Friday, May 14, 2010

Commodities Technical Outlook For Friday Morning


Crude oil's fall from 87.15 resumed by taking out 74.51 support and reaches as low as 72.72 so far. Intraday bias is now on the on the downside for 61.8% projection of 87.15 to 74.51 from 78.51 at 70.70 first. Break will have a test on key support zone of 68.59/69.50. On the upside, break of 78.51 resistance is needed to indicate that crude oil has bottomed. Otherwise, outlook will remain bearish and another fall is still expected even in case of recovery. In the bigger picture, as noted before, rise from 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Such rise might have completed at 87.15 already, ahead of 50% retracement of 147.27 to 33.2 at 90.24. 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.

Natural gas' rise from 3.855 extends further to as high as 4.414 so far and further rally might still be seen. However, strong resistance should be seen at 38.2% retracement of 5.68 to 3.81 at 4.524 to conclude the consolidation from 3.81 finally and bring down trend resumption. Below 4.109 minor support will flip intraday bias back to the downside. Decisive break of 3.81 low will target 3.0 psychological level next. In the bigger picture, medium term rebound from 2.409 has completed at 6.108 and the three wave corrective structure of the rebound argues that it's merely a correction, or part of the consolidation in the larger down trend. Current fall from 6.108 might extend further for a retest on 2.409 low next after sustaining below 61.8% retracement of 2.409 to 6.108 at 3.822. Sustained trading above 4.386 resistance is needed to be the first sign that the trend in natural gas has reversed. Otherwise, outlook will remain bearish.

While gold is losing some upside momentum, further rise would remain in favor as long as 1216.2 minor support holds. Current rally should extend to 1300 psychological level next. On the downside, below 1216.2 minor support will turn intraday bias neutral and bring consolidations. But downside should be contained above 1170.7 resistance turned support and bring rally resumption. In the bigger picture, the break of 1227.5 indicates that correction from there is already completed at 1044.5 already. Longer term rally from 931.3 should have resumed. Next target will be 100% projection of 931.3 to 1227.5 from 1044.5 at 1340. Also, such rally is viewed as part of the long term up trend from 1999 low of 253. We're looking at the prospect of extending the up trend towards 100% projection of 253 to 1033.9 from 681 at 1462 level.



From the staff at ONG-Focus

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Thursday, May 13, 2010

Where is Crude Oil and Gold Headed on Friday?

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




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Phil Flynn: Drivers Start Your Engines!


Drivers start your engines! Let the summer driving season begin. Despite all the talk of $4.00 a gallon gasoline this summer, more and more it looks as though retail gasoline prices have peaked for the season. Even yesterday's drawdown in supply, drop in refinery runs and gasoline production runs might be expected as gas goes up on the racks as refiners and retailers get ready for the official kickoff of the summer driving season on the Memorial Day weekend.

The Energy Information Agency, that awesome division of the Department of Energy, reported a steeper than expected drop in gasoline supply by saying that it fell by 2.8 million barrels last week against a backdrop of falling refinery runs which fell 1.2 percent to 88.4 percent. Gasoline production also fell, averaging 9 million barrels per day. Yet at the same time the report reminded us of our abundance as total gasoline supply is still well above the fiver year average.

And it is not like the refiners have no incentive to produce more gas. They absolutely do as the gas crack, according to Bloomberg News, is at a profit for refining oil into gasoline and it rose to a 15-month high. Besides as Bloomberg also points out, the bulk of last week’s gasoline drawdown was on the West coast where supply fell by a whopping 2.1 million barrels and was most likely caused by the deadline in California to switch to the summer grade blends by May 1, 2010.

Increasing gasoline prices as of late have really been a function of rising oil prices which according to the EIA is about 69% of what you pay for in a gallon of gasoline. We know that crude has risen as of late despite more than ample supply as it was being impacted by the weakness in the dollar and the global economic crisis as a whole. The Energy Information Agency, in their Short Term Energy Outlook, predicted that EIA forecasts for regular-grade motor gasoline retail prices will average $2.94 per gallon during this summer's driving season (the period between April 1 and September 30), up from $2.44 per gallon last summer. The summer gasoline price forecast is up very slightly ($0.02) from last month.

As far as oil goes, we have the International Energy Agency lower demand expectations and OPEC cheating on the rise. What is wrong with this picture here? Very bearish!


