Gold's Net Speculative Long Positions Dropped for the First Time in 7 Weeks

Crude oil price changed little in Asian session after Friday's rally but the near term outlook remained firm as the dollar weakened. Current trading at 76.6, the benchmark WTI contract stayed in the middle of the 70-80 trading range. The chance of going higher and lower is balanced for today but it's unlikely for a break out of the range. Gold price moves narrowly around 1300. While the macroeconomic backdrop is favorable for further gains, a pullback on profit taking cannot be ruled out as the metal has advanced for 7 out of the past 8 weeks.

Dollar's weakness is a main theme sending commodities higher in recent weeks. The USD Index plunged below 80 for the first time since March last week and has dropped -10% from June's peak. USD should continue to be pressured as long as speculations on Fed's additional QE measures remain intact. Today in Asia, EURUSD soared to as high as 1.3494 before retreating. Investors trimmed investments on the euro as Ireland will disclose the final expenses of bailing out Anglo Irish Bank Corp. later this week. In fact, the euro fell against 15 out of 16 currencies as concerns about banking crisis in the Eurozone resurfaced. The euro's weakness against dollar is only mild in comparison with others. USDJPY changed little at 84 although the government may implement a stimulus plan of up to 4.6 trillion yen to boost recovery. Meanwhile the BOJ Governor Masaaki Shirakawa said the central bank is 'ready to implement appropriate action in a timely manner if judged necessary'. A deflationary Japanese economy and the government's currency intervention and stimulus policy are theoretically negative for Japanese yen. Yet, strength in the currency indicates that the effects of a unilateral intervention are limited.

We have a light calendar today. Japan's corporate service price contracted -1.1% in August, slightly better than expectations of -1.2% and unchanged from July, while trade surplus stayed unchanged at +0.59 trillion yen in August from a month ago. The money supply (M3) in the Euro zone probably grew +0.3% y/y in August, following a +0.2% increase in July.
Commitments of Traders:

Speculators showed mixed expectations on the energy complex as they were more bullish on fuels than crude oil. Net length for crude oil declined -4 437 to 43 900 contracts as the Enbridge pipeline 6A resumed operations earlier than market expectations. Net lengths for heating oil and gasoline increased, by 7 083 and 4 367, to 17 891 and 35 232 respectively. Net short for natural gas rose for a 7th week even though price has fluctuated around the $4 level. Traders lacked incentives to trade the futures as we saw both long and short positions declined during the week but the drop in the former was 6 times higher. The fundamental outlook was largely unchanged with gas supply remaining sufficient and hurricanes failing to disrupt production activities.

Performance was also discordant in the precious metal complex. Net length for gold slipped for the first in 7 weeks although price has set new record highs. Some traders entered short positions as they viewed the rally overstressed. While some market participants began to worry about a gold price bubble, gold has only set a record in USD terms but remained below June's levels in terms of many other currencies. Moreover, it's far from the peak when calculated in real terms. We believe gold's long term uptrend remains intact if the low rate environment persists. Net lengths for silver and platinum increased further while that for palladium dropped in concert with price decline.

Let's go to the charts on Non-Commercial Net Positions


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

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Phil Flynn: The Oil Market Finally Decided To Join The Commodity Rally

The oil market finally decided to join the commodity rally after spending most of the week on the sideline. The power of the Fed cannot be ignored forever as the threat of stimulus is always lurking around the corner. With most other commodities putting in strong performances, oil and the products followed but only reluctantly. Some say the durable goods number was the catalyst or strong data from Germany yet more than anything was the rising tide of all commodities that floated the oil market boat. Natural gas is collapsing as the weight of oversupply begins to take its toll.

With Gulf storms seemingly not a threat to supply and the fact that a falling dollar really does not matter that much to this market, gas could start to fall even harder. The trade likes to play crude off of the gas market and that should lead to further downside pressure. Do you remember when OPEC seemed to matter? Dow Jones reports that the Organization of Petroleum Exporting Countries is unlikely to change production quotas at its next meeting in Vienna, scheduled for Oct. 14, as current oil prices are "comfortable," Kuwait's Oil Minister said Monday. Sheikh Ahmad Abdullah Al-Sabah added that he isn't concerned about global crude oil demand but is worried about.....Read the entire article.

