Storms Put Pressure on Crude Oil Shorts, Bulls maintain The Advantage

Crude oil is trading higher as the effects of tropical storm Lee and threats of a new storm work through the gulf region. But traders see this as temporary short covering rebound as lack of confidence in the Europe financial crisis dominates commodity futures. Crude oil Stochastics and RSI are overbought and are turning bearish signaling that the corrective rally off August's low might be ending soon.

Closes below August's uptrend line crossing near 84.26 would confirm that the aforementioned correction 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. Closes above the reaction high crossing at 89.19 are needed to confirm that a short term low has been posted.

First resistance is last Thursday's high crossing at 89.90. Second resistance is the May-July downtrend line crossing near 93.51. First support is August's uptrend line crossing near 84.26. Second support is the reaction low crossing at 82.95. Crude oil pivot point for Wednesday morning is 85.27.

Crude Oil, Gold and Natural Gas Market Commentary For Tuesday Afternoon

Crude oil closed down $0.58 a barrel at $85.87 today. Prices closed nearer the session high today. The bulls have faded after last Friday's very weak U.S. jobs report. I would not be surprised to see choppy trading mostly between $80 and $90 a barrel for the next few weeks.

Gold futures closed down 8.00 an ounce at $1,868.70 today. Prices closed nearer the session low today after hitting a fresh all time record high of $1,923.70 in overnight trading. Profit taking pressure was featured as the day wore on. A stronger U.S. dollar index and lower crude oil prices were also bearish factors for gold today. The fact that U.S. stock indexes had moved well off their daily lows by the time gold closed was also negated for the precious yellow metal.

Natural gas closed up 5.6 cents at $3.928 today. Prices closed nearer the session high today and saw short covering in a bear market. Bears still have the solid near term technical advantage. The next upside price breakout objective for the bulls is closing prices above solid technical resistance at $4.159.

The U.S. stock indexes closed weaker today but well up form the session lows. Last Friday morning's very week U.S. jobs report has sunk the indexes. Key for the stock index bulls is to hold prices above the August lows. If they can do that, then those lows will likely mark major lows. If U.S. stock indexes drop below the August lows, then fresh, serious chart damage would be inflicted to suggest a fresh leg down in prices in the near term. Trading action in the stock indexes this week will be extra important.


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Adam Hewison: It Never Seems to go Away, Does it?

It never seems to go away, does it?

What I’m referring to is the problems with the economy and the sovereign debt problems in Europe. It would appear as though no politician wants to touch these major economic problems with a ten foot pole. Of course like everyone else on the planet they are concerned about protecting their own jobs and getting reelected.

The market action in the equity markets today can only be described as negative. Gold may be having a major reversal, and the dollar is soaring to its best levels in quite some time. Like I have said before, the markets are never boring.

The pullback in crude oil from the top of the Donchian Trading Channel that we have mentioned in previous publications has now taken place. The October crude oil contract has also managed to ignite an intermediate term sell signal when it moved below the parabolic SAR indicator. This should indicate that we will see more sideways to lower price action. With a score of -65 we expect we will see a broader trading range with support coming in around the $80 a barrel level.

At the present time our long term monthly Trade Triangle indicator is negative while the weekly Trade Triangles is positive which is creating a mixed picture at the moment for crude oil. However, 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 = Negative
Combined Strength of Trend Score = – 65

Just click here for your FREE trend analysis of crude oil ETF USO

Crude Oil Market Commentary For Tuesday Morning Sept. 6th

As the world wakes up Tuesday to a fresh round of currency wars [the Swiss getting a shot in this morning] oil traders remain focused on 82.95 as their next support target. Crude oil was lower due to profit taking in overnight trading. Stochastics and the RSI are overbought and are turning bearish signaling that the a-b-c correction off August's low might be coming to an end.

Closes below August's uptrend line crossing near 83.81 would confirm that the aforementioned correction 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. Closes above the reaction high crossing at 89.19 are needed to confirm that a short term low has been posted.

First resistance is last Thursday's high crossing at 89.90. Second resistance is the May-July downtrend line crossing near 93.88. First support is August's uptrend line crossing near 83.81. Second support is the reaction low crossing at 82.95. Crude oil pivot point for Tuesday morning is 84.53.