Phil can be reached at pflynn@pfgbest.com And be sure to watch him every day on the Fox Business News channel.


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Commodities Market Commentary For Thursday Evening


Crude oil closed lower on Thursday as it resumed last week's decline. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If June extends today's decline, the 87% retracement level of the February-April rally crossing at 72.86 is the next downside target. Closes above the 20 day moving average crossing at 81.47 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 79.03. Second resistance is the 20 day moving average crossing at 81.47. First support is today's low crossing at 73.62. Second support is the 87% retracement level of the February-April rally crossing at 72.86.

Natural gas closed higher on Thursday as it extended this week's rally. 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 June extends this week's rally, the 25% retracement level of the October-April decline crossing at 4.438 is the next upside target. Closes below the 10 day moving average crossing at 4.077 would temper the near term friendly outlook. First resistance is today's high crossing at 4.414. Second resistance is the 25% retracement level of the October-April decline crossing at 4.438. First support is the 20 day moving average crossing at 4.128. Second support is the 10 day moving average crossing at 4.077.

The U.S. Dollar closed higher on Thursday as it extends the rebound off Monday's low. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are overbought, diverging but are turning bullish signaling that sideways to higher prices are possible near term. If June extends this month's rally, weekly resistance crossing at 85.85 is the next upside target. Closes below the 20 day moving average crossing at 82.86 are needed to confirm that a short term top has been posted. First resistance is last Thursday's high crossing at 85.46. Second resistance is weekly resistance crossing at 85.85. First support is Monday's low crossing at 83.07. Second support is the 20 day moving average crossing at 82.86.

Gold closed lower due to profit taking on Thursday as it consolidated some of the rally off February's low. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are overbought, diverging but remain neutral to bullish signaling that sideways to higher prices are possible near term. If June extends this year's rally into uncharted territory, upside targets are hard to project. Closes below the 20 day moving average crossing at 1176.40 would confirm that a short term top has been posted. First resistance is Wednesday's high crossing at 1249.20. First support is the 10 day moving average crossing at 1201.40. Second support is the 20 day moving average crossing at 1176.40.



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Crude Oil Falls Hard as Dollar Reverses Losses Against Euro


Crude oil tumbled to a 12 week low in New York as the strengthening dollar curbed the appeal of commodities as an alternative investment. Oil slipped as much as 2.7 percent as the U.S. currency climbed against the euro after Portugal announced austerity measures, spurring concern that fiscal tightening across Europe will limit economic growth. A U.S. Energy Department report yesterday showed that crude supplies rose 0.5 percent to 362.5 million barrels.

“We’ve been very sensitive to what’s happening on the currency side since the recession began,” said Phil Flynn, vice president of research at PFGBest in Chicago. “There’s been a new focus on currency markets since the crisis started in Europe.”
Crude oil for June delivery fell $1.47, or 2 percent, to $74.18 a barrel at 10:22 a.m. on the New York Mercantile Exchange. Futures touched $73.62, the lowest level since Feb. 12. Prices are down 6.5 percent this year.

The greenback advanced to $1.2558 per euro, up 0.4 percent from $1.2614 yesterday. It touched $1.2529 on May 6, the highest level since March 2009. Europe’s common currency has dropped 1.5 percent against the dollar this week, following the EU’s plan to shore up the region’s finances. The package included a pledge from the European Central Bank to buy government and private bonds to stem a surge in borrowing costs among so called peripheral nations such as Greece, Spain and Portugal.....Read the entire article.

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Commodities Technical Outlook For Thursday Morning

Crude Oil Daily Technical Outlook
Intraday bias in crude oil remains neutral as it's still bounded in range above 74.51. Consolidations from there might continue but after all, we'd expect upside to be limited by double top neck line (80.53) and 4 hours 55 EMA (now at 78.55) and bring fall resumption. On the downside, break of 74.51 will target 69.50 key support next.

In the bigger picture, as noted before, 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Such rise might have completed at 87.15 already, ahead of 50% retracement of 147.27 to 33.2 at 90.24. 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.

Natural Gas Daily Technical Outlook
Natural gas's consolidation from 3.81 continues with rise from 3.855 as the third leg. Such rise could still continue with 4.109 minor support intact. However, we'd expect upside to be be limited by 4.386 resistance conclude the consolidation and finally bring down trend resumption. On the downside, below 4.109 minor support will flip intraday bias back to the downside. Decisive break of 3.81 low will target 3.0 psychological level next.

