China Keeps The Commodities Train Rolling

According to Reuters...

Robust manufacturing in China is keeping global production of raw materials spinning and compensating for a worrying drop in American output, while a surge in U.S. durable goods demand is certain with commercial construction rising, analysts said.

While these factors mainly support a case for better base metal prices, a rebounding U.S. stock market and continuous economic growth projected for the next two quarters -- although slower than the first two -- suggest benefits for other commodities too.

The article explains that while US home building is in trouble, commercial construction is picking up the slack -- which keeps demand going for a whole bunch of materials.

Well, should we break out the party hats, then? Alas, not everyone gets to come to the party...

The only exception could be the energy sector, which may have trouble supporting current prices because of rising inventories, the lack of hurricane strikes on U.S. oil platforms so far this year, and little impact seen from sanctions threatened against leading crude exporter Iran.

I've come to that conclusion, too. Unless there's a major hurricane -- and September is traditionally a busy month for hurricanes -- or some other supply disaster, oil should hit $60 per barrel in the next few months. Unlike Reuters, I also believe there are political forces that could drive oil lower. The oil market is small enough that some of the bigger funds and institutions could push it lower if they wanted to get prices at the pump down before the November elections. And I believe they do.

By the numbers…

#1 Is where crude oil broke its uptrend. Then we had to wait and see if oil was going to go sideways for awhile, find a new bullish trend or turn bearish.

#2 is where oil broke support. It is now headed lower. My price objective on oil is $60.

But don't worry, oil bulls. My downside target is only $60 (I get that using a technical analysis tool called a point-and-figure chart, if you're interested), and it's not that far down. And the long-term trend in the energy complex is up ... way up. So we'll look for bargains in energy when oil gets to new support.

Check out my new gold and energy blog at MoneyAndMarkets.com