Trade ideas, analysis and low risk set ups for commodities, Bitcoin, gold, silver, coffee, the indexes, options and your retirement. We'll help you keep your emotions out of your trading.
Saudi Arabia's Prince Turki Al Faisal Al Saud has thrown cold water on forecasts for an oil price superspike, speaking to energy industry peers at Rice University. His nation has the capacity to handle surging demand from both China and other rapidly developing nations.
While many energy analysts are predicting a sharp increase in oil prices in the coming months as a worldwide economic recovery takes hold and demand from China and India increases, Saudi Arabia says it will work to mitigate that rise. Saudi Prince Turki Al Faisal Al Saud says his country has the capacity to play that role for some decades to come.
In his speech to energy industry representatives and academics at the Baker Institute for Public Policy at Rice University, Prince Turki Al Faisal Al Saud emphasized his nation's commitment to a stable oil market. He said the Kingdom of Saudi Arabia's ample oil reserves of over 264 billion proven barrels give it the power to offset sharp increases in demand.
"As the demand for oil continues to rise, especially in China and India, the kingdom has every intention of meeting that demand," said the prince.
As for the Saudi prince's call for more transparent reporting on energy use in China and other large consumer nations, Jaffe says this could help control speculation and stabilize the market.
"There are questions about Chinese oil demand," said Jaffe. "Were they buying for their strategic reserve or was that fundamental growth in demand? When the market cannot know for sure you get these movements in price."
Thus price surges are more the result of market confusion and speculation rather than long term fundamentals, he seems to believe.
Thanks to positive retail sales data from the U.S. Department of Commerce and lackluster figures from the Federal Reserve Bank of New York, the price of crude oil for December delivery remained largely unchanged Monday. Oil settled at $84.86 a barrel, a two cent drop from Friday, after trading within a range from $84.48 to $85.77. The Commerce Department's Census Bureau announced that U.S. retail sales increased by 1.2 percent in October, exceeding private sector expectations and the strongest increase since March 2010. Also, the bureau announced that motor vehicle sales rose by 5 percent last month.
Countering the news from the Census Bureau, however, was a New York Fed report observing deteriorating conditions in November for manufacturers in New York State. The Fed's Empire State Manufacturing Survey found a steep decline in general business conditions, plummeting new orders, and a decrease in shipments. December natural gas received a boost from the Census Bureau's retail sales statistics, however. Gas settled nearly a nickel higher to end the day at $3.845 per thousand cubic feet. Natural gas peaked at $3.87 and bottomed out at $3.71.
Despite the positive motor vehicle sales numbers, front month gasoline fell nearly two cents to settle at $2.195 a gallon. December gasoline traded from $2.21 to $2.25.
The S&P 500 index closed higher due to short covering on Monday as it consolidated some of last week's decline. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. Closes below the 20 day moving average crossing at 1193.25 are needed to confirm that a short term top has been posted. If December renews the rally off August's low, the 62% retracement level of the 2007-2009 decline crossing at 1234.75 is the next upside target. First resistance is last Tuesday's high crossing at 1224.50. Second resistance is the 62% retracement level of the 2007-2009 decline crossing at 1234.75. First support is the 20 day moving average crossing at 1193.26. Second support is the 25% retracement level of the July-November rally crossing at 1169.37.
Crude oil closed lower on Monday as it extended last Friday's decline. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are turning bearish signaling that sideways to lower prices are possible near term. Closes below the 20 day moving average crossing at 83.97 would confirm that a short term top has been posted. If December renews the rally off August's low, the 87% retracement level of May's decline crossing at 90.82 is the next upside target. First resistance is last Thursday's high crossing at 88.63. Second resistance is the 87% retracement level of May's decline crossing at 90.82. First support is last Friday's low crossing at 84.52. Second support is the 20 day moving average crossing at 83.97.
Natural gas closed higher due to short covering on Monday as it consolidates some of last week's decline. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 3.743 are needed to confirm that a short term top has been posted. If December renews the rally off October's low, the 38% retracement level of the June-October decline crossing at 4.362 is the next upside target. First resistance is last Wednesday's high crossing at 4.249. Second resistance is the 38% retracement level of the June-October decline crossing at 4.362. First support is the reaction low crossing at 3.743. Second support is the reaction low crossing at 3.500.
Gold lower due to profit taking on Monday as it consolidated some of this year's rally. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are bearish signaling that sideways to lower prices is possible near term. Closes below the 20 day moving average crossing at 1360.00 would confirm that an important top has been posted. If December renews this year's rally into uncharted territory, upside targets will now be hard to project. First resistance is last Tuesday's high crossing at 1424.30. First support is the 20 day moving average crossing at 1360.00. Second support is the reaction low crossing at 1315.60.
