Is it safe to start buying Gold Stocks yet?

From guest blogger David A Banister- Active Trading Partners.com

One of the most common questions I field from my forecast and trading subscribers is can we buy Gold stocks yet? We have seen Gold consolidating and correcting following a 34 fibonacci month rally that I discussed last fall was going to top out around 1900 per ounce. This type of rally went from October of 2008 to August of 2011 and we saw Gold rally from $680 to $1900 per ounce during that time.

In order to work off the bullish sentiment that was at parabolic extremes, Gold is required to spend a reasonable amount of time in relation to the prior 34 month move to wash out the sentiment and create a strong pivot bottom. While this continues, the Gold stock index has taken it on the chin as money rotates out and into other hot areas like Technology and the Internet 2.0 social media boom. To wit, the GDX ETF peaked out last fall around 67 and current trades under 47 as of this writing.

However, there may be a silver lining developing in those dark mining stock clouds very soon. It does appear that we are in the 5^th and final wave of this pessimistic decline in Gold stocks per my GDX ETF chart below. A typical bottoming pattern ends after 5 clear waves have taken place, and in this case I have targets between $43-$47 per GDX share for a likely pivot low in Gold stocks. Contrarian investors may do well to begin picking the better names in the sector and “scaling in” over the next short period of time.

Gold itself has recently corrected from 1793 per ounce to 1620 in the last several weeks. This has spooked the crowd out of Gold and put further pressure on the Gold mining stocks as well. Should Gold hold the $1620’s area and rebound past $1691 you will see the Gold stocks take off just ahead of that and from these 43-46 levels on the GDX ETF provide very strong returns to investors with the iron stomachs.

The best way to make money long term in the market and to grow your capital is to develop a method where you can define your risk levels within reason near the apex of a downside move, and then scale into that final apex and catch the rally on the upside. This is difficult to do but at my ATP service we have developed a strong methodology that takes advantage of “herd behavioral characteristics” and takes advantage of typical panic selling and panic buying to do just the opposite. We have not yet bought into the Gold Stock sector but I assume fairly soon we will be dipping our toes in the water while others have all rushed out of the sector right near the apex lows.

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Crude Oil Finding Support, Bulls Must Defend $93.50 to Avoid Major Chart Damage

It would appear that for the short term crude oil is finding support around the $95.50 a barrel area. A close below the $93.50 level seen on December 18th would confirm a double top, pivot point formation which would cause major chart damage and risk trading down into the $84 a barrel level. We do remain longer term positive on this market, however it needs to move and close over resistance at $100 to get its upside momentum into high gear. With only our monthly Trade Triangle positive, we expect we will see further market consolidation in crude oil. Long term traders should be long this market with appropriate money management stops.

Crude oil posted an inside day on Monday with a lower close. The mid range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If March extends January's decline, December's low crossing at 92.95 is the next downside target. Closes above the reaction high crossing at 101.39 are needed to confirm that a short term low has been posted. First resistance is the reaction high crossing at 101.39. Second resistance is the reaction high crossing at 102.24. First support is last Thursday's low crossing at 95.44. Second support is December's low crossing at 92.95.

Check out our latest Video, Market Analysis and Forecast for the Dollar, Crude Oil, Gold, Silver, and the SP500

Crude Oil Supply Gains Puts Crude Oil Bulls on Their Backs.....Again!

Crude oil futures tanked today after supplies spiked up by 4 + million barrels. This after the Bloomberg News Survey forecasted a 2.6 million barrel gain.

Crude oil for the past week and a half has lacked any real cohesive direction, in our opinion. With a Score of -55, it reflects a true trading range. We believe we are now at the lower levels of the trading range and would not be surprised to see a pop to the upside.

We still remain longer term positive on this market and expect to see it make some new highs soon, however it must move over resistance at $102 to get its upside momentum into high gear.

With our daily and monthly Trade Triangles in positive modes, we expect we will see further market consolidation in crude oil. Long term traders should be long this market with appropriate money management stops.

