Crude Oil Weekly Technical Outlook

Crude oil's fall from 87.15 resumed after brief consolidations and dived to as low as 70.83 last week. Short term outlook will remain bearish as long as 78.51 resistance holds and we'd expect a test on key support zone of 68.59/69.50 next. On the upside, above 78.51 will indicate that a short term bottom is formed and bring stronger rebound, possibly for a retest on 87.15 high.

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.

In the long term picture, there is no change in the view that fall from 147.27 is part of the correction to the five wave sequence from 98 low of 10.65. While the rebound from 33.2 was strong, there is no solid evidence that suggest fall 147.27 is completed and we're still preferring the case that rebound from 33.2 is merely a corrective rise only. Having said that, strong resistance should be seen between 76.77/90.24 fibo resistance zone and bring reversal for another low below 33.2 before completing the whole correction from 147.27.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Where is Crude Oil and Gold Headed Next Week?

CNBC's Sharon Epperson tries to make sense of the commodities markets, from oil's recent fall to gold's rise, and looks ahead to where oil and gold may be headed next week.





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Crude Oil Finishes the Week Sharply Lower, Bears Maintain Near Term Advantage

Crude oil closed sharply lower on Friday as it extended the decline off April's high but fell short of testing February's low crossing at 70.75. The low range close sets the stage for a steady to lower opening on Monday. 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, February's low crossing at 70.75 is the next downside target. Closes above the 20 day moving average crossing at 80.83 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 77.59. Second resistance is the 20 day moving average crossing at 80.83. First support is today's low crossing at 70.83. Second support is February's low crossing at 70.75.

Natural gas closed slightly lower due to light profit taking on Friday as it consolidated some of this week's rally. The high range close sets the stage for a steady to higher opening on Monday. 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 4.119 would temper the near term friendly outlook. First resistance is Thursday'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 4.140. Second support is the 10 day moving average crossing at 4.119.

The U.S. Dollar closed higher on Friday as it extends this year's rally. The high range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are overbought but are bullish signaling that sideways to higher prices are possible near term. If June extends this month's rally, weekly resistance crossing at 87.22 is the next upside target. Closes below the 20 day moving average crossing at 83.13 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 86.40. Second resistance is weekly resistance crossing at 87.22. First support is the 10 day moving average crossing at 84.52. Second support is the 20 day moving average crossing at 83.13.

Gold closed higher on Friday as it extended the rally off February's low. Profit taking tempered early gains and the mid-range close sets the stage for a steady opening on Monday. 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 1181.00 would confirm that a short term top has been posted. First resistance is today's high crossing at 1249.70. First support is the 10 day moving average crossing at 1206.30. Second support is the 20 day moving average crossing at 1181.00.


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Market Ends Week on a Down Note, Now What?

From guest blogger Kevin Kiefer of Ticker House.Com.....

Well folks, this week was pretty easy to call what would happen. We told you on Monday that we were being careful the rest of the week and that you shouldn't buy after that huge rally. We wanted to fill in that gap on the SPY chart before we got less bearish. Today, we have mostly filled in that gap. While you don't have to be a hero and buy stocks at the lows today, we don't see much more downside from here. We have good support at 1125, 1110 and the 200 day currently at 1100. We still think the market will not trade straight up from here but we do see the following things happening next week.

1) The stock market will finish next week at least slightly higher.
2) Oil/copper will finish the week higher.
3) US Treasury bills and the VIX will finish the week lower.
4) Gold will finish the week lower.

I didn't want to make a call on what will happen Monday but I am confident enough to call those four things. Of course, things can change and we'll keep you updated next week. It's possible we drift lower and retest the 200 day which is about 2% lower from here. However, I think that we have more of a chance of bottoming out today. My trade for next week is CELG which currently is in the green today. Celgene could be setting up for a decent bounce next week. If you want to read about the fundamental case for CELG, read the article that I wrote a few weeks back below. Take a look at Tuesday's article below to see the gap on the SPY we were talking about. Compare it to the chart of the SPY as of 2:10 pm today below this article. To sum things up, we think we are bottoming today but let's wait to see what happens early next week. If you want to buy a stock, I'd recommend CELG. It's chart looks good and it's not connected to the overall economy so it's more defensive.




