago, IL, USA 5:00 AM (GMT-5). The reference data in this report has been partly sourced from REFINITIV. 

Note: Trading decisions require a thorough analysis by individuals. Technical reports, in general, chart out metrics that may be assessed by individuals before any commodity evaluation. The above are illustrative analytical factors used for evaluating the commodity; other parameters can be looked at along with additional risks per se.