Tuesday, December 28, 2010

Commodity Traders to China....."Good Start Guys, But Not Enough"

Crude oil and commodity traders seem to be telling China "good start guys, but not enough" as commodity prices appear to be holding up with support of the continued bad weather in Europe and the U.S.

The usual low volume holiday trading is setting up an interesting first week for 2011. Will this "soft landing" in China's pullback be healthy and create sustainable economic growth in China?

The U.S. dollar showed continued weakness for a fourth day, keeping the appeal for commodities going in the U.S. markets. Traders are looking for U.S. oil stockpiles to decrease by 3 million barrels from 340.7 million in the week ended Dec. 24, according to the median estimate of nine analysts surveyed by Bloomberg News. With supplies falling this month by 19 million barrels, or 5.3 percent, the biggest decrease since December 2006.

Let's scrape the ice off of our monitors and trade the numbers given us. Here they are for Tuesday morning......

Crude oil was higher overnight and is poised to extend the rally off November's low. Stochastics and the RSI are diverging but are bullish signaling that sideways to higher prices are possible near term. If February extends the rally off November's low, May's high crossing at 93.87 is the next upside target. Closes below the 20 day moving average crossing at 89.12 would confirm that a short term top has been posted. First resistance is Monday's high crossing at 91.07. Second resistance is May's high crossing at 93.87. First support is the 10 day moving average crossing at 89.85. Second support is the 20 day moving average crossing at 89.12. Crude oil pivot point for Tuesday morning is 90.38.

Natural gas was lower overnight as it extends last week's trading range. Stochastics and the RSI are neutral signaling that sideways trading is possible near term. If February extends this month's decline, November's low crossing at 3.913 is the next downside target. Closes above the 20 day moving average crossing at 4.283 would confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 4.167. Second resistance is the 20 day moving average crossing at 4.283. First support is the reaction low crossing at 3.985. Second support is November's low crossing at 3.913. Natural gas pivot point for Tuesday morning is 4.119.

Gold was higher overnight and has renewed the rally off last week's low. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. If March renews this year's rally into uncharted territory, upside targets will be hard to project. Closes below the reaction low crossing at 1361.6 would confirm that a short term top has been posted. First resistance is the reaction high crossing at 1408.90. Second resistance is this month's high crossing at 1432.50. First support is the reaction low crossing at 1361.60. Second support is the reaction low crossing at 1352.00. Gold pivot point for Tuesday morning is 1380.90.


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