The U.S. Dollar closed higher on Monday as it extends this month's rally. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If December extends this month's rally, the 38% retracement level of this year's decline crossing at 80.54 is the next upside target. Closes below the 10 day moving average crossing at 77.40 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 78.77. Second resistance is the 38% retracement level of this year's decline crossing at 80.54. First support is the 10 day moving average crossing at 77.40. Second support is this month's low crossing at 75.24.
A week ago everyone was cheering as gold and other commodity markets were making new highs. Last week however, things changed as everyone seemed to want to jump through the same door, at the same time, putting a great deal of downside pressure on many markets.
This phenomenon sometimes happens when people have multiple positions in multiple markets in the same direction. When they start to take profits, there is no one left to buy.
In today’s short video on gold, we show one of the clues that was given by this market all the way back in May of this year. The video runs about 4 minutes and will give you a very good idea of exactly what I’m talking about. As you know, we took profits on a 52 week rule on Tuesday around the $1,416 level and we also exited with a daily “Trade Triangle” signal on Friday at the $1,382 level.
I think traders of all skill levels will get a lot out of this short video. As always all videos are free to watch and there are no registration requirements. Enjoy the gold video.
China has enough inflation problems already but the Fed and their policy of quantitative easing may be forcing the Chinese to take more aggressive steps to subdue inflation. Commodities across the board plunged when the “Economic Daily” reported on its website that an economic researcher with the Chinese Academy of Sciences predicted that the Chinese central bank may raise interest rates twice, on time late this year and again early next year. According to Bloomberg News the country’s consumer prices may grow 4 percent in November and December, pushing full year inflation to 3.2 to 3.3 percent, the report said.
It's expected that China’s consumer prices may grow at 4.7 percent next year. This caused bulls to take stock of their overbought markets and caused a wave of aggressive profit taking. The Chinese is of course the main driver of commodity demand. Commodity and oil bulls look to China as their justification to ignore a global glut of supply. The market had been inspired with a slew of improving demand forecasts such as the one from The International Energy Agency which increased its 2010 oil demand growth forecast by 190,000 bpd to 2.34 million bpd from its previous monthly report on stronger demand in both China and other industrialized economies. The Fed's QE2 is adding to these inflationary pressures.
Hot money is flowing to emerging markets and if China fails to moderate inflation it could create the potential for overcapacity. This emerging market mania has also been helped along by China’s stubborn refusal to allow their currency to reflect its true value. The Chinese, by controlling their currency, runs the risk of creating another major economic crisis if they allow their bubble to pop. Their signals are hopefully telling the world that are prepared to increase interest rates. Maybe they are starting to get it. If the Chinese fail to act quickly enough then the world should get prepared for another bubble to pop.
Make sure you get signed up for a trial of Phil's market trades. Just call him at 800-935-6487 or email him at pflynn@pfgbest.com. Also make sure you are watching the Fox Business Network where you can see him every day!
Crude oil climbed on speculation improving economic indicators in the U.S. and Japan, the world’s first and third biggest crude oil consuming counties, may be a sign of increased fuel demand. Oil rose as much as 1.1 percent after a report showed gross domestic product in Japan grew more than forecast in the third quarter as consumer spending increased. U.S. retail sales last month increased the most since March, a sign consumers may play a bigger role in the economic recovery.
“Some good economic numbers came out today, which gave us a boost,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “The market is moving on sentiment and perception. The headlines of any given day will decide the market’s move.” Crude oil for December delivery advanced 54 cents, or 0.6 percent, to $85.42 a barrel at 9:01 a.m. on the New York Mercantile Exchange. Futures rose as much as 89 cents to $85.77.
Brent crude oil for December settlement increased 67 cents, or 0.8 percent, to $87.01 on the ICE Futures Europe exchange in London. The December Brent contract expires today. More actively traded January oil rose 63 cents, or 0.7 percent, to $87.16. Japan’s economy increased an annualized 3.9 percent in the three months ended Sept. 30, the Cabinet Office said in Tokyo today. The median forecast of 21 economists surveyed by Bloomberg News was for a 2.5 percent gain.......Read the entire article.
Commodities continue to in a consolidative manner in European session after Friday's selloff as the market awaits the next step the Chinese government walks in curbing inflation. Investors also hold breath as Ireland will discuss with EU officials on its financial problems in Brussels tomorrow. The front-month contract for WTI crude oil price hovers around 85 while fuel prices also grind higher. Gold changes little, trading below 1380 in both Asian and European session. PGMs extend weakness with platinum and palladium plunging below 1680 and 670 respectively.
Worries about Chinese tightening have weighed on oil and base metal prices as the government's measures, such as rate hike and raise in RRR, limit investments and hence, demand for these commodities. Indeed, China's impacts extend to precious metals. Recall that when the People's Bank of China raised near term interest rates last month (October 19), gold price slumped with the benchmark COMEX contract falling from 1371.7 to 1328 on that day. The impacts on PGMs will be as big as base metals as China is the world's largest auto producer and consumer.
