EUR 221.66 For Business Accounts Only

COMMODITY OUTLOOK - Copper Up! - Crude Oil Down! Gold Revival!

Highlights

• Base Metals – Aluminium and Nickel have completed five wave impulse patterns in the advance from last year’s lows so there is now limited upside potential going forward as counter-trend corrections begin or resume. This also applies to Zinc, 2016’s stellar outperformer although the correction is expected to unfold into a more complex expanding flat which allows higher-highs over the coming month or two prior to a severe sell-off to complete the pattern sometime after April/May. Copper and Lead have yet to complete an equivalent five wave advance from the Jan.’16/Nov.15 lows so higher-highs lie ahead. As higher-highs develop, this creates a secondary rally within counter-trend declines for the other base metals so the outlook for February, March perhaps April remains biased to the upside – this allows a positive synchronisation to continue in the immediate future. But what is becoming more apparent is that once five wave patterns end for Copper and Lead, a larger corrective decline will follow – this matches the third and final sequence of corrections already underway for Nickel and Zinc. These counter-trend declines are expected from April-May onwards ending sometime into late Q3/early Q4 ’17.

• Precious Metals – Last July/August’s highs for gold and silver ended the 1^st phase of major uptrends. The 2^nd phase of counter-trend declines have since ended into the December ’16 lows with January’s response higher confirming a reversal-signature that begins the 3^rd phase of this uptrend. It is still only early in this sequence with initial gains ending into late-January highs. A shorter-term correction has already begun in gold – silver is expected to join in during the beginning of February. This pullback lower aligns to US$ dollar strength. Several mining stocks are similarly positioned to gold – the GDX resumed its larger uptrend last December with January’s resumption of the larger uptrend ending an initial five wave push now giving way to a shorter-term correction – so more declines forecast in February. The same pattern is also developing for the XAU. Looking further ahead, inflationary pressures are building so we remain very positive for this year’s uptrend.

• Energy – Last November’s OPEC + members of the non-OPEC consortium including Russia agreed to cut back global production by 1.8mn b/d. Although this was reaffirmed in January, we have yet to see full implementation although many countries have reported cutbacks – the official numbers will be released February 17^th. Crude oil sentiment remains very bullish with the latest commitment of trader’s (COT) figures reporting new record speculative long positons. With prices unable to make any additional upside push, the concern is that all positive aspects are already priced-in. From an Elliott Wave perspective, upside price action is also limited basis a zig zag pattern completing from last August’s pullback into recent higher-highs. Any sudden break below support at 50.71 would trigger wholesale long-liquidation and confirm the third sequence of a multi-month expanding flat in downside progress towards 36.70-35.25+/-. Brent oil’s equivalent downside targets are towards 37.88+/-. Only a strong thrust above existing highs of 55.24 and 58.37 respectively would change this bearish outlook. Further out, a multi-year advance that began from the Jan.’16 lows remains intact.