The Best Market Forecast Looks a Lot Like an Aluminum Forecast

MetalMiner avails itself of both Artificial Intelligence (AI) and Technical Analysis (TA) to better understand market direction. In short-term analyses, AI works particularly well. However, when looking for long-term answers, TA is far more insightful. This is particularly true when determining the best market forecast in terms of bullish, sideways, or bearish.

Charts, Forecasts, and Fundamentals

For instance, of late, much attention has been paid to the S&P 500. This is because the index appears poised for a potential shift from sideways to bearish. Some would define such a shift as a “20 percent decline,” but percentage declines have little to do with market direction. Instead, they involve an actual break in support or climb over resistance.
The following chart helps illustrate just how critical this juncture will be for the future of the S&P 500. Here, red lines indicate resistance and green lines indicate support.

Obviously, prices can go in one of two directions. Still, the “breaking of support” to lower lows would not suggest a healthy economy. Ironically, some of the latest metals charts look pretty similar to the S&P 500. Take aluminum, for example:

Source: MetalMiner Insights
Though still trading at historic highs, you can clearly see that aluminum has fallen below a significant support level. Suddenly, even the best aluminum price forecast seems derivative of other indices. In fact, in the following chart, you can see that Tin is following a similar trend.

Source: MetalMiner Insights
Typically commodities and the stock market do not share much – if any – price correlation with one another. Indeed, our state-of-the-art MetalMiner correlation analysis only reinforces this truth. However, a few economic tea leaves suggest that trend changes could come sooner rather than later.
Get the latest on aluminum, tin, steel, and more. For the best market forecast around, you need MetalMiner’s weekly newsletter. Sign up here and begin receiving valuable industry insights.

A Rising Dollar Does Not Lift All Boats

The U.S. Dollar is currently trading at 103+/-, a five-year high, and has a negative .93 correlation with commodities prices. This suggests that prices could shift trends rather abruptly. Meanwhile, a recent WSJ article indicated that “higher interest rates typically support the dollar by making U.S. assets more attractive to yield-seeking investors. Investors expect that the Fed will increase short-term rates more aggressively this year than its central-bank peers.” Such a move could, in turn, put pressure on commodities regardless of supply chain hiccups, high energy prices, etc.
At the same time, MetalMiner has had its eye on Japan, where the yen has fallen to a 20-year low against the dollar. According to that same WSJ article, the Bank of Japan has pledged to maintain low interest rates despite rising inflation. Meanwhile, the Europeans may follow the Fed’s example, but they certainly won’t lead. All in all, the mix of easy and tight monetary policy will likely keep the dollar supported.
Of course, in addition to the higher USD, China’s FXI shares have begun trending down. This suggests that the world’s second-largest economy has its own challenges to overcome in the coming months (and years). Among them are Shanghai’s lockdowns, which recently entered their 6^th week with no end in sight. Currently, even the best market forecast for our China’s vast manufacturing economy looks rather bleak.
Ultimately, rising inflation, along with some signs that U.S. demand has begun to slip, could impact both market momentum and trader sentiment. But whichever direction the market takes us, MetalMiner’s analysis will help lead the way.
Prepare yourself for tomorrow’s market today! Join us Wed May 4 from 11:00-11:30 for a participatory workshop on preparing your metal buy for a recessionary environment. And makes sure to stay informed about global steel markets with MetalMiner’s monthly MMI Report. Sign up here to begin receiving it FREE of charge.