Crude Oil, Natural Gas, Gold and Dollar Commentary For Monday Morning

Crude oil was higher due to short covering overnight as it consolidates some of the decline off April's high. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If June extends the decline off April's high, weekly support crossing at 69.50 is the next downside target. Closes above the 20 day moving average crossing at 80.26 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 76.15. Second resistance is the 20 day moving average crossing at 80.26. First support is the overnight low crossing at 69.82. Second support is weekly support crossing at 68.50.

Natural gas was higher overnight and is poised to extend last week's rally. Stochastics and the RSI remain bullish signaling that additional gains are possible near term. If June extends last week's rally, the reaction high crossing at 4.421 is the next upside target. Closes below the 10 day moving average crossing at 4.153 would temper the near term friendly outlook in the market. First resistance is last Thursday's high crossing at 4.414. Second resistance is the reaction high crossing 4.421. First support is the 10 day moving average crossing at 4.153. Second support is this month's low crossing at 3.855.

The U.S. Dollar was higher overnight as it extends this year's rally. Stochastics and the RSI are overbought but are bullish signaling that sideways to higher prices are possible near term. If June extends this year's rally, the 87% retracement level of 2009's decline on the weekly continuation chart crossing at 87.79 is the next upside target. Closes below the 20 day moving average crossing at 83.41 are needed to confirm that a short term top has been posted. First resistance is the overnight high crossing at 87.21. Second resistance is the 87% retracement level of 2009's decline on the weekly continuation chart crossing at 87.79. First support is the 10 day moving average crossing at 84.95. Second support is the 20 day moving average crossing at 83.41.

Gold was steady to slightly lower overnight as it consolidates some of this month's rally. Stochastics and the RSI are overbought, diverging 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 1185.20 are needed to confirm that a short term top has been posted. If June extends this year's rally into uncharted territory, upside targets will now be hard to project. First resistance is last Friday's high crossing at 1249.70. First support is the 10 day moving average crossing at 1210.00. Second support is the 20 day moving average crossing at 1185.30.

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Crude Oil Falls for a Fifth Day on Concern Europe Debt Woes to Slow Growth

Crude oil fell below $70 a barrel in New York for the first time in three months on concern Europe’s sovereign debt crisis may derail the global economic recovery and reduce fuel consumption. Oil dropped for a fifth day, the longest losing streak in five weeks, as the euro extended losses against the dollar, damping the investment appeal of commodities. Oil’s tumble this month is being driven by Europe’s debt crisis and is beyond the influence of the Organization of Petroleum Exporting Countries, Qatar’s Energy Minister Abdullah al-Attiyah said May 15.

“There are concerns that the European debt crisis will have a negative impact on the global growth outlook and in turn, global fuel demand,” said Toby Hassall, a research analyst at CWA Global Markets Pty in Sydney. “We’re seeing an increase in risk aversion, which has in turn has put upward pressure on the U.S. dollar.” Crude oil for June delivery fell as much as $1.79, or 2.5 percent, to $69.82 a barrel in electronic trading on the New York Mercantile Exchange. That’s the lowest intraday price since Feb. 5. The contract was at $70.37 at 11:34 a.m. Singapore time. Futures have lost 12 percent so far this year.

The euro dropped to the lowest against the dollar in more than four years, amid speculation European measures to reduce fiscal deficits will undermine the region’s recovery. The 16 nation currency reached $1.2235, the weakest since April 2006, from $1.2358 on May 14 in New York.....Read the entire article.


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Weekend Gold, Silver and SP500 Trading Charts

Last week was amazing for both gold and index traders as gold surged higher and the SP500 tested a key resistance then fell 4% in our favor. The past couple weeks with the mini market crash and Euro issues making the market extra volatile both gold and the broad market (SP500) index has been wild.
The added volatility makes trading more difficult because price patterns become less predictable and price movements are much larger increasing risk for traders.

Below are the charts & videos of what to look for in the coming days…

GLD – Gold ETF Trading
Gold continues to trend higher at an accelerated rate. Friday we saw gold pullback and test a key support level then bounced to close in the middle of the days trading range. As you can see the trend line support has become very steep and once the trend line support is broken I figure there will be a sharp drop to digest the recent rally.

SLV – Silver ETF Trading
Silver popped and tested a key resistance level from a previous high as expected. It also tested the top of its trend channel providing even more resistance. This week will be interesting as we wait to see if precious metals have a small pullback or continue to rally.

SPY – SP500 Index ETF Trading Chart
This chart clearly shows what I think is about to unfold by looking at the past market drop. Because of the mini market crash triggering everyone’s stops already I figure we have made the low and the dip we are seeing now will drift down a few more percentage points then bottom out.