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Phil Flynn: But It All Come Tumbling' Down

The oil bulls started the month with such high hopes, but it all come tumbling' down. Well it all comes tumbling' down. Yes, it all comes tumbling' down whenever you're credit isn’t sound.Austerity is a nice word and one the market wants to hear but there are doubts about whether or not that can happen. Not just in the European Union but in the good old United States as well. Oh sure an austerity plan put through by Portugal was welcome by the markets and seemed to calm the recent debt fears stormy seas, yet at the same time moves in the commodities markets are showing that they fear another round of economic anguish.

You see austerity is great, but for the euro zone, it is like removing economic stimulus or even like raising interest rates. Higher taxes and less government spending will slow down the EU’s growth and its demand for oil increasing the spectra of a deflationary down turn.That’s right, deflation. These fears are being clearly stated in the “decoupling” in the gold and oil market. As gold soared to record highs in dollar terms, crude oil has sunk ever lower. Yes it is in part because the dollar looks to be a better bet than the Euro in the short run or that the markets realize that perhaps the mystic of the Euro was a fantasy all along. Have you heard of any oil producers lately calling for oil to be priced in euros? How about any super models wanting to be paid in fiber?

What is being stripped away in oil and other commodities is the extent to which the price we see on the screen is artificially stimulated by a pile of economic puffery that when the true magnitude of debt is unmasked, the amount of economic growth it will take to bay it back is staggering. The inflation that we are seeing is being promoted willfully by central banks but as we continue to unmask the debt demons we see what the rally in gold now is really all about.The rally in gold is not just an inflation hedge but a hedge against a total global economic collapse. People are buying gold because they believe that global governments will dissolve and drown in heaps of mountainous debt that will suck growth down in a hole for decades and demand for commodities and everything else.

Sure when governments print money that is indeed the definition of inflation but by trying to get us to worry about inflation is to try to not have us worry about the real problems. In other words, inflation would be a nice problem to have.As bearish as I am for oil, it's been possible to do pretty good on the long side too. Long term I still feel that oil will break out to the downside yet for most traders, I think that the swing sizes make it harder for them to ride this out. We have seen a precipitous drop from the false breakout to $87 a barrel on the upside that came on a light volume holiday week and oil should target new lows for the year very shortly.

Still for many to ride the short side, the ups and downs may make that impractical. For them it may be better to try to pick the high range and low range for the day. In these market conditions it is imperative that you have a well defined plan.

You can reach Phil at pflynn@pfgbest.com and make sure to catch him every day on the Fox Business Channel.


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Crude Oil Falls to Three Month Low on Concern European Crisis May Slow Recovery

Crude oil fell to a three month low in New York on concern that Europe’s sovereign debt crisis will reduce global economic growth and fuel consumption. Oil dropped for a fourth day and the euro traded near a 17 month low against the dollar as the Spanish daily El Pais reported that French President Nicolas Sarkozy threatened to pull out of the common currency. Supplies at Cushing, Oklahoma, where New York traded West Texas Intermediate oil is delivered, rose to a record last week, according to the Energy Department.

“The European debt worries are hitting a lot of markets,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “This together with rising inventories, especially at Cushing, will continue to weigh on oil.” Crude oil for June delivery fell $1.15, or 1.6 percent, to $73.25 a barrel at 10:06 a.m. on the New York Mercantile Exchange. Futures touched $72.72, the lowest level since Feb. 12. Oil is down 2.5 percent this week.

Oil has dropped 16 percent on the Nymex since it reached $87.15 a barrel on May 3, a 19 month high, as the euro weakened against the dollar. The euro traded at $1.2434, down 0.8 percent from $1.2535 yesterday. The euro breached $1.25 for the first time since March 2009 and touched the lowest level since Nov. 13, 2008. Portugal announced austerity measures yesterday, a day after Spain proposed to reduce its deficit, spurring concern that fiscal tightening in the region will undermine economic growth and derail the global recovery.....Read the entire article.

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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.



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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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