Hello and welcome to CantosCharts. My name is Michael Hewson from spread betting firm CMC Markets.

The previous two days we've looked at Australian dollar, we've looked at the Reuters CRB and we've looked at the mining sector. Now I'm going to sort of take that a little bit further and look at copper and gold as core components of the stuff that I've gone through over the past couple of days.

But first, before I do that, I'm going to look at quite an important index from the overall commodity spectrum. It's called the LMEX Index. NLNow the LMEX Index is essentially a weighted index of all LME commodity prices. That includes aluminium, copper, lead, zinc and nickel.

As you can see, it's pretty much similar to the Reuters CRB in terms of its shape. We've had a very strong decline throughout 2008. We bottomed out around about December 2008/February 2009 and then we started to rally higher at the beginning of 2009 all the way up to the peaks again around about the end of 2009 and the beginning of 2010.

Now this is quite a significant index. I look at this when I want to get some sort of indication as to whether or not commodity prices on the LME are looking to peak out.

It appears to be that we're starting to form a bit of a double top. Yes we do have slightly upward sloping positive momentum through the lows here around about 2,975, but momentum does appear to be waning a little bit which again gives more weight to what I've been saying over the past couple of days about the commodity sector and the mining sector starting to run out of steam a little bit.

So we've got this peak here around about 3,580 on the LMEX and we had quite an aggressive downward move when equity markets in January came slumping lower. The reason they came slumping lower was because of the perception that China may be looking to tighten monetary policy to basically rein back growth in its economy.

There are certain signs within the Chinese economy that growth is starting to run a little bit ahead of control and the Chinese Central Bank want to somehow get that under control. One of the ways to do that is obviously to start pushing rates a little bit higher. So when they raised their Reserve Bank requirements in January, we saw a significant sell off in commodity prices across the board and that's reflected in this LMEX chart here.

So let's see if this was mimicked within the copper price. Well, indeed it was. Now with this copper chart I've drawn a trend line through the highs from 8,940 in mid 2008 and I have drawn it through that spike high there basically because it has closed near the lows of the day. So I'm basically ignoring that spike for the purposes of this particular presentation.

Now there are some purists who will say that I shouldn't ignore that spike. But taking into account the closing price on there, I'm quite happy to do that and I've drawn it through the highs at the end of 2009. The price comes in around about 7,674.

You can also see the last three weeks we've seen a lot of hesitation in terms of the price action.

Now, as I say, the commodity price, the copper price, has come off quite significantly. Again, we could have a potential double top forming here within the confines of this overall move.

But what we really need to see is a break below these lows here that we saw after the declines in January.

So again, there is quite a bit of scope for commodity prices to come off in the short-term if it stays below these particular highs that I've highlighted here.

So let's move on to gold. Gold again is slightly different because unlike copper it is perceived as a bit of a safe haven. So when investors feel a little bit unsure about risk they tend to migrate into gold. So that tends to behave slightly differently to other commodity prices. However, there are signs of declining momentum within that as well and that can be seen from this chart here which does look a little bit busy, but nevertheless, it's still quite significant.

What I've done is I've taken the lows from $864 which occurred just before the equity market rally of last year and we've seen the peaks at $1,126.

Now the market fell and it basically stopped around about this 50 per cent retracement level at $1,045 and has since bounced back, but it has been unable to get back above the $1,140 level which was the 23.6 per cent retracement here.

Now there is potential for gold to come all the way back to $1,045 as well as this trend line from the lows at $864. We've also got the 200 day moving average. So we've got three areas of support building up on gold in the short-term.

We can see, or we've got potential to see, a slightly lower gold price. It doesn't negate the fact that gold is still bullish in the longer term. We could see a little bit of a slide off in gold as people get a little bit nervous, take a bit of profit. But ultimately, we should see a bounce off the 200 day moving average, the trend line support and the old lows at $1,045 on the gold price.

So go back to copper. Potential to see lower copper prices as long as these highs remain intact. The LMEX also again should move in conjunction with that.

So basically when we pull all this stuff together over the past three days, what I've told you about Reuters CRB, Australian dollar, gold, mining sector, they're all showing evidence of a slowdown in momentum, possible highs, a possible slide lower. That could then translate into lower equity markets.

My name is Michael Hewson from CMC Markets. This is CantosCharts. Thank you for listening.