ES M0 – SP500 Mini Futures Trading Setup – Pre-Drop
Below is a chart of the SP500 which we shorted or bought the SDS bear etf trading fund last week looking to profit from a falling stock market. As you can see from the chart we saw the es mini contract drift into a key pivot point on light volume. What this means is that a large group of sellers will be waiting at that price, and because volume is light we know there are not many buyers at this price level. Simple supply/demand comes into play with more sellers causing the price to stop rising and eventually force the price lower which is what we were anticipating.

The green arrows show key support levels on the 60 minute chart where 1/3 of a position should be taken of the table to lock in gains which also reduces overall risk on the trade. Once we cash in the first 1/3 of the position we move our protective stop the breakeven which is the entry point for the remaining portion of our position. This turns the trading into a winner no matter what happens allowing us to enjoy the ride…

ES M0 – SP500 Mini Futures Trading Setup – Current Price
Here is the same chart 24 hours later showing both of our profit targets triggered pocketing 2/3rds of our position for a very nice gain. Depending on the type of trading vehicle you traded there was potential to make up to 150% return in less than 24 hours.

We currently hold 1/3 of the position left with a loose stop allowing the trade to mature incase the down trend continues for several days or weeks. If not and the price rallies then our stop will get triggered for small profit on the balance of the position. Either way we win.

Stock Market ETF and Futures Trading Conclusion:
In short, the market is trading on increased volatility making it difficult to find low risk setups. At the moment we are long gold and short the SP500 with both position deep in the money. All we can do now is manage our positions to make sure we maximize our profits.

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He's Back.....Watch the Trailer for 'Wall Street: Money Never Sleeps'

Watch the Trailer for 'Wall Street: Money Never Sleeps' debuted at the Cannes Film Festival on Friday and the reviews are, well, somewhat sleepy......We'll be the judge of that!

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The Six Advantages of ETFs

ETFs, or Exchange Traded Funds, have increased in popularity over the last few years, and for a number of reasons. Today, Price Headley of BigTrends.com, is going to give us the low down on everything we need to know about this increasingly utilized financial product.
We hope you'll enjoy today's guest blog post and perhaps consider adding ETFs or ETF options to your portfolio in the near future. As always, we're interested in hearing what you have to say about this post or your experiences trading ETFS in our comments section. In recent years the popularity of ETF Options has exploded.

The issue with ETFs and ETF Options has always been liquidity, but things have changed in that regard. Due to the advantageous architecture of ETFs, more investors are hedging their portfolios with ETF options. To understand the reason these vehicles are changing the options environment, let's take a look at the underlying securities and their benefits.

1. ETFs Trade Like a Stock - Unlike mutual funds or hedge funds which can only be entered or exited at the market close each trading day, ETFs can be bought and sold intraday. They can even be day-traded just like stocks. This advantage allows investors to make speculative bets on the direction of an index while still having the ability to exit the trade at any time of the day. ETFs also allow short selling, as well as often being optionable.

2. Diversification - One of the main benefits of trading ETFs is diversification. ETFs were created to track an index, be that a stock index, commodity index, currency index, or almost any other type of security index. The advantage of trading an index is that you are shielded from the volatile up and down swings of a given individual security.

3. Liquidity - There are many funds that are highly liquid. The QQQQ fund (follows the Nasdaq-100 Index) has an average daily trade volume of over 164 million shares and over 75 other funds have an average daily volume of more than 1 million shares. (Liquidity is important to get in or out of a position quickly. There are a lot of other buyers and sellers to facilitate your trades as opposed to relying on market makers to do everything for you. If you are trading options on the funds, many of these also have highly liquid options.)

4. Low Bid/Ask - As a result of high liquidity, many ETFs have low bid/ask spreads. A high bid/ask spread can cut into your trading profits. Most of the highly liquid ETFs have a bid/ask spread of only a few cents during the trading day.

5. Variety - Whichever sector of the market interests you, you can probably find and ETF for it. There are major index funds such as the QQQQ and SPY as well as sector funds such as XLF (Financials), international funds such as EEM (Emerging Markets). In addition to sector specific, fund companies are continually introducing "Ultra" and "Inverse" ETFs. "Ultra" ETFs are leveraged funds in which the returns of the fund are double that of the index. For example, if an ETF is up 10% for a given year, then the Ultra ETF for that same index would be up around 20% in the same year. Keep in mind that this leverage can work for you, as well as against you. "Inverse" ETFs are funds which move in the opposite direction of the underlying index. So if the S&P 500 Index is down 8%, then the inverse ETF for the S&P would be up 8%. To further increase your investing options, some ultra ETFs are also inverse funds as well.

6. Low Expense Ratios (Fees) - ETFs have much lower expense ratios than mutual funds or hedge funds. This means that more of your money stays in the investment rather than going to the firm that is maintaining it.

Some believe Exchange Traded Funds will become the primary investment instrument for most investors largely leaving mutual funds behind. This growth is demonstrated by the increasing availability of ETF options.

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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.


The "Super Cycle" in Gold and How It Will Affect Your Pocketbook in 2010


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