Review Of Platinum
Eric De Groot | Feb 16, 2016 12:32AM ET
Cheap banks loans, falling oil prices, and economic growth have supported a rising trend in automobile sales since 2009. This trend has been boosting demand for raw commodities used in the production of car from aluminum for body sheets, rubber for tires, steel for chassis, to platinum for diesel engines and hydrogen fuel cell technology; Volkswagen's (DE:VOWG_p) scandal has raised concerns that demand for platinum could suffer in the near term. While a fair number of experts remain bullish on platinum, they likely do not recognize economic deterioration throughout the global economy and a business cycle transition from prosperity to liquidation by 2016. This transition would be bearish for automobile sales, commodities used in their production, and investment in future technologies.
Investors, largely driven by emotions rather than discipline, tend to focus on volatility rather than the message of the market. This tendency prevents them from recognizing better opportunities in quieter markets.
Summary (COT Matrix)
The BEAR (Price) and BULLXO (Leverage) trends under Q3 distribution after as seasonal high position platinum as an aging bear opportunity. The BEAR (Price) and BULLXO (Leverage) combination suggests a low energy (Q3 distribution) countertrend rally. Better than average rallies generally arise from Q2 or Q1 accumulation, not Q3 distribution. See latest Review of Gold for comparison to Platinum's setup.
Price
Interactive Charts: PPLT, PLAT
A negative long-term trend oscillator (LTCO) defines a down impulse from 138.35 to 92.15 since the third week of August 2014 (chart 1). The bears control the trend until reversed by a bullish crossover. Compression (white circles) within the CEC cycle generally anticipates this change.
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A close above 147.12 jumps the creek and returns the trend to mark up. A close below 82.29 breaks the ice and transitions the trend from cause to mark down.
Chart 1
Leverage
A positive long-term leverage oscillator (LTLO) defines a bullish crossover and bulls phase since the second week of February (chart 2). The bull phase, a conflicting message from the leadership of leverage and price, suggests consolidation/profit-taking against the down impulse (see price).
A diffusion index (DI) of -18% defines Q3 distribution (chart 3). A capitulation index (CAP) of 31% supports this message (chart 4). DI and CAP's trends, broader flows of leverage and sentiment from distribution to accumulation and extreme complacency (red dotted line) to fear supporting the bears (green arrows), should not only continue to extreme concentrations but also restrain upside expectations until reversed (see price). A rally under these trends, a sign of strength (SOS), would be bullish for platinum longer-term.
Chart 2
Chart 3
Chart 4
Time/Cycle
The 5-year seasonal cycle (blue) defines weakness until the fourth week of June (chart 5). This path of least resistance restrains upside expectations (see price).
Chart 5
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