Friday, December 11, 2009

Crude Oil and Natural Gas Technical Outlook For Friday Morning


Nymex Crude Oil (CL)

Crude oil is still struggling around 70/71 level for the moment and at this point, further fall is still in favor with 73.87 minor resistance intact. As noted before, whole decline from 82.0 is still in progress and should now be targeting 65.05 support. On the upside, above 73.87 will turn bias neutral and bring consolidations. But upside should be limited below 79.04 resistance and bring fall resumption.

In the bigger picture, the break of trend line support (now at 71.86) affirms that case that medium term rebound from 33.2 has completed earlier at 82.00 already. Further decline is now expected to 58.32 cluster support (50% retracement of 33.2 to 82 at 57.60) for confirmation. Firm break there will target a retest of 33.2 low next. On the upside, break of 79.04 resistance is needed to invalidate this bearish view. Otherwise, outlook will remain bearish in case of recovery.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

Nymex Natural Gas (NG)

Natural gas surges sharply to as high as 5.347 after brief retreat. Break of 5.318 resistance indicates that rise from 2.409 is resuming and should now be targeting 61.8% projection of 2.409 to 5.318 from 4.157 at 5.955 next. on the downside, break of 4.837 support will argue that recent consolidation is still in progress and some more sideway trading would be seen again.

In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005 and might have completed at 2.409 already. Rise from 2.409 should not be completed yet and we would continue to anticipate an upside break out of the recent range of 4.157/5.138 eventually. Above 5.318 will target 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. Nevertheless, break of 4.157 support will dampen this bullish case and turn outlook mixed again.....Nymex Natural Gas Continuous Contract 4 Hours Chart.

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Thursday, December 10, 2009

A Seasonal Look At Gold And Oil

Over the course of the past three months, gold has taken the lead from the crude oil market is a normal autumn seasonal pattern. Granted, Oil held up longer than usual and gold rallied longer, but the seasonal trends are still playing.

Let’s look at the gold market first, as it has been front and center. A lot of investors shun gold but a hard look at the commodity market shows that it is one of the lesser volatile commodities. As far as a bubble goes, gold is nowhere near the price appreciations seen in other commodities like copper, sugar, cocoa, orange juice and a host of others.

We can see that price highs are made in the Jan/February time frame on average, but in bull market legs, have been known to extend into the spring. The gold chart below shows that the mid February timeframe established the winter high, made a temporary low at the beginning of May and a secondary low in the July time frame.

On the other end of the spectrum, the September thru December time period is usually where the best appreciation is witnessed. For the most part, this is how gold behaved this year with the exception that the end of September and early November lows were only mild corrections as the bull leg was strong enough to make these seasonal pullbacks just dips on the chart.

In my August 19th Gold and Oil commentary, I made a case for a bull market rally in gold and targeted the ideal time to begin would be September. Two weeks after that update, gold launched into its best run in quite a while and has become a headline item even in the mainstream press. But what is the outlook going forward ?

Gold has now reached a timeframe where a December pullback is in effect. If things play out a temporary bottom should be seen in mid December or early January and another gold leg up would develop into the early winter. That has been the norm of late. Over the past three years, February has been a pivotal month for price peaks in gold. The seasonal chart above shows that January/February price highs can be important. The stronger the rally, the longer the seasonal extends. The 2007 price peak did not come until the month of May, exceeding the February price peak.

So where are we now in the rally?

First off we can see that the fall rally began right on time at the very beginning of September. We entered the September timeframe with gold just below the 950 area. Seasonal pullbacks occurred at months end in September and October. But the beginning of November bought on a major escalation in price once the 1070 area was taken out on the upside. Here’s what I had to say in our August 19th report regarding gold:

“Moves above the 975-985 area would greatly favor an upside breakout and moves above the 1075-1100 would be indicative that the next leg of the gold market has begun.”

From a price perspective gold has support at the 1100 dollar area (plus or minus 25 dollars) and at the bottom of our price channel at the 980-1050 area. All technical indicators confirm of gold’s pullback and if the seasonal tendencies continue to play out, gold should provide one more rally as we work our way into the winter months. The 50 day moving average has not been touched since late August and is due for a visit. This is where we get our first number of 1100 (plus or minus 20 dollars).
The lower black channel line is another area of interest on this chart. It has provided price support in each pullback during the 2009 season and is another area where a potential low might develop. We can see it provided the lows in May, July, Aug, and September. This confirms the importance of this channel line. Just under that channel is the 200 day moving average, a level that provided major support during the April timeframe this year. It currently stands at the 979 area. Coincidentally, it was near this area that the latest leg of this rally began. While that area seems far away we need to keep in mind that the current gold rally began over 13 months ago at the $680 price level. A medium term correction after a $540 dollar move wound be a reasonable expectation as well.

