Wednesday, December 15, 2010

Higher Interest Rates, Lower Volume.....Is This Run in Commodities Over?

With interest rates making a move upward this week, investors are questioning if the higher rates will make home loans and business loans more expensive to get. Stifling efforts by Congress and the Federal Reserve to strengthen the economy. Welcome to the new U.S. economy, this should be a sign of real economic expansion but it only brings new doubt that the governments stimulus package has any positive effect at all.

For now traders seem to be cautious about riding the bullish momentum in most commodities since they have real support from supply and demand principles. Crude oil is another story. With the failure to push through the $90 dollar per barrel level crude oil bulls were brought back to earth with the truth that we continue to have a glut of oil on the market. And yes, the good old days of having a couple of OPEC members mention the possibility of $100 oil moving the market are gone. Our "friends" in Saudi Arabia have proven to be the only real significant players in setting the price of oil. And it's obvious they prefer the $80+ range, just below what some believe is profitable for Iran. Coincidence?

For crude oil bulls to have any hope of getting their momentum back they need to defend the 20 day moving average at 85.83 and that appears unlikely as they watch their fellow traders head out to Florida and warmer weather for the holidays. Taking precious market volume with them. Here's your complete trading numbers for Wednesday morning......

Crude oil was lower overnight and trading below the 10 day moving average crossing at 88.40 signaling that a short term top might be in or is near. Stochastics and the RSI are neutral to bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 85.83 are needed to confirm that a short term top has been posted. If January renews the rally off November's low, May's high crossing at 93.29 is the next upside target. First resistance is last Tuesday's high crossing at 90.76. Second resistance is May's high crossing at 93.29. First support is last Friday's low crossing at 87.10. Second support is the 20 day moving average crossing at 85.83. Crude oil pivot point for Wednesday is 88.32

Natural gas was lower overnight as it extends Tuesday's breakout below the 20 day moving average crossing at 4.346 confirming that a short term top has been posted. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If January extends the decline off last week's high, the reaction low crossing at 4.126 is the next downside target. If January renews the rally off November's low, the 38% retracement level of the June-November decline crossing at 4.654 is the next upside target. First resistance is last Thursday's high crossing at 4.637. Second resistance is the 38% retracement level of the June-November decline crossing at 4.654. First support is the overnight low crossing at 4.230. Second support is the reaction low crossing at 4.126. Natural gas pivot point for Wednesday is 4.315

Gold was lower overnight as it consolidates some of this week's rally but remains above the 20 day moving average crossing at 1382.20. Stochastics and the RSI are turning neutral to 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 20 day moving average crossing at 1382.20 would confirm that a short term top has been posted. First resistance is last Tuesday's high crossing at 1432.50. First support is the 20 day moving average crossing at 1382.20. Second support is the reaction low crossing at 1352.00. Gold pivot point for Wednesday morning is 1401.90.


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