Sharon Epperson: Where Are Commodities Headed on Tuesday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets and looks at where oil and precious metals are likely headed tomorrow.

Euro Rebound Gives Crude Oil Bulls Hope

Crude oil closed higher on Monday due mostly to a rebound in the Euro against the dollar. The high range close sets the stage for a steady to higher opening on Tuesday and bulls are under pressure to follow through if they stand a chance of gaining the upside momentum this week or anytime soon. Stochastics and the RSI are overbought, diverging and are turning neutral to bearish signaling that a short term top might be in or is near.

And we know traders are getting tired of hearing it but closes below the reaction low crossing at 83.20 would confirm an end to the corrective rally off August's low. Closes above the May-July downtrend line crossing near 92.66 would confirm an end to this summer's decline.

First resistance is still last Wednesday's high crossing at 90.48. Second resistance is the May-July downtrend line crossing near 92.66. First support is the reaction low crossing at 83.20. Second support is the reaction low crossing at 79.38.

The U.S. ...... Top Crude Oil Producer By 2017?

We have been known to poke some fun at the oil futures predictions that have come out of Goldman Sachs the past couple of years. Most have been almost laughable. But we can't help but report on a statement coming out of Goldman Sachs this week as they predict the U.S. to be the leader in crude oil production in 2017. Honestly, if we had some leadership in Washington we would be the worlds leading oil producer and all of our economic woes a thing of the past. Both, are yet to be seen.

In the release Goldman Sachs is saying that U.S. oil production should reach 10.9 million barrels a day by 2017, a third higher than 8.3 million barrels currently. Russia, now the top oil producer, should see production increase only 100,000 barrels in the same period, for an output of 10.7 million barrels a day.

QR Energy [QRE] Makes Big Investment in U.S. Oil and Natural Gas

QR Energy LP, ticker QRE, announced on Monday it will purchase oil and natural gas fields in Texas, Oklahoma and New Mexico. Costing the company $577 million.

The Houston based energy company will purchase the properties from the Quantum Resources Fund. Funding of the purchase will come from the issue of $350 million in convertible preferred units and it will also pay Quantum $227 million in cash. This deal should close on Oct. 1.

QR Energy said the fields contain an estimated 37.1 million barrels of oil and is spread over 109,305 acres and already has approximately 1,600 wells.

QRE investors are already enjoying a great dividend at 9 1/2 percent, $1.65 per share as QRE trades slightly to the upside this morning at 17.14.

Transaction Highlights

Properties located in existing core areas: Permian Basin, Ark-La-Tex and Mid-Continent

Net production of 8,000 Boed expected for the fourth quarter of 2011

Total proved reserves of 37.1 MMBoe are 65% proved developed and 41% liquids (oil and NGLs)

More than 1,500 producing oil and natural gas wells

Inventory of low risk development opportunities

Reserve life (R/P) of 12.7 years

77% operated by value based on standardized measure

Expected to be immediately accretive to Distributable Cash Flow per unit

Click here to get a free trend analysis for QRE

Crude Oil Starts The Week Down as European Debt Crisis Looms Large

Crude oil starts the week on a sour note falling for a third day, the longest decline in a month, as most traders feel that Europe will not shake off their debt crisis and economic growth will continue to be under pressure. Combine that with the return of normal production in the Gulf of Mexico as hurricane season appears to be winding down.

Crude oil was lower in Sunday evenings overnight trading as it extends the decline off last Wednesday's high. Stochastics and the RSI are still overbought, diverging and are turning bearish signaling that sideways to lower prices are possible near term.

Closes below last Tuesday's low crossing at 83.20 would confirm that the corrective rally off August's low has ended while opening the door for a possible test of August's low crossing at 76.15 later this fall. If October renews the rebound off August's low, the May-July downtrend line crossing near 92.85 is the next upside target.

First resistance is last Wednesday's high crossing at 90.48. Second resistance is the May-July downtrend line crossing near 92.85. First support is last Tuesday's low crossing at 83.20. Second support is the reaction low crossing at 82.95. Crude oil pivot point for Monday morning trading is 87.46.

Oil N' Gold: Weekly Technical Outlook For Crude Oil

Crude oil edged higher to 90.48 last week but lacked follow through buying and failed to sustain above 90 psychological level. The recovery from 75.71 is so far slightly stronger than expected. But the look of the price actions are still corrective, thus, favoring it's merely a consolidation. Hence, while further recovery could still be seen as long as 83.20 minor support holds, we'd expect upside to be limited below 100.62 resistance and bring resumption of fall from 114.83 eventually. Below 83.20 minor support will flip bias back to the downside for retesting 75.71 low first.