There are a few ways one could play it. First, if your short term oriented or looking for a spot to hop on board, the first area we mentioned, the 1075-1125 area (ideally the 50 day moving average) offers a potential opportunity for gold’s price to turn and would be ideal for a short term play and as it turns out, would put price right near the middle of the channel lines. For those looking to enter, one option is to take the first nibble at this first price area, and a secondary position could be taken should gold make it to the bottom of the channel line near the 1000 area. This would give gold two key areas to bottom in and would be less of a risk using this scale in method for new entrants who have been eager to participate.

The second area of interest is the 200 day moving average and the lower black price channel line on the gold chart above. If we add a plus or minus $25 dollars to this area, we would come up with the 950-1000 area where a potential gold bottom could form. Using the example above, this is where one might contemplate a secondary position.

From a technical perspective both of the areas we’ve mentioned is an important price point on the chart using various methods of calculations for price retracement and support areas. If one is trying to build an entry plan into this market the above EXAMPLE is an excellent way for one to plan and execute a simple entry strategy that has more than one entry point as part of the overall plan. I am not advocating you use the above example, but that you have a plan of your own rather than just enter anywhere on an emotional whim.

In order to be successful in the markets there is really only two things one needs to know. How to enter a market and when to exit one is the bottom line when the scores are tallied. If you have an entry plan, and an exit strategy, your chances of success will be much greater.

Gold Outlook

The 13 month old bull market in gold has an incredible $540 dollar run behind it a short time. This is significant when you consider that for all of history, gold was under $700 at one point last October. The best part of the seasonal run on average is behind us. But that is on average. In bull markets, gold has the tendency to run higher in the mid winter to early spring timeframe. The bullish fundamentals and news of nations and central banks buying gold, the short supply in the physical markets, the rumors of physical shortages at the exchanges, the debasement of paper currencies via the printing press, and the “LOSS OF CONFIDENCE” in world government provides a powerful incentive for potential price increases in gold.

What could derail the train?

It seems there is only one thing that has been able to affect the price of gold to the downside and that is the potential of a mass debt default. This observation is based solely on the fact that the 2008 global meltdown had a direct impact to the price of gold and so far, it seems that the Dubai situation has also coincided with a downdraft. That is not to say that investors wouldn’t flock to gold this time either. They very well might. Suffice to say that should further escalation begin to surface in the debt area, one should be aware of the potential implications for gold. On the bullish side, one can say this. Gold has been the only major financial instrument to make NEW highs since the last debt default.

On the upside.....

From a pure chart perspective in this report, the upper channel line on the gold chart at the 1250 area is an area where we should expect a significant resistance area. Should all the bullish fundamentals come into play and the perfect storm develops for gold, then the breakout above the 1250 area will be even more powerful than the one we saw when gold broke above the 1070 area recently and should provide another leg up into mid winter and or early spring.

On the downside.....

We’ve already pointed out the two key areas to watch (near the 50 and 200 day averages and the upper and lower black channel lines on the chart). Odds would favor that one of these two areas will provide a meaningful or at least a trading bottom for gold. A rally back up from the 50 day moving average that fails to exceed the upper black channel line at the 1250 area would leave the door open for more consolidation in gold’s price over the coming month. Failures at the 50 day average might provide impetus for a test of the lower boundaries of the channel.

The bottom line.....

From a seasonal standpoint, odds favor one more push up into mid winter. We feel the key area to watch price action is at the upper end of this channel line. A failure to move above the upper black channel line would provide the peak for this current leg and a correction into the spring would unfold. A move above this line would suggest the next bull move is underway and would prolong the gold rally into a later timeframe in 2010. We feel that the 1250-1325 is the most important price area over the next few months. Short termers should pay attention to the 50 day and longer term investors at the 200 day average and the lower black channel line. For seasonal players, some profits out of GOLD and INTO CRUDE OIL during the FEB/March timeframe is usually the ideal time for crude to take over the lead in price appreciation. And with that said, let’s look at the crude oil market.

