Thursday, January 6, 2011

Could The Over Printed U.S. Dollar Be The Market Leader? For Now, YES!

With so much good economic news coming out of the U.S. from a second straight month of job growth to reduced crude oil inventories, why does it seem a temporary top has been formed at 92.58? Answer is easy, strength in the U.S. Dollar. And that strength doesn't appear to be fading soon as the dollar was higher overnight extending it's trading range of the past five weeks. Stochastics and the RSI are turning bullish for the dollar signaling that sideways to higher prices are possible near term. Combine that with bubble talk in the gold trade and all the good news in the world won't support $100 oil.

The number one factor in determining sector rotation is "currency of choice". And these days the world markets only see three choices. The U.S Dollar, Gold and crude oil. Their choice this week is obvious, the U.S. Dollar. We still view the long term trend of dollar weakness to be in place but for now the dollar will bring misery to the crude oil bulls until more dire news can take it's place.

As we predicted yesterday our friends in Saudi Arabia took their first step in assuring $100 oil was not in the cards by lowering the prices of heavy crude exports to Asia. Forcing Iran to follow suit and making it even more difficult for Iran to show a profit on their heavy crude production.

So let's turn on the TV and watch the parade of fund managers turned TV stars on our favorite CNBS channels call for $100. We'll trade for today and we'll trade using these numbers.....


Crude oil was lower overnight as it consolidates some of Wednesday's rally. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If February extends this week's decline, the reaction low crossing at 87.43 is the next downside target. Closes above the 10 day moving average crossing at 90.74 would temper the near term bearish outlook. First resistance is the 10 day moving average crossing at 90.74. Second resistance is Monday's high crossing at 92.58. First support is Wednesday's low crossing at 88.10. Second support is the reaction low crossing at 87.43. Crude oil pivot point for Thursday morning is 89.75.

Natural gas was higher overnight as it consolidates some of Wednesday's decline. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term. If February extends the rally off December's low, the 50% retracement level of the June-October decline crossing at 4.876 is the next upside target. Closes below the 20 day moving average crossing at 4.325 would confirm that a short term top has been posted. First resistance is Tuesday's high crossing at 4.707. Second resistance is the 50% retracement level of the June-October decline crossing at 4.876. First support is Monday's gap crossing at 4.454. Second support is the 20 day moving average crossing at 4.325. Natural gas pivot point for Thursday morning is 4.520.

Gold was slightly higher due to short covering overnight as it consolidates some of this week's decline. However, stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If February extends this week's decline, the reaction low crossing at 1331.10 is the next downside target. Closes above the 10 day moving average crossing at 1395.90 would temper the near term bearish outlook. First resistance is the 10 day moving average crossing at 1395.90. Second resistance is Monday's high crossing at 1424.40. First support is the reaction low crossing at 1361.60. Second support is the reaction low crossing at 1331.10. Gold pivot point for Thursday morning is 1374.30.


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