Gold Ready to Attack Prior Highs in the 1900’s

From David Banister at Market Trend Forecast.......

It’s been several weeks since I’ve written about Gold and we have had a wild ride since the 1910-1920 highs in August.  At the time as we approached I forecasted a major correction was nigh and we were shorting the rise from 1862-1910 prior to a huge $208 drop that took place over just a few days.  We covered our short at $1725 and then Gold rallied back to a double top at $1920 and then fell back to $1531.

That pullback to $1531 qualifies as a Fibonacci retracement of the 34 month rally from $681 to $1920, and would also qualify for a price low for a 4^th major wave correction that I discussed in prior forecasts.  My initial targets for the Gold pullback were $1480-$1520 if the $1650 area was violated.  Most recently we have seen Gold run up to 1681 which is another Fibonacci resistance zone a few times and then back off to the low $1600’s.

With the recent push over $1681, we can now confirm the 4^th wave is over at $1531 lows and that the 5^th wave is likely in the very early stages, but beginning to build steam. I will say that we want to make sure the 1650-1680’s areas are defended by Gold on any pullbacks in order for this forecast to remain valid.  During this 5^th wave up, eventually we should see the $2380 ranges in Gold, but it will not take place overnight.  In the next few months I am looking for Gold to attack the $1900 range, possibly even by year end, and then in 2012 attacking the $2000 plus ranges.

With all of the Macro events in Europe changing on an almost daily basis, the whipsaws in both the precious metals and equities markets are difficult to forecast and trade for most investors. However, Gold has been moving in defined Fibonacci and wave patterns for ten years now, and has about three years left in a 13 year bull cycle if I’m right.

Below is the updated weekly chart of Gold.  You can see prior low’s as they related to oversold indicators, and where we just came off the 1531 lows and its Fibonacci pivot along with the oversold indicators below.

Look for Gold to attack 1775 first, then 1800, 1840, then 1900 in the coming 6-10 weeks or so.

Gold Forecast

You can get 3-5 updates a week on Gold, SP500, and Silver by visiting my website at Market Trend Forecast

Check out David's latest articles at "The Market Trend Forecasts"

Crude Oil Bulls Cling to a Technical Advantage After a Rough Go in Tuesday Trading

Crude oil closed down $2.34 a barrel at $90.86 on Tuesday. Prices closed near mid range today and saw more profit taking pressure from recent gains. A higher U.S. dollar index and weaker stock indexes pressured crude again today. Crude bulls still have the overall near term technical advantage, but are fading and need to show fresh power soon.

Natural gas closed down 14.7 cents at $3.782 today. Prices closed nearer the session low today. The bears still have the solid overall near term technical advantage.

Gold futures closed down $6.60 an ounce at $1,719.20 today. Prices closed nearer the session high today after being under stronger selling pressure early on today. The market was pressured by a stronger U.S. dollar index and lower crude oil prices.

Profit taking from recent gains in gold was seen again today. No chart damage has occurred this week. Bulls still have the overall near term technical advantage. A five week old uptrend is still in place on the daily bar chart.

Phil Flynn: Confidence Game

When it comes to the markets confidence is key. Yet obviously if you look at the last 24 hours confidence has been shaken. Whether it be the call for a Greek referendum on the EU bailout or the weakness in the Chinese manufacturing data or the situation with the bankruptcy of MF Global confidence has been shaken. And despite the blow to confidence, the markets are something that you can believe in. You can also believe in the protections offered the customer provided by the exchanges.

The oil market, despite the absence of MF Global traders, had a very low volume and oil prices acted like they would have if all traders were present. They reacted as you might expect to the movement from the Japanese yen and dollar intervention and the economic data. They reacted to strong Libyan oil production that rose 245,000 barrels to 345,000, the highest level since March. Or strong production out of Iraq and the highest OPEC oil production since 2008.....Read Phil's entire article.


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Crude Oil Declines Below $90 on China Manufacturing Slowdown, European Debt

Crude oil fell below $90 a barrel for the first time in a week in New York on speculation commodity demand will falter as Chinese manufacturing slows and European leaders struggle to contain the region’s debt crisis.

