Weekly Market Wrap: 15 February 2013

This regular column reviews the condition of stocks, commodities and precious metals. This week focuses on the Dow Jones Industrial Average, the Wilshire 5000, the Reuters-CRB commodities index, and the recent divergence among the precious metals.

Stocks

Dow Jones Industrial Average

As the chart below shows, the Dow Jones Industrial Average continues to advance within its major uptrend channel (green lines). However, the pace of the advance, as indicated by the blue short-term trend channels has slowed considerably.

A 40 day (60 min) chart of the Dow Jones Industrial Average (Click on the chart for a larger version)

A 40 day (60 min) chart of the Dow Jones Industrial Average (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

The stochastic oscillator (circled) shows that momentum is now to the upside, and the next target for the Dow is the all-time high of 14,198.10 made in October 2007 where it is sure to run into some resistance.

Wilshire 5000

While the Dow and S&P 500 remain 1.6% and 3.5% below their all-time highs respectively, the Wilshire 5000 Composite Index has already broken out to a new all-time high. The Wilshire 5000 (shown below) is the broadest index of US equities, measuring the performance of all US equity securities with readily available price data.

A 20 year daily chart of the Wilshire 5000 Composite Index (Click on the chart for a larger version)

A 20 year daily chart of the Wilshire 5000 Composite Index (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

In the short-term the major stock market indices remain overbought and a 10 to 15% correction seems increasingly likely in the weeks ahead. Longer-term however, the ultra-loose monetary policies being pursued by central banks around the world is likely to continue to push stocks higher.

Commodities

Reuters-CRB commodities index

The Reuters-CRB commodities index, which is made up of 19 different commodities, made an all-time high in April 2011 at 690.05. Since then however it has been steadily declining to today’s price of 558.05, and, as the chart below shows, the index has repeatedly failed to break above the blue downtrend line.

A 5 year (daily) chart of the Reuters-CRB commodities index (Click on the chart for a larger version)

A 5 year (daily) chart of the Reuters-CRB commodities index (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

The soft commodities, which include corn, wheat, sugar and coffee, have been in decline recently, however both crude oil and heating oil have been rising. Brent crude is now just $7 below its 2011 and 2012 peak at around $126, a level that could begin to have an impact on global economic activity.

Precious metals

Gold, Silver, Platinum & Palladium

The chart below shows the recent divergence among the four precious metals. Since late January gold and silver have taken a dive while platinum and particularly palladium have rallied strongly.

A 3 month (daily) chart of Gold, Silver, Platinum & Palladium (Click on the chart for a larger version)

A 3 month (daily) chart of Gold, Silver, Platinum & Palladium (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

The rise of these two metals, which are used in the manufacture of catalytic converters, has to do with the cyclical recovery in China and tight above ground supplies.

The rise in both platinum and palladium can be expected to continue well into 2013, while gold (and by extension silver), are likely to remain range bound for a while longer.

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