Commodities Continue to Move Higher

Another day of consolidation for the broad markets. With the exception of Apple and Silver there wasn’t much to cheer about. The good news is most sectors held their gains and carried forward. There was no real news to speak of, but plenty of background noise to keep stocks in the game. The challenge for the broad market currently is the wait and see game in Europe as rumblings continue about what the ECB will or will not do with Germany’s approval. The Fed stimulus rumor is back with the FOMC minutes due out on Wednesday and hopes it will in some way reveal what Bernanke and the 12 dwarfs are thinking. I wouldn’t hold my breath on that, but it is in the headlines. The market is looking for some news to drive stocks through the resistance point and it seems content to wait and see.

Enough of that let’s look at the areas of interest… Silver anyone? The metal (SLV) jumped more than 2.6% on the trading day. The metal has been lagging and the recent interest in gold has helped silver as well. Looking at the chart of SLV the move above $27.50 too out one resistance point, but it move directly into the next at $27.95. There is plenty of upside potential in the metal looking forward. The miners have been on our watch list for awhile and the silver miners (SIL) have moved off the low and are in position to break above the resistance at $20.10. If you follow the models on Jim’s Notes you know these are in the models as well as on our watch list to enter positions.

Corn was up more than 2% as well on Monday as the soft commodity trades regain some life. The move is in response to more facts concerning the impact of the drought. CORN moved back near the previous high and top of the short term consolidation range. WEAT gained more than 2% as well on the day. SOYB was back near the high as well looking to break above $27.50. DBA, PowerShares Agriculture ETF gained 1% as a basket of the commodities. This remains on our watch list to own as the upside has been consolidating the gains off the June lows.

Crude oil continues to move towards the $97.60 resistance. The upside remains in play short term. We recommend raising your stops to manage the downside risk and protect your gains. The overlap to stocks has been evident in the charts of OIH and XLE. The trend is in place and the upside remains for now. Gasoline (UGA) has hit resistance near the $59 level. We own positions in this ETF and have raised our stops to prevent giving back our gains on the position.

Commodities have been on the upswing since late June early July. Some areas are showing signs of topping short term, but the move to the upside is still in play. The risk of the positions have grown based on the moves. Protect your against the downside risk and look for the opportunities in any significant selling.

All eyes are on the major indexes and the potential break above the multi year highs on the S&P 500, Dow and NASDAQ. Will there be enough news or momentum to push the indexes higher currently? Will there be a pullback, consolidation before a run higher? Does the market just continue on the current patch of sideways consolidation and drifting higher? I have no definitive answers, but know that the market trades looking forward. Based on that fact, it is looking at stimulus from the Fed and the ECB as the primary drivers to growth or opportunity. If this doesn’t materialize near term, investors will eventually react negatively to the delay. Thus you have to be patient, set your stops, and see how this plays out going forward.

Leadership remains in technology, energy, consumer services, commodities and some financials. There is enough momentum to carry stocks higher, but any hiccup in the news or data relative to the outlook going forward and we will pullback and test the move. Don’t assume anything, manage your risk going forward.