01-05-2010: April Platinum: Tracking U.S. Dollar in Opposite Direction
Signals are very mixed on precious metals, especially platinum. What signals there are seem to be marginal or less clear than we might hope. But from the marginal indication we do have, it seems to point to a stronger U.S. Dollar being the key factor as less supportive for precious metals, and in particular platinum, due to recent complications arising in many foreign economies, including both Japan's and Europe's. Based upon our assessment of this key factor and the marginal indicators in this report, we would think the most likely next move for platinum is down.
April Platinum:
April Platinum:
As the Dollar rises on worries over Japan's fiscal outlook, gold and platinum's appeal as a hedge against a weaker greenback was reduced. Precious metals prices fell recently for the second straight day. Analysts expect platinum movements to track the Dollar in the opposite direction. Among Japan's problems was a potential bankruptcy filing by Japan Airlines. Geo-political tensions in Iran and Yemen could be supportive for gold, however. Thousands of people took the streets in Tehran as at least 15 people were killed by brutal police supression. Retail sales rose 3.6% from last year during the Christmas season which was good for precious metals. Russia's Norilsk, a supplier of platinum, sees 2010 domestic revenues at $8 billion. As new home sales pushed lower, this weighed on the Dollar and supportive for precious metals as an alternative investment. Goldman Sachs put out new buy ratings on platinum mining companies. Another factor strengthening the Dollar and weakening platinum was Greece's credit rating problem and its impact on foreign currencies. Platinum miners in South Africa have had continuing problems with labor strife, with management battling with labor and restructuring issues. Politicians there have repeatedly called for government ownership of mines, a move that could potentially scare off investors. South Africa's largest platinum mining company reported a 25% drop in fourth quarter sales, as platinum prices rose. For the full year they declined 6% to 682,955 ounces, with expected 2010 sales at 700,000 ounces. Some mines have been forced to shut down with consequent loss of jobs. Anglo Platimum Ltd., the world's largest platinum producer said it would continue to fire workers. A recent surprisingly positive U.S. employment report was also a negative factor for precious metals in general. When the Dollar was strong, the heaviest burden on precious metals prices came from central bank sales. In 2009 however, central banks were net buyers of gold.
278.0I R 12/31
I NYM - Apr-10 Platinum, 50 troy oz., $/oz. Cm.=0.06 Lim.= 3.6
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258.0I_________________________________________________________________________
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Our computer says a non-conventional reactive interpretation of point-and-figure chart signals works best for Platinum. Therefore, the above chart is taken as giving a sell signal.
We are headed toward a cyclical low and a seasonal up period.
Our best-performing internal program is "WilderRT." It is giving a buy signal.
Results of "WilderRT" for Platinum (blue lines = successful trades, red, unsuccessful): (Always in the market.)
Our third system has triggered a sell signal. (Note, disregard the year date on the chart. Our regular readers know this is not a Y2K-compliant system, but it still works.)
The point value is $50. Initial margin on a single contract is $8,100. Use of options is not advised because options are not available.
If we discount the blip in early 2008, then scale trade sellers are moving in for the long-term in this price range.
In the chart below, the yellow line is the futures price, read on the right axis. All other colors are read on the left axis. Red is small speculators. Green is large speculators. Blue is commercials. Large speculators with the best track record are getting increasingly-short.
The average volatility shown below suggests that a major change in direction to down is imminent from the last volatility low point.
We could find no options for this commodity.
What the Apr. - Jul. calendar spread suggests to us is that buying the near contract and selling the far one is at most times profitable, which we think is a sign that these futures may go up. The best time to enter or leave the above spread is when it is at -2.00 or narrower selling the near as prices are falling and then buying the far, and exiting or entering when it is at -3.00 or wider buying the near as prices are rising and then sellling the far.
Here's an intraday chart for the previous day ( 12/31 ).
Risk Versus Opportunity Report
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PLJ0 April Platinum
High Price: 1537
Current Price: 1471
Low Price: 1336
Risk: -0.092
Opportunity: -0.188
(O/R) Ratio = 2.045
Level Table:
| Factors | Weighted Points |
|---|---|
| Parabolic Chart | + 1 |
| Nirvana Chart | + 1 |
| News | - 1 |
| Point & Figure | - 1 |
| Cyclicals | - 1 |
| Seasonals | + 1 |
| Internal System 1 | + 1 |
| Internal System 2 | 0 |
| Third System | - 1 |
| Commitment of Traders | - 1 |
| Historic Range | - 1 |
| Range/Volatility | - 1 |
| Level Table | + 1 |
| Other Factors | + 1 |
| Total | - 1 |
Place 3 January Platinum on a Sell Watch with stoploss @ +61.00 below the get-in point.(when the current price is represented as "1471.0")______________________________________________________________________________________________________________________G.S.
