Commodities have been suffering along with the stock market over the past few weeks. This is not surprising, considering one of the recent catalysts has been centered on the idea of further deterioration of the economy. However, the dollar has also been moving sideways, and any strength in our currency would likely drive commodities even lower. Interestingly though, not all commodities have behaved the same way.

Tutorial: Commodities

Gold, as represented by the SPDR Gold Trust (NYSE:GLD) ETF, remains very close to all time highs. While it certainly experienced a sharp drop in May, it recovered most of that dip and is just hanging around. This can be explained by a variety of theories, but the bottom line is that gold has been showing relative strength to the other commodities. The $140 level remains as likely support on any sustained weakness, but GLD hasn't even approached that - and this at a time when other commodities have been weak.

Silver, on the other hand, has not displayed the same strength. The metal, as represented by the iShares Silver Trust (NYSE:SLV) ETF, has had a difficult time recovering from the sharp reversal earlier this Spring. Silver had been in a parabolic trend and thus the correction was more steep. That being said, it also hasn't pushed any lower than the thrust towards $32.50. SLV is now in a trading range between $32.50 and $37.50. Traders should key off of those levels, as a move to either side should result in a trading opportunity.

Oil on the other hand has continued to grind lower. The prior trend was not as clean as the metals complex, and oil has continued to show volatility. The commodity, as represented by the United States Oil Fund (NYSE:USO) ETF, just broke under its 200-day moving average after attempting to find some footing near the $39 level. Volume has been high over the past few months suggesting some distribution, and USO has been much weaker than the metals. USO should be avoided until it can at least trade back above the channel it has been following the past few weeks. This would require a close above the $40-$41 level. (For more, see 7 Commodity ETFs To Know.)

Looking at broader view of the commodities group, the PowerShares DB Commodity Index (NYSE:DBC) ETF is showing an interesting pattern. While it remains fairly close to its recent highs, it is also starting to form a possible head and shoulders topping pattern. It is important to note that this pattern would not be confirmed until a break below the neckline, which currently stands just under $29. Otherwise, the pattern can be considered a consolidation since DBC is technically just trading sideways. The $30.70 level is also worth noting, as it has served as both support and resistance over the past few months. A close above this level would possibly negate the head and shoulders pattern, thus improving the picture for DBC.

The stock market is closely correlated to the commodities complex, and traders should always keep an eye on these markets regardless of whether they trade them. They will often provide clues when it's difficult to otherwise find clear signals in the stock market. Monitoring the commodities, along with currencies, is very important, and many of these commodities are showing interesting patterns. Gold, in particular, remains pretty close to all time highs, and one would think that DBC would already be headed lower. Traders should keep a close eye on these ETFs until the picture clearer in the indexes. (For more, see 4 Commodities Affected By World Conflix.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

Related Articles
  1. Investing

    Have Commodities Bottomed?

    Commodity prices have been heading lower for more than four years, being the worst performing asset class of 2015 with more losses in cyclical commodities.
  2. Chart Advisor

    ChartAdvisor for October 2 2015

    Weekly technical summary of the major U.S. indexes.
  3. Mutual Funds & ETFs

    Top Three Transportation ETFs

    These three transportation funds attract the majority of sector volume.
  4. Investing Basics

    Tops Tips for Trading ETFs

    A look at two different trading strategies for ETFs - one for investors and the other for active traders.
  5. Investing

    How Diversifying Can Help You Manage Market Mayhem

    The recent market volatility, while not unexpected, has certainly been hard for any investor to digest.
  6. Investing

    The Quinoa Quandary for Bolivian Farmers

    Growing global demand for quinoa has impacted Bolivian farmers' way of life. Should the American consumer be wary of buying this product?
  7. Technical Indicators

    Why MACD Divergence Is an Unreliable Signal

    MACD divergence is a popular method for predicting reversals, but unfortunately it isn't very accurate. Learn the weaknesses of indicator divergence.
  8. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  9. Mutual Funds & ETFs

    Top 4 Investment Grade Corporate Bonds ETFs

    Discover detailed analysis and information about some of the top exchange-traded funds (ETFs) that offer exposure to the investment-grade corporate bond market.
  10. Investing

    A Look at 6 Leading Female Value Investors

    In an industry still largely predominated by men, we look at 6 leading female value investors working today.
  1. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  2. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  3. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  4. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. Does index trading increase market vulnerability?

    The rise of index trading may increase the overall vulnerability of the stock market due to increased correlations between ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!