Crude oil closed lower on Wednesday and the low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term.

If March renews January's decline, December's low crossing at 92.95 is the next downside target. Closes above the reaction high crossing at 101.39 are needed to confirm that a short term low has been posted.

First resistance is the reaction high crossing at 101.39. Second resistance is the reaction high crossing at 102.24. First support is last Monday's low crossing at 97.40. Second support is December's low crossing at 92.95.

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Crude Oil Bulls Can't Seem to Take Advantage of Price Action Above $100

Crude oil closed down $0.42 a barrel at $98.35 today. Prices closed nearer the session low today and scored a bearish “outside day” down on the daily bar chart. Prices were pressured by a firmer U.S. dollar index today. Crude oil bulls have the overall near term technical advantage. However, the going does get tough for the bulls once prices move above the key $100.00 level.

Gold futures closed up $4.00 an ounce at $1,783.30 today. Prices closed near mid range today, hit a fresh seven week high and closed at a bullish monthly high close. Gold bulls still have the solid overall near term technical advantage and still have upside near term technical momentum. A steep four week old uptrend is in place on the daily bar chart.

Natural gas closed down 20.9 cents at $2.504 today. Prices closed nearer the session low today. Bulls faded today. Bears have the overall near term technical advantage. The next upside price breakout objective for the bulls is closing prices above major psychological resistance at $3.00.

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Crude Oil Bulls Gaining Much Needed Momentum

Crude oil closed lower on Thursday as it consolidated some of the rally off last Friday's low. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. If March renews the rally off December's low, the 75% retracement level of the 2011 decline crossing at 105.23 is the next upside target.

If March renews this month's decline, December's low crossing at 92.95 is the next downside target. First resistance is this month's high crossing at 103.90. Second resistance is the 75% retracement level of the 2011 decline crossing at 105.23. First support is last Friday's low crossing at 97.93. Second support is December's low crossing at 92.95.

The consolidation in crude oil above the $98 a barrel level continues. We are longer term positive on this market, however it must move over resistance at $104 to get upside momentum into high gear. With a Chart Analysis Score of +90, this market is in a strong trend and with all our Trade Triangles in a positive mode we expect we will see this market breakout to the upside. Long and intermediate term traders should be long this market with appropriate money management stops.

Check out our gold trend forecast for the 1st quarter of 2012

Obamas "More Debt" Speech and Fridays Oil Numbers

It's looks like traders view President Obamas new "stimulus" plan, yes we'll say it, for just what it is, more debt. Crude oil traded lower in Thursday evenings overnight session consolidating some of Wednesday's rally putting oil into overbought territory.Oil prices are diverging but are neutral to bullish signaling that sideways to higher prices are possible near term. If October extends the rebound off August's low, the May-July downtrend line crossing near 92.45 is the next upside target.

If the oil bulls expect to maintain any of this momentum they will need to defend 83.20, And closes below Tuesday's low crossing at 83.20 would confirm that the rally off August's low has ended. If October renews the decline off May's high, the 75% retracement level of the 2009-2011 rally crossing at 71.73 is the next downside target.

First resistance is Wednesday's high crossing at 90.48. Second resistance is the May-July downtrend line crossing near 92.45. First support is Tuesday's low crossing at 83.20. Second support is the reaction low crossing at 82.95. Crude oil pivot point for Fridays trading is 89.23.

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Higher Interest Rates, Lower Volume.....Is This Run in Commodities Over?

With interest rates making a move upward this week, investors are questioning if the higher rates will make home loans and business loans more expensive to get. Stifling efforts by Congress and the Federal Reserve to strengthen the economy. Welcome to the new U.S. economy, this should be a sign of real economic expansion but it only brings new doubt that the governments stimulus package has any positive effect at all.

For now traders seem to be cautious about riding the bullish momentum in most commodities since they have real support from supply and demand principles. Crude oil is another story. With the failure to push through the $90 dollar per barrel level crude oil bulls were brought back to earth with the truth that we continue to have a glut of oil on the market. And yes, the good old days of having a couple of OPEC members mention the possibility of $100 oil moving the market are gone. Our "friends" in Saudi Arabia have proven to be the only real significant players in setting the price of oil. And it's obvious they prefer the $80+ range, just below what some believe is profitable for Iran. Coincidence?