Futures slid as much as 3.8 percent, after posting their biggest gain last month since May 2009, amid signs of higher production from OPEC members as Libya bolstered exports. China’s Purchasing Managers’ Index fell for the first time in three months in October, a report showed. Greek Prime Minister George Papandreou said he will submit the European Union’s new financing deal for a national referendum.

“The list of things weighing on the market is long,” said Olivier Jakob, managing director at Petromatrix GmbH in Zug, Switzerland, who correctly predicted that this year’s oil rally would stall. “There’s the Chinese PMI, the Greek referendum taking EU leaders by surprise, the euro-dollar collapsing.”

Oil for December delivery declined as much as $3.56 to $89.63 a barrel in electronic trading on the New York Mercantile Exchange and was at $90.56 as of 12:48 p.m. London time. Futures fell 0.1 percent yesterday and climbed 18 percent in October......Read the entire article.


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Shell Prepares for Start of Offshore Alaska Drilling

Royal Dutch Shell (RDSA) is currently deploying some workers and infrastructure in Alaska to start drilling for oil and gas in the Arctic next summer as the oil giant is "optimistic" that new legal challenges won't derail an exploration plan on which it has spent $4 billion, a senior executive said Monday.

"We are already spending money building resources, putting people in place to be ready to drill in the summer of 2012," Marvin Odum, president of Shell Oil Co., the U.S. unit of the Anglo-Dutch giant, told Dow Jones Newswires in an interview. "Because the buildup time to have all the resources on time, it's a fairly long runway we have to start working [on] now to be ready next summer. Spending is going to ramp up after the end of year, in the first months of next year."

The remarks came after some environmental groups filed this month a formal challenge to air quality permits that Shell needs to drill in the Arctic. The permits under question were approved by the U.S. Environmental Protection Agency in September and they allow Shell to use the drillship "Discoverer" and a fleet of icebreakers and other vessels in the Chukchi and Beaufort Seas. In September, other environmental groups also sued the Interior Department for approving the company's exploration proposal for the Beaufort.

"We expect legal challenges every step of the way. But we are cautiously optimistic that we will be in a position to drill next year," Odum said.....Read the entire article.


How To Trade Market Sentiment

Crude Oil Bulls Have the Advantage Despite Overbought Conditions

Crude oil closed lower on Monday while extending last week's trading range. The mid range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are overbought but are neutral to bullish signaling that sideways to higher prices are possible near term.

If December extends the rally off this month's low, the 50% retracement level of the May-October decline crossing at 95.32 is the next upside target. Closes below the 20 day moving average crossing at 87.00 are needed to confirm that a short term top has been posted.

First resistance is the 50% retracement level of the May-October decline crossing at 95.32
Second resistance is the 62% retracement level of the May-October decline crossing at 100.08

First support is the 20 day moving average crossing at 87.00
Second support is the reaction low crossing at 83.40


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Crude Drifts Lower As Volume Drops Out

Crude futures drifted lower Monday amid light volume as trading was halted for clients of MF Global, one of the market's largest commodity brokers that filed for bankruptcy Monday.

Volume was less than half of normal levels, with fewer than 300,000 contracts traded compared with the 200 day moving average of nearly 660,000, as exchanges informed clients of MF that they would be limited to liquidating positions and otherwise unable to trade until they moved their accounts to other brokerages.

Brokerage firms such as MF provide vital "clearing" services for the markets, acting as escrow agents of sorts to match orders, handle payments, and execute and settle trades. The firm counted many major hedge funds and commercial hedging clients among its customers. The chaotic process got under way shortly after the opening of the market in New York on Monday, frustrating traders with untold delays as they processed papers to move accounts and positions elsewhere.

"I'm unable to trade," one trader and client of MF said, on the condition he not be identified. "Nothing can go in or out of your account until it moves over to another clearinghouse, and that is a function of paperwork, begun during the trading day, which is not the way to do it".......Read the entire Rigzone article.

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ConocoPhillips Unloads $1.5 Billion in Vietnam Assets to PetroVietnam

PetroVietnam Monday placed a $1.5 billion bid Monday to buy ConocoPhillips' Vietnamese oil assets in the disputed waters of the South China Sea, according to a Reuters report.