In the bigger picture, medium term rebound from 33.2 is treated as the second leg of consolidation pattern from 147.24 and should have finished at 114.83 already. Current decline should target next key cluster support at 64.23 (61.8% retracement of 33.2 to 114.83 at 64.38) next. Sustained break will pave the way to retest 33.2 low. However, break of 100.62 resistance will indicate that fall from 114.83 has completed after meeting missing 100% projection target. The corrective structure of such decline in turn argues that rise from 33.2 is still in progress for another high above 114.83.

In the long term picture, crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2, second wave might be finished. Upon confirmation of medium term reversal, the third wave of the pattern should have started for a retest on 33.2 low.

J.W. Jones: What The Social Mood is Saying About the S&P 500

Social mood is absolutely horrible right now. In my experience as a trader I do not recall a similar time frame in my life. Social mood has deteriorated to the point that it would not surprise me to see two grown men come to blows over a fantasy football draft. Oh wait, that happens every year!

In all seriousness, the world seems to be getting more dangerous every day. At this point I think even Mother Earth is socially frustrated as she wreaks havoc all over the world. Earthquakes, droughts, wild fires, famine, hurricanes and the list goes on and on. Politics are as divisive as any time in recent history and the rhetoric is just excruciating. So what does all of this negativity mean for financial markets?

It means that every article is under the microscope and anyone who opposes the view of the writer or speaker reacts with vitriolic commentary that many could conceivable call “hate mail.” People are hurting badly from both an economic and social perspective. You can bet that the current social malaise is going to impact financial markets and I would argue that it already has.

August was a poor month for most investors as the equity indices took a nosedive and sold off sharply. I warned members of my service incessantly to reduce risk ahead of the selloff and I sat in cash as markets were crushed. I received countless emails telling me I was essentially an idiot and Mr. Market was going to kick my backside. Initially they were right, but time proved my analysis prescient.

August was the single best month I have had for members at my service at Options Trading Signals.com. I only placed 3 trades in the entire month. Two SPY trades that were directionally biased to the long side and both produced outstanding profits. I also utilized a time decay strategy for a GLD position which worked out quite well. By the end of the month of August all 3 positions were closed and the gross gain based on maximum risk was over 100%. If a trader risked a maximum of $1,000 on each trade taken at the end of August the trader’s account would have grown to around $2,000.

One of the guys I trade with got his ETF newsletter subscribers in at the bottom for a quick 4.5% bounce then shorted a week later using the SDS inverse etf to catching another 6% on the way down… So as you can see there are many ways to play market volatility

So what is going to happen next? The funny thing is not a lot has changed since my most recent article I

posted back on August 28^th. The following chart below still holds sway in terms of overhead resistance for the S&P 500:

In the same article I wrote the following statement:

“In the short to intermediate term, I believe we will see higher prices and a test of the key S&P       1,220 area or possibly a re-test of the key S&P 1,250 price level which corresponds with the     March 2011 pivot lows. Additional resistance would come in around the 1,260 – 1.270 area which marks the neckline of the recent head and shoulders pattern which triggered the selloff in the S&P 500.”

Unlike many financial writers, I am a trader first and a writer second. I put my money where my mouth was and took a trade that got long based on the analysis I provided readers and members of my service. The following price chart illustrates the resistance level that held the S&P 500′s first attempt to rally:

Those of you who do not believe that technical analysis works are wrong. While technical analysis should not be the only metric used to enter or exit positions, basic support and resistance levels can help traders take profits at appropriate times. In addition, laying out longer term support and resistance levels give traders the ability to place trades in a step or tiered system. Essentially, once a trader has identified support and resistance levels the trade can sell into resistance and add to his/her position near support. Technical analysis provides great exit and entry points for astute traders.

My viewpoint of the S&P 500 has not changed much since August 28^th. I think we will continue to see choppy price action and a retest of the 1,220 level is likely, if not probable. If the SPX 1,220 price level gives way to higher prices a retest of the March pivot lows will be the next resistance point. The March pivot lows correspond directly with the SPX 1,250 price level and the 50 period moving average will be flirting nearby.

If prices continue to work higher the neckline of the head and shoulders pattern which produced the selloff in early August will be tested. The point that readers should take from this is that overhead resistance is extreme at this point. The following chart below illustrates the key resistance levels and the current rising channel on the daily chart.

While it may sound a bit confusing, higher prices in the near term will likely be bearish in the intermediate to longer term. In my previous article, I commented that I believed we had likely entered the next phase of the bear market and I still believe that. At this point in time I am just waiting for the price action to confirm my suspicions.