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Crude Oil Technical Outlook For Monday Morning Sept. 27th

Crude oil was steady to slightly higher overnight as it extends last Friday's rally above the 20 day moving average. Stochastics and the RSI are turning neutral to bullish signaling that sideways to higher prices are possible near term.

If November extends the rally off last week's low, the reaction high crossing at 78.86 is the next upside target. Closes below last Thursday's low crossing at 73.58 would renew the decline off this month's low.

First resistance is the overnight high crossing at 76.89
Second resistance is the reaction high crossing at 78.86

Crude oil pivot point for Monday morning is 75.94

First support is last Thursday's low crossing at 73.58
Second support is the reaction low crossing at 73.08

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SP500 Internals, Dollar & Gold Pre-Week Analysis

From Chris Vermuelen.....The Gold and Oil Guy

After a fierce equities rally on Friday, which I figured would happen, just not that strong; I have to wonder if there is some event or major decision in the works we don’t know about?

Friday’s rally could be something simpler like window dressing by the funds. This is when the funds buy up all the top performing stocks for month end reporting. They do this so that their investors think they are on the ball and know what they are doing. Window dressing will end Monday and from there we could see some profit taking (selling) start. But for all we know Obama could be extending the tax cuts for everyone or cutting payroll taxes etc…

It would only take one of these events to trigger a sharp up move in the market and that could be what Friday’s move was anticipating. That being said volume has remained light and during low volume session the market has a tendency to move higher. Sell offs in the market require strong volume to pull the market down, so until volume picks up there could still be higher prices just around the corner.

Let’s take a look at some charts…

SPY – SP500 60 Minute Intraday Chart
Last week we saw the market reverse to the down side with a strong end of say sell off. That set the tone for some follow through selling and for any bounces to be sold into. That being said, the market always has a way of surprising traders and it did just that on Friday gapping above Thursday’s reversal high causing shorts to cover and the typical end of week light volume drift to help hold prices up.

NYSE Market Internals – 15 Minute Chart
I like to follow some market internals to help understand if investors are becoming fearful or greedy. It also helps me gauge if the market is over bought or oversold on any given day.

These three charts below show some interesting data.
Top Chart – This indicator shows me if the majority of shares traded are bought or sold. When the red line spikes up and trades above 5 then I know the majority of traders are buying over covering their shorts. I call this panic buying because traders are buying in fear that the market will continue higher and they will miss the train. When everyone is buying you know a pullback is most likely to occur.

Middle Chart – This is the NYSE advance/decline line. When this indicator is below -1500 then the market is over sold and bottom pickers/value buyers will step in and nibble at stocks. But when this indicator is trading over 1500 then you know the market is overbought and there should be some profit taking starting any time soon.

Bottom Chart – This is the put/call ratio and this tells us how many people are buying calls vs put options. When this indicator is below 0.80 level more traders are bullish and buying leverage. My theory is if they are buying leverage for higher prices, then they have already bought all their stocks and now want to add some leverage for more profits. When I see the majority of traders bullish then I an sure to tighten my stops (if long) as top my be forming.

Putting the charts together – When each of these charts are trading in the red zone know I must be cautious for any long positions because the market just may be starting to top. Or a short term correction may occur.

UUP – US Dollar Daily Chart
The US dollar has been under some serious pressure with all the talk about quantitative easing (printing money). Obviously the more the Fed’s print the less value the dollar will have. The chart below shows a green gap window which I think once it is filled should put the dollar in a oversold condition for a short term swing trade bounce before heading back down. A bounce in the dollar will put pressure on equities, gold and oil.

GLD – Gold Daily Chart
Gold continues to grind its way up. This move is looking very long in the teeth and pullback will most likely be sharp.

Weekend Trading Conclusion:
In short, equities and gold continue to grind their way higher while the US dollar continues its grind lower. When I say the market is grinding I am implying the market is over extended and a reversal any day should occur.

Financial stocks like Goldman (GS) which typically leads the market has been strongly underperforming over the past week. Insiders were selling GS very strongly which is strange and makes me wonder what’s up there? With the financial stocks underperforming it sure looks like a market reversal is just around the corner.

If Friday’s rally was simply window dressing by the funds then it should end on Monday and with any luck we will see a sharp reversal to the down side early this week.