In the bigger picture, medium term rebound from 2.409 has completed at 6.108 and the three wave corrective structure of the rebound argues that it's merely a correction, or part of the consolidation in the larger down trend. Current fall from 6.108 might extend further for a retest on 2.409 low next after sustaining below 61.8% retracement of 2.409 to 6.108 at 3.822. Sustained trading above 4.386 resistance is needed to be the first sign that the trend in natural gas has reversed. Otherwise, outlook will remain bearish.

Gold Daily Technical Outlook
Further rise in gold is still expected with 1216.2 minor support intact. Current rally should target 1300 psychological level next. On the downside, below 1216.2 minor support will turn intraday bias neutral and bring consolidations. But downside should be contained above 1170.7 resistance turned support and bring rally resumption.

In the bigger picture, the break of 1227.5 indicates that correction from there is already completed at 1044.5 already. Longer term rally from 931.3 should have resumed. Next target will be 100% projection of 931.3 to 1227.5 from 1044.5 at 1340. Also, such rally is viewed as part of the long term up trend from 1999 low of 253. We're looking at the prospect of extending the up trend towards 100% projection of 253 to 1033.9 from 681 at 1462 level.

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Wednesday, May 12, 2010

Are Precious Metals and Indexes Going Parabolic?

It’s been an exciting couple weeks in the market with gold now making new all time highs as money floods into this shiny safe haven. It has everyone all worked up wanting to take part or they are riding the rally up already. But the big question is when should some money be taken off the table to lock in gains and lower your overall risk during these crazy times?

Below are a few charts showing you how I see things at this time.

GLD – Gold Exchange Traded Fund
The price of GLD and gold appear to be going parabolic (straight up). The tough part about this type of price action is that large moves can happen in a very short period of time. But on the flip side, when the price reverses we tend to see prices fall just as fast if not faster. Trading this type of price action carries a very high level of risk. Those chasing it up buying at these overbought market conditions is a double edge knife.



SLV – Silver Exchange Traded Fund
Silver is trading similar to gold but the key difference here is that silver has not broken to a new high as of yet. The high was set in 2008 just over $20 per ounce. But from looking at the chart I think metals are ready for a breather.



HUI Index – Gold Stocks
Gold stocks have yet to breakout along with silver as they both are nearing key resistance levels. With gold stocks and silver trading near resistance I figure we will see pause in the coming days as traders digest the recent strong moves up taking some money off the table incase prices get stuck under these resistance level.



SPY – SP500 Broad Market Exchange Traded Fund
The broad market appears to be forming a possible short setup on the daily chart as the price continues to drift higher with declining volume. Also indexes are testing key resistance levels and the 10 period moving average. The next few days should be interesting....



Mid-Week Precious Metals and Index Exchange Traded Fund Report:
In short, it looks like precious metals and the broad market could take a breather in the coming days. I’m not sure how large of a correction we will see but I do not think it will be all that big.

Gold and silver should have a quick dip with buyers stepping back in on weakness. The SP500/broad market is a little more tough to call as last weeks market crash messed things up washing out all the stops in one day instead of weeks....but we could easily see a 5% drop in the market still.

Check out Chris Vermeulen's trading services at The Gold and Oil Guy.Com.







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Where is Crude Oil and Gold Headed on Thursday?

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





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Crude Oil Market Commentary For Wednesday Evening


Crude oil closed lower on Wednesday and is poised to resume last week's decline. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If June renews last week's decline, the 87% retracement level of the February-April rally crossing at 72.86 is the next downside target. Closes above the 20 day moving average crossing at 82.08 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 80.09. Second resistance is the 20 day moving average crossing at 82.08. First support is last Friday's low crossing at 74.51. Second support is the 87% retracement level of the February-April rally crossing at 72.86.

Natural gas closed higher on Wednesday as it extended this week's rally above the 20 day moving average. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If June extends this week's rally, the 25% retracement level of the October-April decline crossing at 4.438 is the next upside target. If June renews this winter's decline, weekly support crossing at 3.502 is the next downside target. First resistance is today's high crossing at 4.292. Second resistance is the 25% retracement level of the October-April decline crossing at 4.438. First support is the 10 day moving average crossing at 4.042. Second support is last Thursday's low crossing at 3.855.

