Tuesday, January 25, 2011

Inflation Woes Take Center Stage in the Commodity Futures Trade

It's not a matter of if inflation woes will hit us in the U.S. but when. The old cliche that the current QE and QE2 money printing programs will be on the backs of our great children is just a myth. The sad results will be painfully laid upon the American people whenever the communist regime in China says it will be. And some very smart people think it's coming sooner then we think.

With the Chinese slowly allowing the Yuan to inflate it is obvious they know it's currency has to eventually be allowed to increase in value. And it won't be our great grand children who will feel that, it will be us. Few Americans seem to understand that all of our Quantitative Easing will then be felt by every one of us when we fill our gas tanks or pass through the grocery store check out line. That is where you will be expected to pay your share of all of this money being printed in Washington. And our "friends" in China will decide exactly when and how that will happen.

In an interview with The Wall Street Journal ahead of this week's annual meeting of the World Economic Forum in Davos, Switzerland, even Jean-Claude Trichet warned that inflation pressures in the euro zone must be watched closely, and urged central bankers everywhere to ensure that higher energy and food prices don't gain a foothold in the global economy.

Sure, markets don't move in a straight line. We will have many pull backs and corrections in commodity prices. But don't think for a second that the long term trend in commodities is any thing but up. So lets pay for them higher food prices in the future by making money today. And here is the pivot, resistance and support numbers we'll be using for todays trading.....

Crude oil was lower overnight as it extends last week's decline. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If March extends this month's decline, the 38% retracement level of the May-January rally crossing at 85.51 is the next downside target. Closes above the 20 day moving average crossing at 90.91 are needed to confirm that a short term low has been posted. First resistance is the 20 day moving average crossing at 90.91. Second resistance is this year's high crossing at 93.46. First support is the overnight low crossing at 86.33. Second support is the 38% retracement level of the May-January rally crossing at 85.51. Crude oil pivot point for Tuesday morning is 88.26.

Natural gas was lower overnight following Monday's key reversal down following a test of the 50% retracement level of the June-October decline crossing at 4.802. Stochastics and the RSI are overbought and are turning neutral to bearish signaling that a short term top might be in or is near. Closes below the 20 day moving average crossing at 4.488 are needed to confirm that a short term top has been posted. If March extends the rally off October's low, the 62% retracement level of the June-October decline crossing at 5.025 is the next upside target. First resistance is Monday's high crossing at 4.823. Second resistance is the 62% retracement level of the June-October decline crossing at 5.025. First support is the 10 day moving average crossing at 4.553. Second support is the 20 day moving average crossing at 4.488. Natural gas pivot point for Tuesday morning is 4.465.

Gold was lower overnight as it extends this month's decline. Stochastics and the RSI are oversold but remain bearish signaling that sideways to lower prices are possible. If February extends this month's decline, the 25% retracement level of the 2009-2010 rally crossing at 1296.40 is the next downside target. Closes above the 20 day moving average crossing at 1377.40 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 1361.30. Second resistance is the 20 day moving average crossing at 1377.40. First support is the overnight low crossing at 1321.90. Second support is the 25% retracement level of the 2009-2010 rally crossing at 1296.40. Gold pivot point for Tuesday morning is 1342.90.


Don't miss "If Things Work Out Like They Have in the Past This Market is Putting in a Top"


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