The fundamental supply story for the Palladium future (PAM13) continues to be supportive of the metal on pullbacks. The forecasted 2013 supply deficit for palladium has resulted in a forty percent rally since the end of July 2012. The contract has traded in a seventy dollar range, at the high end of its multi month rally, over the past five weeks. The concern for palladium investors, moving forward, would be a slowdown in the Chinese and US automobile markets and reduced demand for catalytic converters, the major use for palladium.

Momentum studies on a short term basis are neutral but would be supportive of further upside action. Initial support may come in at 740.00-750.00, with strong support at 715.00-725.00. Over the near term initial resistance may come in at 779.00-795.00, with further resistance at 832.00-839.00.

From December 31, 2013 to February 06, 2013 the Platinum Future (PLJ13) rallied roughly fifteen and a half percent. Mining issues in South Africa, resulting in concern over potential supply disruptions and improved growth expectations for the global economy, supported the rally. The contract has since fallen back on renewed concerns about global growth going forward, in particular data indicating further economic weakness in the Euro Zone.

PLJ13 registered overbought readings based on several momentum indicators in both short and intermediate term time frames on the rally that scored an intraday high of 1744.5 on February 06. The contract should find initial resistance at 1708.00-1716.00 and stronger selling at 1726.00-1735.00. Initial support may come in at 1654.00-1660.00 with stronger support at 1626.00-1640.00.

Since October 29 the March Palladium future (PAH13) has appreciated twenty percent. During that period the increase in long positions by speculative participants, as shown by the most recent Commitment of Traders Report (COT), has increased on relative terms a considerable amount.

Some traders may put forward the position that the rally in PAH13 is due to the improved auto demand in the US and Japan and the potential for a pickup in China. The most recent HSBC Manufacturing Purchasing Managers Index (PMI), released on December 31, 2012 for China came in at 51.5 up from 50.5 in November. The improvement in the PMI has lead many investors to expect further improvement in the Chinese economy going into 2013.

PAH13 is moving towards an overbought condition, but the contract appears to have some strong buying pressure underneath it. Initial resistance may appear 726.00-731.00 with further resistance at 736.00-747.00. Initial support may appear at 686.00-695.00 and stronger support at 672.00-683.00.

Palladium futures basis the January contract (PAF12) pulled back from yesterday’s closing high at 689.45, after its five week move up. The contract fell along with the gold, silver, platinum and roughly eighty- five percent of the raw materials included in the Standard & Poor’s GSCI Spot Index. Uncertainty over the US Fiscal Cliff debacle continues to undermine both financial and commodity markets. PAF13 continues to trade in a well defined $100.00 range $600.00-700.00 and will probably resolve its longer term direction once traders have a better view for the global economy in 2013.

Technically PAF13 is overbought based on several short term momentum indicators and a further pullback could be expected. Resistance should appear at 687.00-695.00 and then 704-00-711.00. Initial support may be found 667.00-670.00 and then 634.00-648.