Commodities down again, market tries to rally

Commodities got knocked down again today, along with many of the commodity related stocks that seem to have been in a bubble. I had been suggesting for some time that jumping on the commodity momentum bandwagon could turn out ugly. Many analysts have been saying that commodities and short dollar plays are where one should continue to trade. I have disagreed for some time, although I turned bearish way too early. The gold market got hit especially hard today. I was suspicious of the recent rally. I didn’t report much on gold on that last move up as I thought it couldn’t hold up if the dollar stopped falling and the bubbles continued to pop in the other commodity markets. I finally put up a chart showing the recent uptrend just yesterday as price looked like it was heading back to the moving average. Today price fell all the way through the longer moving average to close under the darker blue line (see post yesterday for chart). The moving averages are still showing an uptrend, and price is right at the last pivot, or swing point. Momentum is oversold on a very short term basis. If this trend turns back down, the longer term picture for gold would look very bearish. The recent rally failed to take out the peak from last March. If price can now take out the low from the May/June range, the longer term gold bull move could well have ended. It’s premature to call the gold bull dead yet, but it looks increasingly likely. Many of the mining shares got hit hard today, along with oil and ag names. The stock indexes were quite tentative. They ended higher, but one would have expected a little more enthusiasm with the drop in commodities.