Spain is in Pain – US Dollar & Gold Are Safe Havens

It’s been an interesting week with Spain being downgraded as Europe debt crisis widens. This has investors looking at the US dollar in a new light thinking that maybe it’s not that bad of an investment after all. This sent the US Dollar higher along with the price of gold so far this week.

The past 7 days we have seen both the US Dollar and Gold rise together which is not something that happens often. With financial crisis’s popping up around the world I think the US dollar and gold will continue to strengthen (with corrections along the way). I think it will take another 12-24 months before another wave if issues arise in the financial markets and until then we just continue to focus mainly on buying the dips and corrections with the occasional short play in the larger corrections.



SP500 – Daily Chart

On April 14th we saw an extreme level of selling which sent the broad market sharply lower. This sell off was followed by value buyers pushing the prices back up to new 2010 highs.

Well this week we have seen the same extreme selling volume and the question we all want to know is will there be buyers this time around?



ETF & Futures Trading Conclusion

Gold is in a bull market but it was setup for another round of selling but this Spain issue has been a pain. If we had another downward word move on gold to the $1115 – 1120 area it would have washed out the majority of gold bulls resetting it’s self up for a big rally.

The Europe debt crisis has thrown a twist into the picture helping boost the price of gold. Gold could still head lower washing out the weak positions but the picture is fuzzy. Silver did not react much to this news as it’s not really seen as the safe haven gold or the US Dollar are.

As for stock picks and the broad market, it looks and feels like we are about to start a correction. But this week we saw fear in the market again with the VIX and selling volume surging higher to levels which have triggered temporary bottoms in the past. The problem I see here is that some key price levels have been taken out, so the odds are pointing to lower prices in the near future. But Tuesdays panic selling has pushed the market into an oversold condition so we should see a drift upwards for 1-4 days before sellers get active again as they want to sell and short the market at premium prices.

In short, precious metals are not giving any clear price action to take advantage of yet, and the SP500 looks like it’s on its last legs before heading lower for a meaningful correction which should provide a short setup and then a nice long setup once it bottoms out.

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Where is Crude Oil Headed on Thursday?

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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Phil Flynn: Oil On Junk

Oil prices and commodities got slammed on the S&P downgrades. They sent Greece to junk and Portugal is headed in that direction. Once again oil traders are reminded how much of the price of oil is dependent on some semblance of market stability. With the Fed dead ahead, oil traders have to realize that the price of oil transcends what some consider traditional supply and demand fundamentals. It is also a reflection of how the world views the economy and the relative value of the currency backing this commodity.

In the beginning of the financial crisis oil soared towards $147 a barrel and I attempted to explain that things were amiss. The price move in oil was out of line with the five year average price increase that already reflected stunning oil demand growth. I was scoffed at by some when I suggested that the spike in oil might lead to demand destruction. That the world economy had not “decoupled” from the US economy and that no matter what, Europe and China would consume oil even if the US banks started to fail. The naysayer and the blindly bullish say that the price move was just a function of peak oil and the prices would continue to soar higher and that price would have little impact on demand.

Yet I said that oil was being used as a safe haven and a hedge against systemic risk as the sub-prime crisis began to evolve. Of course the skeptics say it was nothing but a case of speculation gone wild. We remember that we were told not to worry because sub-prime crisis was less than 10% of all mortgages, the same way some are saying now not to worry about Greece because it is such a small economy.

We may see oil come back a bit today. The Greece crisis is in the market for the time being and oil may focus less on the loss of demand created by this crisis but by the fact that this crisis may ensure that US interest rates will stay lower for longer than expected. The Fed Fund Futures November contract which had priced in a 74% chance of a quarter point interest rate increase fell 15% after the European downgrade after the news. If the oil market gets the sense that interest rates are going to stay low for a longer and longer period of time, then oil becomes more bullish. It becomes bullish because the dollar will get weaker and it will get stronger as oil already puffed up on cheap printed oil stimulus money, then we can continue to see this global demand growth until the bubble eventually pops.

The Fed meeting will be key! The best way to get that news is watching it on the Fox Business Network where you can see Phil every day! Phil can also be reached at pflynn@pfgbest.com.


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Crude Oil Market Commentary For Wednesday Evening

Crude oil closed up $0.76 at $83.20 a barrel today. Prices closed near the session high today after hitting a fresh five week low early on. Crude oil bulls are fading and need to show more power soon. The next upside price objective for the bulls is producing a close above solid technical resistance at the April high of $87.59 a barrel.

