Wednesday, January 5, 2011

Lower Oil Prices.....Blame it on the Gasoline!

Well that didn't take long. Even in the face of better job estimates crude oil bulls have already begun to show their "nervousness" as they trade oil down as low as 88.10 in the overnight session. The lowest crude oil has traded since December 20th. And what do they blame it on? Blame it on the gasoline.

The street is saying that massive snow storms during the recent holiday week have caused a large drop in gasoline demand. MasterCard Inc., the second biggest payments network company, said in its SpendingPulse report that motorists bought an average 8.41 million barrels of gasoline a day in the week ended Dec. 31, down from 9.61 million the previous week.

This even with continued draw down in crude inventories is giving us an insight into where the tolerance level of the commodity traders is. The bulls are screaming "$100 oil is just not in the cards". And that just might be the case. Weather you believe the long term oil production capabilities claimed by the Saudis or not the effect they have on the market is real. And they have made no secret of the fact that they do not want $100 oil.

The Saudi's, saviors of the U.S. economy. Strange as it sounds it just might be true as they know better then anyone that we can't have it both ways. We can't have high gas prices and an expanding U.S. economy. And still our politicians in this country [U.S.] still do everything in their power to keep us from increasing our own oil production and weaning ourselves off of foreign oil. Just sell electric cars, that is the answer. While we do everything we can to limit the production and expansion of energy production and distribution.

Good thing we don't have to trade what will happen in the future, we can trade today! And here's the numbers we'll be using to do just that......

Crude oil was lower overnight as it extends Tuesday's decline below the 20 day moving average. Stochastics and the RSI are 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 90.61 would temper the near term bearish outlook. First resistance is the 10 day moving average crossing at 90.61. Second resistance is Monday's high crossing at 92.58. First support is the overnight low crossing at 88.16. Second support is the reaction low crossing at 87.43. Crude oil pivot point for Wednesday morning is 89.94.

Natural gas was lower due to profit taking overnight as it consolidates some of the rally off December's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If February extends the aforementioned rally, 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 4.334 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 4.334. Natural gas pivot point for Wednesday morning is 4.644.

Gold was slightly higher due to short covering overnight as it consolidates some of Tuesday's decline. However, stochastics and the RSI are overbought and are turning bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 1372.70 are needed to confirm that a short term top has been posted. Closes above the 10 day moving average crossing at 1397.80 would temper the near term bearish outlook. First resistance is the 10 day moving average crossing at 1397.80. Second resistance is Monday's high crossing at 1424.40. First support is the reaction low crossing at 1372.70. Second support is the reaction low crossing at 1361.60. Gold pivot point for Wednesday morning is 1390.50.


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