You can get my ETF and Commodity Trading Signals if you become a subscriber of my newsletter. These free reports will continue to come on a weekly basis; however, instead of covering 3-5 investments at a time, I’ll be covering only 1. Newsletter subscribers will be getting more analysis that’s actionable. I’ve also decided to add video analysis as it allows me toe get more into across to you quicker and is more educational, and I’ll be covering more of the market to include currencies, bonds and sectors. Before everyone’s emails were answered personally, but now my focus is on building a strong group of traders and they will receive direct personal responses regarding trade ideas and analysis going forward.

Let the volatility and volume return!

Chris Vermeulen
The Gold and Oil Guy .com

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Lukoil, Investors Buy $2.4 Billion of Company's Shares From ConocoPhillips

Lukoil, Russia’s largest oil producer not controlled by the state, together with a group of investors bought almost 5 percent of Lukoil’s shares from ConocoPhillips [COP] for $2.4 billion, the Moscow based company said.

Lukoil and the investor group bought 42.5 million shares in the form of American depositary receipts at a price of $56 each. The purchase, arranged by UniCredit Bank AG, was for less than half of an 11.6 percent holding that ConocoPhillips had made available under an option that expired yesterday, Lukoil said in an emailed statement.

The deal aims at enhancing the company’s attractiveness to investors. “It allows us to support our share prices, since the transaction is funded by the group’s internal resources, without increasing the company’s total debt,” Lukoil Vice President Leonid Fedun said in the statement today.....Read the entire article.

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

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Commodity Corner: Crude Oil, Natural Gas End the Week Higher

A positive change in a German business indicator helped to bolster the euro against the dollar Friday, which in turn gave crude oil a nice bump to end the week.

The price of a barrel of oil for November delivery settled at $76.49 a barrel, a $1.31 improvement from Thursday, after the Munich based IFO Institute for Economic Research announced a slight improvement in Germany's business climate for September. Using 100 as the seasonally adjusted benchmark, IFO reported a business climate index of 106.8 for September 2010. In comparison, the figures for the preceding month and September 2009 were 106.7 and 91.3, respectively. The IFO Business Survey revealed that manufacturing firms remain encouraged by export opportunities. However, they expect the pace of the export market to slow down six months out.

Oil also benefited from rallying equities markets. The Dow Jones was up 1.86% as of 4 p.m. Friday while the S&P 500 and Nasdaq were up 2.12% and 2.33%, respectively. The intraday range for crude was $74.66 to $76.64, and oil ended the week up 2.2%.

The diminishing likelihood that Tropical Storm Matthew will affect oil and gas infrastructure in the Gulf of Mexico placed downward pressure on natural gas prices, which lost 14 cents Friday to settle at $3.88 per thousand cubic feet. Nevertheless, October natural gas ended the week 1.5% higher compared to the settlement price last Monday. Natural gas traded from $3.87 to $4.04 on Friday.

Gasoline for October delivery settled three cents higher at $1.95 a gallon. The front month contract price fluctuated between $1.91 and $1.96. For the week, gasoline remained flat.

Courtesy of Rigzone .Com

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Crude to Remain Range Bound Under OPEC's Manipulation

The dovish September FOMC statement heightened speculations that the Fed will announce additional monetary easing measures later this year. Provision of extra liquidity to the market is negative for USD. The dollar index dropped below 80 for the first time since March 2010. Weakness in USD drove commodities higher. WTI crude oil rallied, after a week of selloff in the prior week due to earlier than expected resumption of operation in the 6A pipeline, as a lower dollar increased it appeal despite unexpected rise in crude inventory. Precious metals strengthened with gold reaching rising above 1300 for the first time on record while silver outperforming its counterparts. Base metals were generally higher as robust demand from China boosted confidence in the complex's outlook.

Crude oil rallied on Friday as driven by strength in Wall Street. WTI crude oil for November delivery jumped to 76.68, the highest level in more than a week, before settling at 76.49, up +3.84% during the week. Meanwhile, corresponding contract for Brent crude gained +0.84% during the week. WTI-Brent spread widened to 4.9, a level not seen since mid-May, on Wednesday, as crude inventory surprisingly increased despite shutdown of the Enbridge pipeline, before narrowing to 2.4 on Friday.

