Wednesday, December 29, 2010

Is Consumer Confidence and Housing Enough to Stop Crude Oil's Run?

No doubt that 2010 was no 2009 when it comes to oil prices with 2010 bringing a mere 14% gain compared to 2009's 78%. Can 2011 continue the run in the face of even worse consumer confidence reports in the U.S. and a larger than expected drop in home values as the S&P/Case-Shiller index of U.S. property values reported a decline of 0.8 percent in October from a year earlier. If anything can bring down the commodity and equity markets in 2011 it's the much feared double dip in the U.S. housing market.

Say it can't happen? Like anything else in life, just follow the money. The smart money. Why are the banks refusing home loans without large cash down payments? Simple, because when issuing a loan it is really the bank that is investing in the home, not the home owner. The lender is only hoping the home owner will pay it off for THEM! Smart money [the banks in this case] know that the homes are not worth the current prices even as low as they are, making a double dip inevitable.

We know what this will do for consumer confidence in the U.S. but will it stop China and India's rapid expansion and continued increase in energy demand? Unlikely, welcome to the new world economy. Here's your trading numbers for Wednesday morning......

Crude oil was lower due to light profit taking overnight. Stochastics and the RSI are diverging but remain neutral to 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 89.45 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 90.08. Second support is the 20 day moving average crossing at 89.45. Crude oil pivot point for Wednesday morning is 90.94.

Natural gas was slightly lower overnight as it consolidates some of Tuesday's rally. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 4.295 are needed to confirm that a short term low has been posted. If February renews this month's decline, November's low crossing at 3.913 is the next downside target. First resistance is the 20 day moving average crossing at 4.295. Second resistance is the reaction high crossing at 4.554. 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 Wednesday morning is 4.240.

Gold was slightly lower due to light profit taking overnight as it consolidates some of Tuesday's rally. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term. If March extends Tuesday's rally, this month's high crossing at 1432.50 is the next upside target. Closes below the reaction low crossing at 1361.6 would confirm that a short term top has been posted. First resistance is the overnight high crossing at 1410.00. 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 Wednesday morning is 1398.70.


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