Gold posted another new all time high on Wednesday as it extends the rally off February's low. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If June extends this year's rally into uncharted territory, upside targets are hard to project. Closes below the 20 day moving average crossing at 1172.70 would confirm that a short term top has been posted. First resistance is today's high crossing at 1249.20. First support is the 10 day moving average crossing at 1194.90. Second support is the 20 day moving average crossing at 1172.70.

The U.S. Dollar closed higher on Wednesday as it extends the rebound off Monday's low. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 82.62 are needed to confirm that a short term top has been posted. If June extends this month's rally, weekly resistance crossing at 85.85 is the next upside target. First resistance is last Thursday's high crossing at 85.46. Second resistance is weekly resistance crossing at 85.85. First support is Monday's low crossing at 83.07. Second support is the 20 day moving average crossing at 82.62.



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Phil Flynn: The Great European Gold Rush


The global oil market is trying once again to find value in a global economy gone mad. The near trillion dollar effort to save the euro from a debt laden collapse has crude oil still trying to adjust to this latest chapter in the global economic crisis. Oh sure, earlier in this crisis it was much easier for oil to find its way. The United States having a fed funds target rate of near zero and was buying back toxic assets and so it was clearer. The Fed was printing money like it was going out of style and the EU was not supposed to do the same. So it was clear what to do, buy oil, sell the dollar and buy the Euro. Oil moved inverse to the dollar. The EU you see was not allowed to buy toxic assets. Oh sure, individual countries within the union could buy all the garbage that they may have wanted.

But now the EU, with the backing of the IMF, moved to buy toxic assets and so the purity of the currency is being called into question. Within the EU citizens of the member countries are nervous. They are knocking people over to buy gold. You might say it is a European gold rush not unlike the gold rush we saw in this country post TARP and supplies in Europe are tightening as the fear quotient rises. This movement to hard assets and the Euro confidence flight means crude oil's direct inverse relationship with the dollar is being re-calibrated as the crisis revolves.

As the depth of the Greece Crisis first started to become clear, we have seen Europeans move away from the Euro and buy into gold. The Wall Street Journal says that gold has been hitting records in euro terms since February. On Tuesday it reached €960.41 in London, a increase of more than 26% this year, more than twice the gains of gold in dollar terms. Last week with the Greece debt crisis threatening to bring down global stock markets, the gold buying became a European frenzy. Now in the aftermath of the bailout, gold has hit a record in dollar terms transcending even the US dollar as a safe haven play showing the growing concern that this bailout will save the paper backed global economy from eventual collapse.

Now oil traders are justifiably confused. When oil traders for over a year took their major cue from the movement in the dollar ignoring supply and demand statistics, this changing landscape led to more swings. One thing that the market now realizes is that oil in the high eighty area was and is unsustainable at this time. Now the question is how low can we go or will oil find happiness and comfort in the mid-seventy zone. We think that oil will eventually break lower as the dollar continues to gain and currency uncertainty keeps the market focus on over supply and the rate of improving demand. The truth is that even if demand improves dramatically it will take some time to work into our supply. The API said we added to that supply reporting that crude stocks increased by 362,000 barrels last week, they reported another big build in Cushing Oklahoma of 783,000 barrels. They also showed that distillate stocks increased by 94,000 barrels. Gas stocks fell by approximately 906,000 barrels perhaps reflecting better demand.

Barbara Powell at Bloomberg reported the MasterCard Spending Pulse report showed U.S. gasoline demand at the pump rose 1.4 percent last week from near a 10-week low as fuel consumption increased in six of seven geographic regions. Motorists bought an average 9.34 million barrels of motor fuel a day in the week ended May 7. Daily fuel use over the past four weeks averaged 9.31 million barrels a day, down 0.5 percent from a year earlier. The four-week average was below the previous year for the second straight week. Year-to-date, demand is up 1.3 percent from 2009 which may be the first sign of the pickup in demand as we head toward the long Memorial Day weekend but we’re looking to see if there is a sustained pickup in demand which we have not seen the last two years. We are still long term bears but despite the big drop, crude oil could see anther rebound unless today's Energy Information Agency supply report breaks us again. Oil is a bit oversold and the bulls will try to make a stand. Still we feel the best way to trade it is by playing the wide daily ranges.


Phil can be reached at pflynn@pfgbest.com And make sure to watch him every day on the Fox Business Channel.



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