When sovereign crisis in the Eurozone reached its peak in May/June, rally in the dollar and selloff in growth assets had sent crude oil price to as low as 64.24. As the concerns gradually abated and risk appetite increased slowly, oil buyers became active again and sent prices above 80 in August. Nevertheless, crude oil price has remained within a range of 70 and 80 for most of the time. In fact, we expect the 'range-bound' situation will continue for the rest of the year as we see price below 70 would attract buying, e.g. from the Chinese government as strategic reserves, and trigger 'intervention' by the OPEC while price above 80 is unsustainable giving growing non-OPEC production and ample OPEC spare capacity.

China's strategic petroleum reserve (SPR) plan aims at completing the 3 phases of oil reserve base construction in 15 year (around 2020). While the sky-high oil price in 2008 had discouraged stockpiling, China's oil imports rebounded sharply in March 2009 when oil price stabilized after a sharp selloff. In 2010, China has been importing a large amount of oil and a record high being set in June 2010 (at 22.27M metric tons). We believe part of the oil imports went to the country's national oil reserves and the commercial oil reserves of China National Petroleum Corporation (CNPC) and the Sinopec Group. Now that the country's is in the middle of the 15-year plan and, given the opportunistic nature of the SPR buying, it's likely for the country to accelerate the pace of stockpiling when global oil price fall below 70,  the lower boundary of the trading range.

OPEC is in control of the world's 40% oil supply and has proven capability of 'adjusting' oil prices using its output. The cartel appears satisfied with recent price levels and some oil ministers expressed they preferred oil to trade at around 70-80. Saudi Arabia's King Abdullah said that 75 is a level he wants. Therefore, it's reasonable to believe the cartel will do something, i.e. cut production, to defend the floor.

Yet OPEC's supply is a 2-edged sword. While it may cut production so that oil price will not fall to a level that hurts oil investment and national revenues, its abundant spare capacity is limiting the upside of oil price.

According to the September Short-Term Energy Report by the US Energy Department, OPEC's crude oil production will increase +0.3M bpd and 0.5M bpd 2010 and 2011, respectively, with non-crude petroleum liquids expected to increase by 0.6M bpd 2010 and 0.7M bpd in 2011. Spare capacity in the cartel should remain near 5M bpd compared with 4.3M bpd in 2009 and 1.5M bpd in 2008.

Courtesy of Oil N Gold.Com....Here's the Precious Metals Weekly Report

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Phil Flynn: How Fed Saved Oil And OPEC From A Total Price Collapse

The Federal Reserve promise to maintain the target range for the federal funds rate at 0 to 1/4 percent and maintain its existing policy of reinvesting principal payments from its securities holdings to provide additional accommodation or a second round of quantitative easing if necessary, helped the oil market ignore some of the most bearish fundamentals in decades. Just this week the Energy Information Agency reported that total U.S domestic oil product inventories hit 768.1 million barrels which is the highest level since 1990 since the Energy Department began reporting weekly data.

The figure doesn’t even include ethanol stockpiles which add to the bearishness and the fact that demands in this shoulder season is even weaker than normal. With an economic outlook that is deteriorating and a glut of supply, oil prices should be getting annihilated yet despite this historically bearish outlook, oil losses in the weakest demand period of the year are only modest. The Feds impact on the price of oil is an undeniable fact and there are many reasons for that. First and foremost is the impact of that policy on the.....Read the entire article.

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New Video: Let The Carnival Begin!

Here is a market that we like a lot more than the US market. We really like the way its acting and it looks set to take out the highs that were seen in December of 2009. If that is the case, then we could see this market make all time highs pretty quickly. You definitely want to have
this one on your radar screen.

In this new short video, I show you what I'm looking at and how we showcased this market last week when we did our last webinar. This webinar is set to be rebroadcast on Friday, September 24th at 5pm EST/9pm GMT.

This market is still looking good and looking strong. Pay very close to it this Friday because if it closes well, it should bode well for the following week.

As always our videos are free to watch and there is no need for registration.

Click Here to watch "Let The Carnival Begin!"

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Crude Oil Technical Outlook For Friday Morning Sept. 24th

Crude oil was steady to slightly higher overnight as it consolidates some of the decline off last week's high. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If November extends this decline, the reaction low crossing at 73.08 is the next downside target. Closes above the 10 day moving average crossing at 75.99 would confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 75.92
Second resistance is the 10 day moving average crossing at 75.99

Crude oil pivot point for Friday morning is 74.79

First support is Thursday's low crossing at 73.58
Second support is the reaction low crossing at 73.08

How to Use Money Management Stops Effectively

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