Bloomberg Analysis: Crude Oil May Plunge as Prices Diverge From Strength Index

Crude oil may plunge below $80 a barrel in New York as the failure of its relative strength index to keep pace with price gains signals that this month’s rally is over, according to technical analysis by Commerzbank AG. Futures surged to a two-year high of $88.63 a barrel on the New York Mercantile Exchange on Nov. 11. On that day, oil’s 14 day RSI, a measure of how rapidly prices rise or fall in that period, failed to surpass a nine month peak reached in October. That indicates the gains have run their course and a downward correction may be imminent, Commerzbank said.

“This suggests a loss of upside momentum,” London based analyst Karen Anne Jones said in an interview. Oil, which traded for $83.47 at 14:19 p.m. London time, earlier today broke a trend line that has supported prices since September at $83.88, and is set to plummet, Jones said. The 14 day RSI was at 50.8.

“The market is sitting today on the two month uptrend, and this is now exposed,” she said. “Failure looks likely and will spell a deeper retracement.” Once crude drops below $83.88 it will be drawn toward a range of $78.50 to $79.31 within three weeks, according to Commerzbank. This price band combines a threshold from the Fibonacci sequence of numbers, with the convergence point of two moving averages.

A move to the $78.50-$79.31 area would complete a 38.2 percent reversal of oil’s advance since May, Jones said. The significance of a 38.2 percent movement derives from the Fibonacci sequence, used by traders to predict points of resistance and support as markets repeat earlier moves. This region is also where crude’s 100 day and 200 day averages cross. The 100 day and 200 day rolling mean are both at $78.57 a barrel.

Bloomberg reporter Grant Smith can be contacted at gsmith52@bloomberg.net

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Phil Flynn: QE2 Or Not To QE2 That Is The Question

While the Fed printing presses continue to roll interest rate worries are seemingly dominating the direction of the oil market. While the Federal Reserves prints more money rates continue to raise giving surprising strength to the dollar and putting downward pressure on oil. The Chinese stock market got hammered overnight after The Bank of Korea worried about inflation raided their base interest rate by a quarter points to 2.50%. The move means that more than likely China will not be too far behind as countries across Asia are reacting to a major onslaught of inflationary pressures.

In the mean time the markets are focused on the problems in Europe. EU members want Ireland to take their money as they fear that Irelands debt problems could spread to other countries. Ireland ion the other hand says that they are fine and is telling the EU that they do not need their help. Yet the EU feels that the fallout from Ireland’s debt could drive up borrowing costs in other PIIG countries especially Portugal, Italy and Spain. The EU is saying please take the money. Of course all of this global intrigue is impacting the......Read the entire article.

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Crude Oil Technical Outlook For Tuesday Morning Nov. 16th

Crude oil was lower overnight and trading below the 20 day moving average crossing at 84.15 as it extends last week's decline. 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 84.15 are needed to confirm that a short term top has been posted. Closes above the 10 day moving average crossing at 86.07 would temper the near term bearish outlook.

First resistance is the 10 day moving average crossing at 86.07
Second resistance is last Thursday's high crossing at 88.63

Crude oil pivot point for Tuesday morning is 85.04

First support is the overnight low crossing at 83.56
Second support is the 38% retracement level of the August-November rally crossing at 82.44


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Saudi Arabia: Peak Oil Forecasts Are Ridiculous Because We'll Keep Prices Cheap For A Very Long Time

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.

Posted courtesy of The Business Insider

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Commodity Corner: Crude Oil Largely Unchanged on Mixed Data

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.

Courtesy of Rigzone.Com

What a Difference a Week Makes....Is It All Over For Gold?

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Matt Nesto: Where is Crude Oil and Gold Headed on Tuesday?

CNBC's Matt Nesto 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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Stock Market and Commodities Commentary For Monday Evening Nov. 15th

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.


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What a Difference a Week Makes....Is It All Over For Gold?

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.

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Phil Flynn: China Bubble Means Potential Commodity Trouble

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!




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Crude Oil Increases as Improving Economic Indicators Point to Higher Fuel Demand

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.


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