Monday, January 3, 2011

Crude Oil Bulls Start 2011 on a Positive Note

We can't deny the run, crude oil gained 15 percent last year and most analyst who called the bull run in oil prices were spot on. But is that it? Can a "V" shaped recovery in oil continue in the face of slowed Chinese manufacturing in December 2010 for the first time since July. The Bloomberg survey of economists shows that China, the world’s biggest energy consumer, will slow to 9 percent this year from 10 percent, that would still be three times the rate in the U.S. and six times Europe’s.

Russia for one is doing it's part to put an end to the run. Reporting oil production numbers not seen since the Soviet era. And while that increase in crude oil production was a mere 2.2% Russian natural gas production spiked a whopping 15% in 2010. Do they have more of that in store for us in 2011? And how will our "friends" in OPEC respond? Regardless of what they say I would not expect any pull back from the cash strapped countries of the now obsolete organization. In fact we expect to see an increase from the.....can we call them an organization?

The 2010 run ended with crude oil inventories dropping 4 weeks in row, the longest drop in more then a year. Does all of this scream out bubble? We suspect the bulls are going to enjoy a warm welcome from the sun tanned returning traders. But we stick by our cautioning tale that the second week of January could bring these oil prices back to earth with higher inventory reports. But we are trading TODAY, and here are the numbers we are going to use......

Crude oil was higher overnight as it extends the rally off August's low. Stochastics and the RSI are diverging but are turning neutral to bullish again signaling that sideways to higher prices are possible near term. If February extends the rally off August's low, May's high crossing at 93.87 is the next upside target. Closes below last Thursday's low crossing at 89.02 would confirm that a short term top has been posted. First resistance is the overnight high crossing at 92.20. Second resistance is May's high crossing at 93.87. First support is the 10 day moving average crossing at 90.80. Second support is last Thursday's low crossing at 89.02. Crude oil pivot point for Monday morning is 90.83.

Natural gas gapped up overnight and was higher as it extends the rally off December's low. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If February extends the aforementioned rally, December's high crossing at 4.635 is the next upside target. Closes below the 10 day moving average crossing at 4.268 would confirm that a short term top has been posted. First resistance is the overnight high crossing at 4.563. Second resistance is December's high crossing at 4.635. First support is the 20 day moving average crossing at 4.310. Second support is November's low crossing at 4.268. Natural gas pivot point for Monday morning is 4.388.

Gold was slightly lower due to light profit taking overnight as it consolidates some of last week's rally. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If March extends last week's rally, December'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 last Friday's high crossing at 1422.00. Second resistance is December'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 Monday morning is 1416.00.


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