Thursday, January 27, 2011

Is This Just Where Crude Oil Prices Belong?

Yes, this just may be where oil prices belong for some time to come. The oil, energy and commodities markets just can't trade on emotion for long, fundamentals matter. And despite stronger than expected U.S. economic and housing data bearish fundamentals will continue to dominate Nymex oil prices. Futures declined 1.2 percent to trade more than $11 a barrel below the Brent oil price. U.S. crude supplies climbed four times more than analysts forecast. All of this is making many traders question NYMEX oil pricing and it's continued ability to reflect world oil demand and pricing.

Brent’s premium over West Texas Intermediate crude oil spiked to a record $11.27 a barrel. Inventories at the Cushing Oklahoma storage facility rose 2.3 percent in the week ending Jan. 21st. The highest inventory increase since August 2010, according to the Energy Departments statistics report released on Wednesday. But Brent's future pricing is likely to follow NYMEX pricing south after failing a the critical 200 day moving average.

This in a week that many traders expected more of a boost from their friends at the FOMC. Their unanimous vote this week to maintain the current short term interest rates at near zero and more importantly  continued support of the QE 2 program was expected to support higher oil and commodity prices through the weakening of the U.S. Dollar. So why didn't crude oil push through the $100 dollar level? It is possible that traders are already eyeing the end to QE2 as the FOMC has already set a target date for QE 2 and it's current purchase of $600 billion in longer term treasury securities by the end of the second quarter, 2011. Then what?


But we are trading the U.S. market TODAY and here is the pivot, resistance and support numbers we'll be using......

Crude oil was lower overnight and remains poised to extend this month's decline. Stochastics and the RSI are oversold but remain neutral to 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 90.38 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 89.57. Second resistance is the 20 day moving average crossing at 90.38. First support is Wednesday's low crossing at 86.03. Second support is the 38% retracement level of the May-January rally crossing at 85.51. Crude oil pivot point for Thursday morning is 87.05.

Natural gas was lower overnight as it extends the decline off Monday's high and is trading below the 20 day moving average crossing at 4.503. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. Closes below the 20 day moving average crossing at 4.503 are needed to confirm that a short term top has been posted. If March renews 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 Thursday's low crossing at 4.397. Second support is the reaction low crossing at 4.302. Natural gas pivot point for Thursday morning is 4.476.

Gold was higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are oversold but remain neutral to 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 1372.10 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 1353.35. Second resistance is the 20 day moving average crossing at 1372.10. First support is Tuesday's low crossing at 1323.50. Second support is the 25% retracement level of the 2009-2010 rally crossing at 1296.40. Gold pivot point for Thursday morning is 1334.60.

Make sure to watch "The Real Reason For Gold's $100 Pull Back"

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3 comments:

Anonymous said...

Hey, great blog, if support of 85.51 is breached, do we have a free-fall? How likely do you think we'll hit 81, do you think it's a good time to be bullish right now?

Ray @ The Crude Oil Trader said...

What time frame are you thinking? I do see a general market correction and with that a challenge of the 58.32 level. So yes, I do see 81 getting blown out.

Ray @ The Crude Oil Trader said...

Crude futures fell to an eight-week low Thursday, creating a record disparity between the U.S. and London benchmarks. Light, sweet crude on the New York Mercantile Exchange (NYMEX) dropped 1.9 percent to $85.63 a barrel. In contrast, London's Brent soared at $97.35 on the ICE futures exchange.

The $11.83-gap between the Brent and NYMEX contracts Thursday was the highest difference ever. The two contracts usually trade within $2.00 of one another. Analysts believe investors are purchasing Brent benchmarks due to the surpluses in oil supplies at the NYMEX price settlement point in Cushing, Okla.

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