For crude oil bulls to have any hope of getting their momentum back they need to defend the 20 day moving average at 85.83 and that appears unlikely as they watch their fellow traders head out to Florida and warmer weather for the holidays. Taking precious market volume with them. Here's your complete trading numbers for Wednesday morning......

Crude oil was lower overnight and trading below the 10 day moving average crossing at 88.40 signaling that a short term top might be in or is near. Stochastics and the RSI are neutral to bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 85.83 are needed to confirm that a short term top has been posted. If January renews the rally off November's low, May's high crossing at 93.29 is the next upside target. First resistance is last Tuesday's high crossing at 90.76. Second resistance is May's high crossing at 93.29. First support is last Friday's low crossing at 87.10. Second support is the 20 day moving average crossing at 85.83. Crude oil pivot point for Wednesday is 88.32

Natural gas was lower overnight as it extends Tuesday's breakout below the 20 day moving average crossing at 4.346 confirming that a short term top has been posted. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If January extends the decline off last week's high, the reaction low crossing at 4.126 is the next downside target. If January renews the rally off November's low, the 38% retracement level of the June-November decline crossing at 4.654 is the next upside target. First resistance is last Thursday's high crossing at 4.637. Second resistance is the 38% retracement level of the June-November decline crossing at 4.654. First support is the overnight low crossing at 4.230. Second support is the reaction low crossing at 4.126. Natural gas pivot point for Wednesday is 4.315

Gold was lower overnight as it consolidates some of this week's rally but remains above the 20 day moving average crossing at 1382.20. Stochastics and the RSI are turning neutral to bullish signaling that sideways to higher prices are possible near term. If March renews this year's rally into uncharted territory, upside targets will be hard to project. Closes below the 20 day moving average crossing at 1382.20 would confirm that a short term top has been posted. First resistance is last Tuesday's high crossing at 1432.50. First support is the 20 day moving average crossing at 1382.20. Second support is the reaction low crossing at 1352.00. Gold pivot point for Wednesday morning is 1401.90.


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Phil Flynn: Spooky QE2

Oil, boil, toil and trouble, we’re going to print more money. Count Bernanke is out to suck more blood out us poor turnips as the Fed looks like QE2 might be a whopper after all! Hey wait a minute! What? Is it possible that the Fed and the upcoming Mid-Term elections are not scaring the oil bear anymore? Well at least for a day the oil market seemed more spooked about mounting supply and decreasing demand then any spell that the Fed was going to cast upon the economy. Despite weakness in the dollar and the most impressive gold rush in weeks, oil struggled to close higher on the day.

Perhaps the market is still coming to grips with the horror of this week’s big build in U.S. supply which, according to the Energy Information Agency, is the highest level ever ending the month of October sitting at 366.2 million barrels. Now that’s scary! Not only that, the supply numbers are daunting with concern that demand from Asia is weakening. Dow Jones news wires reported that India's crude oil imports fell 21.9% to 10.94 million tons in September, or 2.67 million barrels a day, from 14.01 million tons a year earlier. Crude imports were up 14% from 9.57 million tons in August.

But there is still some concern about Indian demand. India imports about three quarters of its crude oil for its demand needs. We know that the global oil market feeds off of China and India feeds off of China and in China this week they took more steps to slow energy demand. After increasing interest rates, the Chinese attacked oil demand directly by increasing the cost of diesel and gasoline by 3%. Now we do not know whether or not a 3% increase will significantly slow demand but it might. Now take into account rising OPEC production and a glut of spare production capacity around the globe and it is no wonder why the oil upward momentum has been limited.