In the seasonal chart below, we can see that the main area where crude oil usually bottoms is the FEB/MARCH time frame on Average. I suspect that all the calls for $100 dollar oil over the past few months has been temporarily delayed due to the seasonal tendencies of the crude oil market. Indeed, the current downdraft is playing right along with these aspects. We can see that coming up, there usually is a slight bounce in December to January, and from there, a major low into late winter. In a bull market, crude can and does sometimes bottom in December and the pullback in winter can at times provide a higher low. Purchases at the seasonal bottom have two key liquidation times on average, April/June and/or October/November.
The weakest part of the cycle as we can see is the October thru February timeframe, a timeframe we have now entered. (months are below this chart…contract month above.)

In the Crude oil market, the seasonal tendencies are much more pronounced and to some extent, the timeframes are more consistent.

The chart below of crude shows some interesting seasonal highlights from last year. First and most important is the seasonal low in December, the January bounce, and the final low at the end of February and beginning of March. This was a perfect seasonal move. From there an April move began to pullback, but the bullish action ran it higher into June and crude peaked very late. The seasonal chart calling for a July low was a very short 4 to 6 week affair. However, it did produce the seasonal July low right on time. From that point we rallied right to the end of October and peaked at the 82 dollar area right on the seasonal date for a turn. Since then we have dropped all the way to the 69 dollar area.

The end of December approaches and an initial low is due soon in crude. A look at the chart shows the 65-70 dollar area is a key spot where the 200 day moving average and the current daily trend channel lie. On the technical side, RSI is near the oversold area, and Williams %R is nearing that area as well. A longer term support area is the fat red line just above the 55 area on the chart. Odds suggest that a rally attempt should develop from this 65-70 dollar area. SHOULD OIL MOVE BELOW the 200 day average at$ 65, then the potential for a move below 60 towards the red support line will be a potential area for a late winter bottom.

Look for December or March to provide the lows in crude. March is a great time to trim a few gold profits and funnel them into the crude oil market.

These are interesting times for commodity investors and it is important to be looking at all aspects of the markets. Seasonals are so often overlooked, yet they provide a guideline for what to expect and when to expect it. At our website, we are following the seasonal trends of gold and oil always analyzing the price charts looking for low risk set-up trades and/or entries for our subscribers. We invite you to visit our site and have a look.


John Winston
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Where is Crude Oil Headed on Friday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed tomorrow.




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Crude Oil Closes Lower, Bears Eye Critical Support Lines


Crude oil closed lower on Thursday as it extended the decline off October's high and spiked below the 75% retracement level of this fall's rally crossing at 70.23. The mid range close sets the stage for a steady to lower opening on Friday.

If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 76.45 are needed to confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 74.79
Second resistance is the 20 day moving average crossing at 76.45

First support is today's low crossing at 69.81
Second support is the 87% retracement level of this fall's rally crossing at 68.16

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Natural gas posted a key reversal up on Thursday as it extended this week's rally and spiked above the late November high crossing at 5.590. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If January extends this week's rally, the 62% retracement level of this fall's decline crossing at 5.565 is the next upside target. Closes below the 20 day moving average crossing at 4.848 would temper the near term friendly outlook in the market.

First resistance is today's high crossing at 5.347
Second resistance is the 62% retracement level at 5.565

First support is the 10 day moving average crossing at 4.865
Second support is the 20 day moving average crossing at 4.848

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The U.S. Dollar closed lower due to profit taking on Thursday as it consolidates some of this week's rally. The mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI are overbought but remain bullish signaling that sideways to higher prices are possible near term.

If March extends its current rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.62 would temper the near term friendly outlook in the Dollar.

First resistance is Wednesday's high crossing at 76.66
Second resistance is November's high crossing at 77.27

First support is the 10 day moving average crossing at 75.74
Second support is the 20 day moving average crossing at 75.62


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Oil Falls Below $70 on Stronger Dollar, Ample U.S. Supplies


Crude oil fell below $70 a barrel for the first time in two months as the dollar gained and ample U.S. fuel supplies undermined confidence demand is recovering. Prices have dropped 11 percent in seven days, the longest losing stretch since September 2006, as gasoline supplies climbed to the highest level since April and a stronger dollar curbed investor appetite for commodities. “Prices are still quite high given the fundamentals of the market,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We may see a lot of positions cashed in between now and the end of the year. This may lead prices to $60 or even lower.”