The move is considered to be the Hanoi based oil and gas group's official attempt to acquire the assets in effort to protect the city's territorial claims of the waters. Vietnam, Japan and the Phillipines continue to protest China's claim of territorial authority of the South China Sea.

If PetroVietnam's bid is accepted, the oil and gas group would take control of.......

23.3% stake in Su Tu Den oilfield in five oil fields located in the Cuu Long basin bock
15-1. 36% stake in the Rang Dong field in Block 15-2. 16.3% stake in the Nam Con Son gas pipeline that connects the Nam Con Son basin with southern Vietnam.

The sale of the assets is part of Houston based ConocoPhillips' March 2010 plan to divest non core assets to reduce debt and enhance shareholder returns.


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Crude Oil, Natural Gas and Gold Market Summary For Monday Oct. 31st

Crude oil was lower due to profit taking overnight but remains above the 38% retracement level of the May-October decline crossing at 90.56. Stochastics and the RSI are overbought but remain neutral to bullish signaling that additional short term gains are possible.

If December extends this month's rally, the 50% retracement level of the May-October decline crossing at 95.32 is the next upside target. Closes below the 20 day moving average crossing at 87.00 are needed to confirm that a short term top has been posted.

First resistance is the 50% retracement level of the May-October decline crossing at 95.32 Second resistance is the 62% retracement level of the May-October decline crossing at 100.08

Crude oil pivot point for Monday morning trading is 93.09

First support is the 10 day moving average crossing at 90.28
Second support is the 20 day moving average crossing at 87.00

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Natural gas was higher overnight as it extends last Friday's short covering rally. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term.

Closes above the reaction high crossing at 4.039 are needed to confirm that a short term low has been posted. If December renews this year's decline, monthly support crossing at 3.225 is the next downside target.

First resistance is the reaction high crossing at 4.039
Second resistance is the 25% retracement level of the June-October decline crossing at 4.133

Natural gas' pivot point for Monday morning trading is 3.878

First support is last Thursday's low crossing at 3.724
Second support is monthly support crossing at 3.225

The Buy and Hold Myth.....Is Buy and Hold Back?

Gold was lower due to profit taking overnight as it consolidates some of the short covering rally off September's low. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If December extends the aforementioned rally, the 62% retracement level of September's decline crossing at 1775.20 is the next upside target. Closes below the reaction low crossing at 1604.70 would confirm that a short term top has been posted.

First resistance is last Friday's high crossing at 1754.00
Second resistance is the 62% retracement level of September's decline crossing at 1775.20

Gold's pivot point for Monday morning trading is 93.09

First support is the reaction low crossing at 1604.70
Second support is September's low crossing at 1535.00

Dennis Gartman’s 22 Rules of Trading

The Unfortunate Truth About an Overbought Stock Market

Writing about financial markets is probably the most challenging endeavor I have ever immersed myself into. I am a trader first and a writer second, but I have really come to enjoy scribing missives about financial markets because it really forces me to concentrate on my analysis.

Writing for the general public has really enhanced my perception of the market and forced me to dig deeper and learn new forms of analysis. I find myself learning more and more every day and the beauty of trading is that even for the most experienced of traders there is always an opportunity to learn more. As members of my service know, I strive to be different than most of my peers as my focus is on education and being completely transparent and honest.

I want readers to know that I was wrong about my recent expectations regarding the European sovereign debt summit. I was expecting the Dollar to rally based on the recent price action and quite frankly I expected stocks to falter after running up nearly 15% into the announcement. My expectations could not have been more untimely and incorrect.

I share this with you because as I read and listen to market pundits discussing financial markets I find that too many writers and commentators flip flop their positions to always have the appearance of accuracy. In some cases, there have been television pundits that stated we were possibly going to revisit a depression in 2012 no more than 5 weeks ago. These so called experts have now changed their positions stating that we have started a new bull market in recent weeks. How can anyone take these people seriously?