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Crude Oil Daily Technical Outlook For Friday

While upside momentum is diminishing in crude oil, further rise is still in favor with 80.16 minor support index. Current rally from 69.50 could extend further to retest 83.95 high. Nevertheless, break of 80.16 will indicate that a short term top is already in place and deeper pull back should be seen to 38.2% retracement of 69.50 to 83.03 at 77.86 and below.

In the bigger picture, crude oil was supported above mentioned 68.59 key support and thus, there was no confirmation of medium term reversal. The strong rebound from 69.50 dampened our bearish view and argue that medium term rise from 33.2 might not be over yet. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.


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Crude Oil Technical Outlook For Wednesday Morning

With 4 hours MACD crossed above signal line, some more sideway trading could be seen in crude oil and another recovery might be seen to 4 hours 55 EMA (now at 76.52). Nevertheless, fall fro 83.95 is still in favor to continue as long as 79.16 resistance holds. Sustained break of 61.8% retracement of 68.59 to 83.95 at 74.46 will target a retest on 68.59 support. However, note that break of 79.16 will indicate that fall from 83.95 has completed and will flip intraday bias back to the upside for retesting this resistance.

In the bigger picture, upside momentum is clearly diminishing as seen in bearish divergence condition in daily MACD. However, there is no confirmation that medium term rise has topped out yet as long as 68.59 support holds. Such medium term rise could still continue and above 83.95 will target 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. Nevertheless, even in such case, we'll continue to look for reversal signal and expect crude oil to top out finally as it approaches 90 level. On the downside, break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Crude Oil Technical Outlook For Tuesday Morning

While downside momentum is diminsihing a bit, intraday bias is still on the downside. Crude oil's fall from 83.95 is expected to continue and sustained d break of 61.8% retracement of 68.59 to 83.95 at 74.46 will target a rest on 68.59 support. On the upside, above 76.68 resistance will turn intraday bias neutral and bring consolidations. But break of 79.16 resistance is needed to indicate that fall from 83.95 has completed. Otherwise, short term risk will remain on the downside.

In the bigger picture, upside momentum is clearly diminishing as seen in bearish divergence condition in daily MACD. However, there is no confirmation that medium term rise has topped out yet as long as 68.59 support holds. Such medium term rise could still continue and above 83.95 will target 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. Nevertheless, even in such case, we'll continue to look for reversal signal and expect crude oil to top out finally as it approaches 90 level. ON the downside, break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Phil Flynn: They Are So Tired

They're so tired, they haven't slept a wink. They're so to tired, their mind is on the blink. They wonder if they should get up and fix themselves a drink but what they really are wondering where all the bullish momentum has gone. I mean come on it seemed like the oil bulls were on top of the world as the year started on such a bullish note. The bulls had their arguments like cold weather and China but with every passing day those arguments become more tired.

On the other hand the bearish case is wide awake. We have weak demand, ample inventories, rising OPEC and non OPEC production and questions about the continued growth in China oil demand. Now throw in some proposed new banking regulations that could zap demand and it's the bull's worst nightmare. No wonder they can't get any sleep. The bull market and the bulls are just downright tired.

The Energy Information Agency weekly report did not help out the bullish case. The EIA did report that oil supplies fell modestly (400,000 barrels) and that we had a big drop in distillates (3.3 million barrels) but are we not to expect that when the weather is cold? And we are still above the average range in both categories. At the same time we had a huge build in gasoline supply 3.3 million barrels and a historical low refining run rate of 78.4 % which just seems too scream out weak non-weather related demand.

Of course the oil bulls would tell you that it is not about US oil demand but demand from China. Yet is it possible that the oil demand story is not all it seems or at the very least the oil market got far ahead of the China demand story. I have been raising this issue for some time. Yesterday I warned that despite the fact of an explosive Chinese growth rate of 10.7%, the impact of China raising reserve rates and desperately reigning in credit could cause problems for the oil bulls.

I warned that even though it raised market fears, the Chinese government will take even more steps to reign in credit. I said that the market's reaction to the banking news could really be saying something more profound about how the market feels about the Chinese economy and even more, the health of the Chinese banking system as a whole.....Read the entire article.

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