Crude oil for January delivery fell 62 cents, or 0.9 percent, to $70.05 a barrel at 1:16 p.m. on the New York Mercantile Exchange. Futures touched $69.81, the lowest since Oct. 8. Prices are up 57 percent this year. Gasoline for January delivery dipped 2.83 cents, or 1.5 percent, to $1.829 a gallon in New York. The contract touched $1.824, the lowest since Oct. 13. Heating oil for January delivery fell 1.04 cents, or 0.5 percent, to $1.8989 a gallon. The dollar traded at $1.4695 per euro, up 0.2 percent from $1.4726 yesterday.

Gasoline stockpiles climbed 2.25 million barrels to 216.3 million last week, the highest since the week ended April 17, an Energy Department report showed yesterday. Supplies of distillate fuel, a category that includes heating oil and diesel, increased 1.62 million barrels to 167.3 million.....Read the entire article.


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Is The S&P 500 Getting Ready to Skyrocket or Collapse?


There’s no doubt about it, for the past four weeks the S&P 500 index has been trapped in a trading range. In our new video we show you a key level to watch this week. If this level is broken, it will be a game changer for this index.

Just click here to watch the video and as always our videos are free to view and there is no registration requirement.

Enjoy the video and let us know what you think by leaving us a comment!

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Ray C. Parrish
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Crude Oil Slightly Higher on Overnight Short Covering


Crude oil was higher due to short covering overnight as it consolidates some of this week's decline. Stochastics and the RSI are oversold but remain bearish signaling that sideways to lower prices are possible near term.

If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 76.48 are needed to confirm that a short term low has been posted.

Thursday's pivot point, our line in the sand is 71.56

First resistance is the 10 day moving average crossing at 74.85
Second resistance is the 20 day moving average crossing at 76.48

First support is Wednesday's low crossing at 70.13
Second support is the 87% retracement level of this fall's rally crossing at 68.16

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Natural gas was higher due to short covering overnight as it consolidates some of Wednesday's key reversal down. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If January extends this week's rally, the reaction high crossing at 5.290 is the next upside target. Closes below the 20 day moving average crossing at 4.830 would temper the near term bullish outlook in the market.

Nat gas pivot for Thursday is 4.992

First resistance is Wednesday's high crossing at 5.230
Second resistance is the reaction high crossing at 5.290

First support is the 10 day moving average crossing at 4.830
econd support is the 20 day moving average crossing at 4.830

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The U.S. Dollar was lower due to profit taking overnight as it consolidates some of Tuesday's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If March extends this week's rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.62 would temper the near term bullish outlook in the market.

First resistance is Wednesday's high crossing at 76.66
Second resistance is November's high crossing at 77.27

First support is the 10 day moving average crossing at 75.73
Second support is the 20 day moving average crossing at 75.62

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Crude Oil and Natural Gas Technical Outlook For Thursday Morning


Nymex Crude Oil (CL)

Crude oil dives to as low as 70.13 so far and at this point, intraday bias remains on the downside. The break of 72.39 support confirms that decline from 82.0 has resumed and should now be targeting 65.05 support next. On the upside, above 73.87 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited below 79.04 resistance and bring fall resumption.

In the bigger picture, the break of trend line support (now at 71.86) affirms that case that medium term rebound from 33.2 has completed earlier at 82.00 already. Further decline is now expected to 58.32 cluster support (50% retracement of 33.2 to 82 at 57.60) for confirmation. Firm break there will target a retest of 33.2 low next. On the upside, break of 79.04 resistance is needed to invalidate this bearish view. Otherwise, outlook will remain bearish in case of recovery.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

Nymex Natural Gas (NG)

Natural gas's pull back and break of 4.960 minor support suggests that recent consolidation is still in progress and turns intraday bias neutral again. Choppy sideway trading could still be seen between 4.157 and 5.318 but after all, we'd continue to anticipate an upside breakout eventually. Decisive break of 5.318 resistance will confirm that recent consolidations have completed and rise from 2.409 has resumed for 61.8% projection of 2.409 to 5.318 from 4.157 at 5.955 next.

