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China top extension, Cocoa latest commodity buy, energy comment

There was a top extension in one of the Chinese indices in Tuesday’s session. We have had a broadly bullish view of China since weekly scale compressions broke up - see the July 31st edition for the most recent update and this fresh top extension mean that we now expect another pause or dip in that uptrend. If still long, take some profits.

China top ext

There was also a bottom extension in Cocoa  futures. This is the latest commodity market to provide a ‘buy’ signal and we advise buying some here. The basis for this campaign is a weekly-scale bottom extension in a commodity index that we follow and we are providing buying advice in each commodity as and when they provide additional individual ‘buy’ signals. Here is the cocoa signal and an update on the commodity index:

Commodity index and cocoa

There have also been some signals in energy but the situation remains unclear. The commodity index bottom extension shown above makes us inclined to a bullish view of many, if not most commodities and those classed as ‘energy’ are well represented in that index. The individual energy components have been showing lightly bearish signs for some time however as reported in several recent editions. There was a daily-scale compression in Rbob that initially broke downward but the small consequent weakness was interrupted by a weekly-scale compression that showed the market was still poised on a knife-edge. There has also been a daily-scale compression in crude oil that seems to be breaking own but it is too dangerous to sell it while Rbob is compressed at a weekly scale. Heating oil i also compressed at a weekly scale , but is not shown here. This whole situation should resolve soon - possibly even in the direction of an energy ‘buy’ and we will advise.

Crude and Rbob compressions