Financial markets are dynamic and consistently fool the best minds and most experienced traders out there. Financial markets do not reward hubris. If a trader does not remain humble, Mr. Market will happily handle the humbling process for him. I was humbled this week. I was reminded yet again that  financial markets do not take prisoners and they show no mercy. I am sharing this with readers because I want you to know that I refuse to flip flop my position without first declaring that I was wrong.

When I am wrong, I will own up to it purely out of sense of responsibility. My word and my name actually mean something to me, and while I strive to present accurate analysis I am fallible and I will make mistakes. The key however to the mistakes that I make is my ability to learn from them and the past week was a great learning opportunity.

After regrouping and stepping back after the price action on Thursday, a few key elements really stood out to me regarding recent price action. First of all, in the short term we are extremely overbought. The chart below illustrates the number of stocks in domestic equity markets trading above their 20 period moving averages over the past 5 years:

Overbought Stock Momentum

What is apparent from the chart above is that prices are almost as overbought right now as they have been anytime in the past 5 years. The number of domestic equities trading above their 50 period moving average over the past 5 years is also nearing the highest levels seen during the same period as the chart below illustrates:

Trading Stock Market Momentum

Equities trading above the 100, 150, and 200 period moving averages are somewhat subdued by comparison meaning in the short run a possible correction appears likely. The longer term time frames are no longer oversold, but they have considerable upside to work with before we could declare that they are overbought.

Additionally, the details of the European Union’s supposed solution have not yet been released raising questions going forward. Every move that is made will create unintended consequences. As an example, since Greece had 50% of their debt written down why would Ireland or Portugal refuse to pay their debts in full?

The Irish and Portuguese governments are going to come under pressure from their constituents to renegotiate the terms of their debt based on the agreement that was made with Greece recently. Spain politicians will likely be under pressure as well. The decisions made in these so called bailouts reverberate across the geopolitical spectrum. Moral hazard still exists, it just evolves over time.

The risk premium of sovereign debt has to be adjusted since credit default swaps did not trigger payment as the write downs were considered “voluntary.” Thus credit default swaps are not the answer to hedge sovereign debt as it would appear that governments have the ability to write down debt without triggering a default based on the status of the write down. The long term unintended consequences could be severe and are unknown at this point in time.

In addition to the unknown factors impacting the European “solution”, next week the Federal Reserve will have their regular FOMC meeting and statement. There has been a lot of chatter regarding the potential for QE III to come out of this meeting. While I could be wrong, initiating QE III right after the Operation Twist announcement would lead many to believe that Operation Twist was a failure.

With interest rates at or near all time lows and the recent rally we have seen in the stock market, it does not make sense that QE III would be initiated during this meeting. It is possible that if QE III is not announced the U.S. Dollar could rally and put pressure on risk assets such as the S&P 500 in the short to intermediate term. If this sequence of events played out, a correction would be likely. The following is a daily chart of the S&P 500 with possible correction targets in place:

SPY Overbought Stock Market

Right now it is a toss up in the financial blogosphere as to the expectations of where price action will head. Are we near a top? Is this the beginning of a new bull market? I scanned through several charts Friday evening and Saturday morning and came to this realization. If the market is going to breakout and this is not a top but the beginning of a major bullish wave higher, then the Nasdaq 100 Index (NDX) has to breakout over the 2011 highs.

The Nasdaq 100 Index is comprised of stocks such as AAPL, GOOG, INTC, and YHOO. In order for a new leg higher to transpire, hyper beta names like AAPL and GOOG have to breakout higher and show continuation with strong supporting volume. If the NDX does not breakout over the 2011 highs, a top could potentially be forming. The daily chart of the Nasdaq 100 Index is shown below:

QQQ Overbought Market

In conclusion, the short term looks like a possible correction could play out. However, it is critical to note that the longer term time frames are more neutral at this time. Furthermore, if price action cannot penetrate the 2011 highs for the Nasdaq 100 Index, I do not believe that a new bull market will have begun. If the Nasdaq 100 Index cannot breakout above the 2011 highs, we could be putting in a potential top going into the holiday season.

In closing, I will leave you with the thoughtful muse of famed writer and minister Hugh Prather, “Almost any difficulty will move in the face of honesty. When I am honest I never feel stupid. And when I am honest I am automatically humble.”

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J.W. Jones

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