The first confirmation that the bear market will have returned would be a lower high on the daily and weekly time frame. The final confirmation would occur if prices rollover and breakdown below the August lows. If the August lows are taken out on a daily and/or weekly close an all-out rush to the exits is possible. Ultimately I believe that risk is increasing to the downside if prices keep working higher.

Right now I’m expecting higher prices unless the ascending trendline of the channel is penetrated on a daily or weekly close. Otherwise, the bullish churn higher will continue. The chart below illustrates the key support levels that if broken could lead to additional downside.

I am expecting to see a test of the 1,250 area before the end of September. It is entirely possible to see a test of the neckline as well which would help suck in retail investors who are scared they are going to miss the move back up. A rally that is contained around the SPX 1,250 – 1,275 price levels could result in a sharp sell off.

All eyes are on the key 1,220 price level to the upside and the August lows. A breakout in either direction could result in a big move. If I had to guess, the thrust higher will end in late September or the early part of October, but I would be remiss not to mention that one headline out of Europe could derail my entire thesis.

The two single largest threats to a stock market advance stem from Europe. The European sovereign debt crisis is one key issue that could alter the marketplace by its own merit. A more silent concern for U.S. equity markets is the impact the European situation will have on the U.S. Dollar.

Subscribers of OTS pocketed over 100% return in August alone! So don't wait, Sign up now at Options Trading Signals.com for a 24 hour 66% off coupon.

Adam Hewison: The Markets Voted and it's No Confidence In Obama

It would appear that President Obama’s speech last night was not well received looking at the financial markets this morning.

Readers of this report know that we rely on our Trade Triangle technology for trends, and not what a government official has to say and this includes the president of the United States. I learned over the years that the markets generally tell you what they’re going to do. Price action alone is the greatest truth you can see in the marketplace. Price action is what determines trends, price action is what determines traders actions.

Many newbie traders think there must be some mystical power that drives the markets. The truth is, the market is driven by people who believe prices are you going to go higher or go lower. It is that simple, however, most investors tend to over think the market.

Now I understand that there are folks out there that would disagree with that statement and say that the fundamentals, i.e. supply and demand, earnings etc. etc. is what drives the markets. Yes, there is a certain truth to that, but the other part of the equation is the psychology of the market. Market sentiment or psyche can really play havoc on the fundamentals and that is why price action alone is the best market analyst in the world.

As we go into this weekend with the 10th anniversary of 9/11 looming over everyone’s head It’s important to look at how the markets are closing for the week.

We consider how a market closes for the week to be very important. Did the market make or lose ground for the week? Which way is the monthly Trade Triangles? Did the market close in the direction of the major trend? All of these thoughts are reflected for the most part in the weekly closing price of any market. That’s why we concentrate and bring to you our weekend updates, which allows you to see the big picture and not the minutia of every tick.

Let's look at Crude Oils price action........

The Crude Oil market once again backed off from the $90 a barrel level which we have talked about as being resistance for this market. The Williams % R is setting up for a negative divergence to the downside. Crude Oil reversed itself from the top of its Donchian trading channel yesterday. The monthly Trade Triangle is still negative for this market. We look for Crude Oil to continue to move in a sideways pattern much like it did for most of August. The longer term monthly Trade Triangle must be given more weight than either the daily or weekly Trade Triangles.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = + 60

Check out todays video that covers all 6 markets that Adam follows.....

Unlimited access to this and other trading videos FREE! Click Here!

Sharon Epperson: Where is Commodities Headed Next Week?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets and looks ahead to where oil and precious metals are likely headed next week.

Obamas "More Debt" Speech and Fridays Oil Numbers

It's looks like traders view President Obamas new "stimulus" plan, yes we'll say it, for just what it is, more debt. Crude oil traded lower in Thursday evenings overnight session consolidating some of Wednesday's rally putting oil into overbought territory.Oil prices are diverging but are neutral to bullish signaling that sideways to higher prices are possible near term. If October extends the rebound off August's low, the May-July downtrend line crossing near 92.45 is the next upside target.

If the oil bulls expect to maintain any of this momentum they will need to defend 83.20, And closes below Tuesday's low crossing at 83.20 would confirm that the rally off August's low has ended. If October renews the decline off May's high, the 75% retracement level of the 2009-2011 rally crossing at 71.73 is the next downside target.

First resistance is Wednesday's high crossing at 90.48. Second resistance is the May-July downtrend line crossing near 92.45. First support is Tuesday's low crossing at 83.20. Second support is the reaction low crossing at 82.95. Crude oil pivot point for Fridays trading is 89.23.