According to Bombay Bullion Association, India’s gold imports jumped +65% y/y in October as driven by Diwali. India’s demand for other commodities such as oil and agricultural products should also surge in coming years. EIA’s Short-term Energy Report forecast annual growth in oil demand in India will be +7.95% in 2010 and +4.21% in 2011. The pace will exceed that of China (2010:+4.26%; 2011: 0.00%) although the absolute amount is still small.
Crude oil was higher due to short covering overnight as it consolidates some of last Friday's huge decline. However, stochastics and the RSI are turning bearish hinting that a short term top might be in or is near.
Closes below the 20 day moving average crossing at 84.00 are needed to confirm that a short term top has been posted. If December extends the rally off August's low, the 87% retracement level of May's decline crossing at 90.82 is the next upside target.
First resistance is last Thursday's high crossing at 88.63
Second resistance is the 87% retracement level of May's decline crossing at 90.82
Crude oil pivot point for Monday morning is 85.75
First support is last Friday's low crossing at 84.52
Second support is the 20 day moving average crossing at 84.00
Over the past few months it seems as though everything has been tied to the dollar. Simple inter-market analysis makes it obvious that almost everything in the financial market eventually has an affect on stocks and commodities in some way. But recently trading has really been all about the dollar. If you watch the SP500 and gold prices you will notice at times virtually every tick the dollar makes directly affects the price and direction of gold and the SP500 index.
Let’s take a look at some charts to see the underlying trends and what they are telling us…
Dollar Index – Daily Chart
As you can see the trend is clearly down. Currently the dollar is trying to find a bottom as it bounces and pierces the previous high. The question everyone wants to know is if the dollar is about to rally and reverse trends or was Friday’s pierce of the October high just a shake out before the next leg down?
Back in late August the dollar pierced the July high on an intraday basis (shake out) just before prices dropped sharply. I think this could very easily happen again but when you see what gold volume is doing, it’s a different story.
Those who follow me closely know I focus on trading with the underlying trend, but manage my risk by trading smaller position sizes when the market has more uncertainty than normal with is what we are currently experiencing.
GLD – Gold Fund – Daily Chart
Gold and the dollar are almost inverse charts when comparing the two. Gold happens to be testing a key support level and its going to be interesting to see how the price holds up going forward. The one thing that has me concerned is the amount of selling taking place. The chart shows heavy volume selling and could be warning us of a possible trend change in the dollar, gold, oil and equities in the coming weeks.
Again the trend for gold is still up, so I would not be trying to short it at this time, rather look to buy into dips until the market trend proves us wrong. That being said, with the selling volume giving off a negative vibe and the fact that gold has rallied for such a long time, any new positions should be very small....
Crude Oil – Daily Chart
Oil looks to be forming a possible cup and handle pattern. If the Dollar continues to consolidate for another 1-3 weeks and breaks down, then we should see the price of oil trade in the range shown on the chart and eventually breakout to the upside. I have a $95-100 price target on oil if the dollar continues to trend down. Until we see some type of handle form here I am not trading oil.
SPY – SP500 Fund – Daily Chart
The equities market looks to have had one of those days which spooked the herd. Friday the price dropped triggering protective stops with rising volume. I was watching the intraday chart as the SP500 broke below the weeks low, and this triggered protective stops which can be seen on the 1 minute charts. In an uptrend I prefer watching stops get triggered because it means traders are getting taking out of long positions and most likely looking to play the short side. When the masses become bearish on the market, that’s when I start looking to play the upside in a bull market (buy the dip).
The chart below clearly shows the days when the shake outs/running of the stops took place. Most traders were exiting their positions and/or going short because the chart looked bearish. One thing I find that helps my trading is that if the chart looks rally scary (bearish) then I start looking at a shorter term time frame for a possible entry point to go long using price and volume analysis.
Weekend Market Trend Trading Conclusion:
In short, I feel the market is at a critical point which will trigger a very strong movement in the coming days or weeks. Because the dollar, gold, oil and the equities market have had such big moves I think trading VERY DEFENSIVE is the only way to play right now. That means trading small position sizes. Right now I am trading 1/8 – 1/4 the amount of capital I generally use on a trade. Meaning if I typically put $40,000 to work, right now I am only taking positions valued at $10,000.
Remember not to anticipate trend reversals by taking a position early. Continue to trade with the underlying trend with small positions or skip a couple setups if you feel strongly of a possible reversal. Once the trend reverses and the volume confirms, only then should you be playing the new trend. Picking tops can be expensive and stressful.
Get Chris Vermeulen's Daily Pre-Market Trading Analysis Videos, Intraday Updates & Trade Alerts Here at www Gold And Oil Guy.com