In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005 and might have completed at 2.409 already. Rise from 2.409 should not be completed yet and we would continue to anticipate an upside break out of the recent range of 4.157/5.138 eventually. Above 5.318 will target 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. Nevertheless, break of 4.157 support will dampen this bullish case and turn outlook mixed again.....Nymex Natural Gas Continuous Contract 4 Hours Chart.

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Wednesday, December 9, 2009

ETF Trading: Gold, Silver, Oil and the Dow Index

Etf trading has made it so easy for traders and investors to get maximum exposure to the entire market without the high fees of mutual funds and manager. There are now etfs covering almost every investment type whether it’s stocks, indexes, sectors, commodities, bonds, real estate, currencies etc…

In this short report I will quickly show a few charts on what is happening for precious metals and energy.

HUI – Gold Stock
This monthly chart of the gold stocks index you can see how easy it is to trade the market and avoid large sell offs when using technical analysis. Currently gold stocks are in a bull market, testing the 2008 highs. Until we are proven wrong buying stocks after a pullback is a winning strategy.



Trading the GLD ETF
We have been in the GLD etf for a few months as we ride this bull to new highs. This chart clearly shows how buying dips in a bull market can really pay off. I do have certain criteria which must be met before buying dips so I know the odds are in my favor.



ETF Trade Silver
Silver along with gold and oil are looking ready for an oversold bounce. I don’t think prices will jump and rally higher right out of the gate but eventually I feel the will head higher.



Crude Oil Fund - USO
Crude oil looks prime for the picking. It is currently oversold and testing 2 support levels. The downside momentum is still strong so this selling could last another 1-2 days but I’m expecting it to soon.

This is not a low risk setup. This is more of a short term aggressive contrarian play. For those of you who like heart pounding plays.



Natural Gas Fund - UNG
Natural gas has been taking its time to bottom. Virtually every bottom picker has been burned this year. I am starting to hear everyone get more bearish on it again which is great! It should bottom any day then! LOL….

Seriously it cannot get much more bearish for gas. We don’t have enough space to store it and companies are finding more natural gas in the ground every day. Because it sounds like a terrible investment it must be getting close to a bottom. If this is the start of a flat basing pattern, then I expect it could drag out for a few months before actually making a nice move up.



Dow Jones ETF - DIA
The Dow looks similar to gold and silver. I feel we are ready for a 1-2 day bounce then we go a little lower to shake traders out of the market before heading higher.



ETF Trading Conclusion
Gold stocks and the broad market are in a bull market. The recent pullback has many traders worried. I think this an opportunity to bet into some positions before the next rally. Buying the dips in a bull market is a low risk trade until proven wrong. I think we still have more of a pullback yet but then we could have a very profitable year end Xmas rally.

Natural Gas is just bumping along bottom I think. Not expecting any trade for a few weeks anyways.

Crude Oil looks like its ready for a move whether it is a 1-2 day bounce or the start of a new leg higher. If you loot at late Sept you can see USO broke down on heavy volume shaking most traders out of their positions just before the next leg higher, and this is what I feel it is doing now. Only time will tell.

Let’s see how the second half of this week unfolds.

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Crude Hovers Near $70 Despite Surprise Drawdown


Despite a surprise drawdown in domestic crude stocks reported today, U.S. crude oil futures fell once more on the New York Mercantile Exchange Wednesday, pressured by oil traders' increasingly bearish outlook regarding the market's underlying fundamentals, as well as concerns about the global economy's recovery. Recording a negative movement on the NYMEX for the sixth consecutive session, the price of light, sweet crude oil closed nearly $2 less than its previous settlement to $70.67 a barrel. Additionally, natural gas spot prices at the Henry Hub reversed to just under the $5-threshold to settle at $4.898 per thousand cubic feet.

"We have broken out to the downside of this $75-$80 range in the crude oil market that had been holding since the middle of October," noted Bill O'Grady, the chief markets strategist at St.Louis based Confluence Investment Management LLC. "We fell out of it yesterday and accelerated today on government data that wasn't really all that bearish, you had a bullish crude number, but the product numbers were not very strong." Interestingly, the dollar's three day advance collapsed against the euro on Wednesday, which did little to prop up energy prices. Typically, a weaker greenback loses its safe haven appeal, spurring traders toward cheaper dollar denominated commodities.....Read the entire article.


Crude Oil - The New World Currency




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