Morning Futures Roundup

PGM's Prices Under Pressure

   Fundamentals
Platinum Metals Group ("PMG") traders appear to have a dour assessment of the global economic climate as of late, as both Platinum and Palladium futures have fallen to multi-week lows.

Downcast corporate guidance, so far this quarter, has sparked fears that the global economic climate cloud be slowing more than originally thought. If so, the demand for industrial commodities, such as Platinum and Palladium, may fall short of analysts' expectations.

The most recent Commitment of Traders report is showing a small decline in the net-long position that was accumulated by non-commercial traders due to the ongoing labor dispute by mining workers in South Africa last week, but is still, especially in the case of Platinum, approaching record levels.

This has raised a concern about the liquidity in both these markets, which could become especially problematic, if commercial buyers are reluctant to participate at current prices. This could spark a severe sell-off in prices, in both Platinum and Palladium, should we start to see wholesale long liquidation selling emerge as prices move lower.

   Technical Notes
Looking at the daily chart for December Palladium, we notice what appears to be a head and shoulders technical formation. This is usually viewed by some chartists as a sign that a market top is in place. Prices accelerated to the downside once support at the 100-day moving average was breached on Tuesday.

The 14-day RSI is weak but not yet in oversold territory with a current reading of 38.54. 558.75 is seen as the next support level for December Palladium, with resistance found at the 100-day moving average, currently near 619.20.

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About Mike Zarembski

Born in the grain pits of the Mid-America Commodity Exchange (MidAm) in the early 1990s, Mike's futures career soon shifted to the offices of TD Waterhouse in 1999, followed by Xpresstrade in 2002 and eventually optionsXpress in 2007.