Natural gas closed up 4.2 cents at $4.357 today. Prices closed near mid-range today and did hit a fresh five week high in quieter trading. Bears still have the overall near term technical advantage. Prices are trading sideways and choppy at lower price levels. The next upside price objective for the bulls is closing prices above solid technical resistance at $4.75.

Gold futures closed up $10.00 at $1,172.70 today. Prices closed nearer the session high today and hit a fresh nearly five month high. Gold's gains today again came despite a stronger U.S. dollar and lower crude oil futures prices. Traders this week are buying gold as a safe haven asset and as a hedge against further weakening of the European currencies as the Greek debt crisis appears to be worsening. Gold bulls have the solid near term technical advantage and have gained more upside momentum this week.

The U.S. dollar index closed up 16 points at 82.47 today. Prices closed near mid-range today and hit another fresh contract high on a flight to quality amid the European Union's sovereign debt crisis. The bulls have the solid overall near term technical advantage and have gained more upside momentum this week.


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Crude Oil Daily Technical Outlook Wednesday Morning

Intraday bias in Crude oil remains on the downside for the moment and further decline should be seen to 38.2% retracement of 69.50 to 87.09 at 80.37 or further to 100% projection of 87.09 to 80.53 from 85.63 at 79.07. On the upside, above 82.94 minor resistance will turn intraday bias neutral and bring recovery. But risk will now remain on the downside as long as 85.63 resistance holds.

In the bigger picture, medium term rise from 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Our preferred view is that rise from 33.2 is in form of a three wave structure (73.23, 65.05, ?) and should be near to completion. Strong resistance is expected around 90 psychological level, which coincide with 50% retracement of 147.27 to 33.2 at 90.24 and 61.8% projection of 33.2 to 73.23 from 65.05 at 89.79, and bring reversal.

So even though another rally cannot be ruled out, upside potential should be limited. On the downside, break of 69.50 support will break the series of higher low pattern from 33.2 and will be an important indication that the trend has reversed. In such case, we'll turn bearish on crude oil and expect the then down trend to target a new low below 33.2.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Stronger Dollar Sends Crude Oil Bulls to the Sidelines

Crude oil closed down $2.14 at $82.06 a barrel today. Prices closed near the session low today and closed at a fresh five week low close. Prices were pressured by a stronger U.S. dollar index and weaker stock market today. Crude oil bulls are now fading and need to show fresh power soon. The next upside price objective for the bulls is producing a close above solid technical resistance at the April high of $87.59 a barrel.

Natural gas closed down 2.4 cents at $4.327 today. Prices closed near mid-range today in quieter trading. Bears still have the overall near term technical advantage. Prices are trading sideways and choppy at lower price levels. The next upside price objective for the bulls is closing prices above solid technical resistance at the April high of $4.421.

Gold futures closed up $8.00 at $1,162.00 today. Prices closed nearer the session high today, scored a bullish "outside day" up on the daily bar chart and hit a fresh three week high. Gold's gains came despite a stronger U.S. dollar and lower crude oil futures prices. Traders were buying gold today as a hedge against further weakening of the European currencies as the Greek debt crisis appears to be worsening. Gold bulls have the firm near term technical advantage and gained some more upside momentum today.

The U.S. dollar index closed up 86 points at 82.47 today. Prices closed nearer the session high today and hit a fresh contract high on a flight to quality amid the European Union's sovereign debt crisis. The bulls have the solid overall near term technical advantage and gained more upside momentum today.


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Phil Flynn: Oil Is Fed UP!

Oil prices still are having a hard time following through on its breakout over $85 a barrel. Obviously you have to respect that fact that the market has broken out yet at the same time, the bulls have to wonder what the market is waiting for.

It is very possible that the market is waiting for reassurance and permission to buy from our very accommodative Federal Reserve. The Fed has been taking baby steps back from the historic payload of economic stimulus and the oil market fears the impact that the removal of stimulus might have on the price of oil. The oil market has never before experienced the artificial amount of stimulation that it has experienced over the last year and so there is no wonder why there may be some angst building as we get closer to the judgment day. We can talk a lot about the demand growth in China but that too is the product of massive government spending. The Chinese spent 586 billion dollars to prop up their economy and it is unlikely that they will be pumping the economy with that kind of money again. Asian stocks fell hard on rising concerns that China, instead of adding stimulus, will actually be taking it away.

Oil just can’t get going because it is worried about the never ending Greece crisis and the concerns over other weak members in the PIIGS zone. Oil is worried about China and it is worried about what the Fed might say. The Fed has raised interest rates and removed most of its emergency lending programs. Now the market wants to know when the rates will start to rise. Every oil trader in the world is waiting for the answer. The removal of stimulus is a bearish oil event just waiting to happen.

If the bulls cannot get reassurance from the Fed maybe they can get it from Schlumberger. Chief Executive Andrew Gould said he feels that oil near $80 a barrel should hold and that customers will boost spending at oil prices near $80 a barrel. "Our customers will loosen their purse strings on high end technology," Gould said during a conference call to discuss the oil field services company's first-quarter earnings.

There is a lot of oil in storage. Bloomberg News reports that, “Traders increased the number of vessels used to store crude oil by 75 percent last week as the potential profit from storage rose, Morgan Stanley said. There were 21 oil tankers storing dirty products last week, 20 of them are very large crude carriers, up from 12 vessels in the previous week, a Morgan Stanley analyst, said in a report yesterday. Among the nine vessels there are four in Iran. About 41 million barrels of oil were stored in the tankers, Morgan Stanley said, enough to meet more than two days of U.S. consumption. That’s up from 24.5 million barrels a week ago.”

We also need to get prepared for the possible market impact from potential sanctions on Iran. I know that the Iran situation is well known that even with their abundant production of oil, they still do not have the refining capacity to produce what they need in refined products. So it is widely expected that any sanctions on the country will be a ban on gasoline. The AFP is reporting that Iran has increased its gasoline by inventories by about 220 million gallons and plans to boost domestic production to offset possible fuel sanctions according to Nooreddin Shahnazi-Zadeh, the head of National Iranian Oil Refining and Distribution. He claims that, "At the moment the volume of Iran's strategic petrol supplies has increased by over a billion liters" and dismissed the threat of sanctions saying, "it is impossible to impose such limitations in the current situation."

Phil can be reached at pflynn@pfgbest.com And as always watch him each day on the Fox Business Network.


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Crude Oil Falls the Most in a Week as Equities Decline, Dollar Strengthens

Crude Oil fell the most in more than a week as global equities declined and the dollar advanced on skepticism European governments will approve the Greek bailout plan quickly enough to help the country avoid default. Oil lost 1.4 percent after Greece’s largest union said it will stage a strike for a day next month and Germany’s Chancellor Angela Merkel said yesterday that Greece “must do its homework” to reduce its deficit. A stronger dollar reduces the appeal of commodities as an alternative investment.

“Oil is lower because global equities are weaker and the dollar’s stronger,” said Addison Armstrong, director of market research at Tradition Energy, a Stamford, Connecticut-based procurement adviser. Crude oil for June delivery dropped 78 cents, or 0.9 percent, to $83.42 a barrel at 10:13 a.m. on the New York Mercantile Exchange. Earlier, it touched $83.06 a barrel. Prices have risen 66 percent in the past year.
The U.S. dollar rose to $1.3306 per euro from $1.3383 in New York yesterday. The Standard & Poor’s 500 Index dropped 0.4 percent to 1,207.60.

Oil and equities pared their losses after the Conference Board reported confidence among U.S. consumers increased in April to the highest level since September 2008 as Americans became more upbeat about the labor market. The Conference Board’s confidence index rose more than forecast to 57.9 from 52.3 in March, according to the New York- based private research group. The median forecast of economists surveyed by Bloomberg News projected an increase to 53.5.....Read the entire article.

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Crude Oil Intraday Bias is Flipped Back to the Downside

Crude oil's sharp fall from 85.63 dragged 4 hours MACD below signal line and suggests that recovery from 80.53 has completed. Intraday bias is flipped back to the downside and deeper fall should be seen towards 38.2% retracement of 69.50 to 87.09 at 80.37 or further to 100% projection of 87.09 to 80.53 from 85.63 at 79.07. On the upside, above 85.63 will bring another rise to retest 87.09 high. But after all, sustained break there is needed to confirm rally resumption. Otherwise, another fall would still be seen before consolidation from 87.09 concludes.

In the bigger picture, medium term rise from 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Our preferred view is that rise from 33.2 is in form of a three wave structure (73.23, 65.05, ?) and should be near to completion. Strong resistance is expected around 90 psychological level, which coincide with 50% retracement of 147.27 to 33.2 at 90.24 and 61.8% projection of 33.2 to 73.23 from 65.05 at 89.79, and bring reversal. Hence, even though another rally cannot be ruled out, upside potential should be limited. On the downside, break of 69.50 support will break the series of higher low pattern from 33.2 and will be an important indication that the trend has reversed. In such case, we'll turn bearish on crude oil and expect the then down trend to target a new low below 33.2.....Nymex Crude Oil Continuous Contract 4 Hours Chart.



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Where is Crude Oil Headed on Tuesday?

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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