Chris Vermeulen: The Black Monday the Public Doesn’t Know About

Tonight I jumped on the computer so see what the futures market was up to. The good news was that our short trade on the equities market was up 10% from our entry point last week. The bad news was that the stock market overseas was selling off big and so were US stocks. It was a black Monday in both the sky and on the screen…

I’m not really sure how many people watch the futures market but I do know the majority of people do not. So Tuesday morning there will be a lot of people in a panic when they see stocks gap down sharply.

Taking a look at the 4 hour charts you can see the recent price action which unfolded today. We have been anticipating this from early last week. So none of this should be a surprise.

Dollar Index 4 Hour Chart:
The dollar index broke out of it falling pattern and has made a run up to the first resistance level of 75.40. I feel we could see it go a little higher on Tuesday but overall it looks ready for a pause or pullback here.

SP500 Futures 4 Hour Chart:
The equities market has fallen sharply in the past week and the green circle is where we shorted the market using the SDS etf. We did take partial profits last week to lock in 7.4% profit in a couple days, but we still hold the balance of the position which is currently up over 10% using today’s futures price.

The SP500 looks to be getting oversold here and is now entering the previous low set a few weeks back. I will be looking to tighten stops and or exit the position early this week before a sharp rebound takes place.

Bond Futures 4 Hour Chart:
Bonds are a safe haven for investors when fear is running high. The past couple trading session’s the price of bonds have shot up. This tells me panic selling in the stocks market has starting and that generally means we are nearing and tradable bottom for stocks…..

Gold Futures 4 Hour Chart:
Gold is the other safe haven. Here again we see money flow into gold at a very quick pace….We will need to see some resolutions in Euro land before gold will trade lower or sideways, but until then I think scared money is going to keep rolling into gold.

Crude Oil Futures 4 Hour Chart:
Oil has drifted its way up into a resistance level as of late last week only to find overhead supply. Once the selling started oil slid lower at a steady rate all the way back down to a short term support zone. Now we are waiting to see if it will make a double bottom at $79 or bounce here

Weekend Trading Conclusion:

In short, Tuesday will be a volatile session judging from today’s sharp price action. Fear is driving prices at the moment and until everyone panics out of stock positions and dumps their money into the save havens we will not see a bottom form. Generally this takes 2-5 days to play out but time will tell.

I hope this quick Labor Day update helps get you back on track for trading this week.
Consider joining me at The Gold and Oil Guy for ETF trade ideas on the SP500, Oil, Gold, and Silver with great accuracy. Check it out at The Gold and Oil Guy.Com

Do You Really Know How To Trade Ticker USO?

Markets are closed so let's talk shop. Here is a great article from our friends at Wolf Option Trading. Let's see how they trade the USO contango and how to partially offset it.......

The United States Oil ETF, LP (USO) is a twin of The United States Natural Gas ETF, LP (UNG), a futures based ETF that encounters issues with contango. If you are investing in futures based ETFs you should already be familiar with the issue and know how it impacts the funds. Thereby, I am not going to go into great detail about the pitfalls, but simply talk about it briefly.

USO owns crude at $85 and by this time next year the futures are pricing crude at $90 or roughly 6%. If all remains the same, this means that anyone buying USO today will not make money and instead lose money, if oil stays below $90. A year of losing money unless prices go up by more than 6% is never fun.

The bright side of this dark oily substance has many folds. Since oil is denominated in US dollars, you have traders that use it as a dollar hedge trade, bad for oil prices going up when a flight to safety is occuring. However, the world will not always live in fear and when it stops, then the trades get reversed and oil and USO then will go up. Oil has many more types of traders (aside from actual fundamental supply/demand folks) such as inflation hedgers, gold/oil ratio folks, oil/natural gas ratio folks, brent/wti ratio folks and a good amount more I am probably neglecting to mention. Fundamentally, the case for higher oil prices is strong and only further economic weakness would cause prices to go substantially lower.

It is likely oil prices will be much higher in the future than $85, but for folks buying USO they have to factor in the amount of contango they will face in order to see if it is a wise time to buy and hold currently. My take is that is probably early to buy crude at $85 and speculate that it will be above $90 by this time next year. There could be a better entry for a buy and hold investor.

However, everyone always has that itch to be more aggressive or look for more bullish things than may exist. I am not immune and it takes a lot of self discipline to be more strategic and wait for better opportunities.

The only easy way to partially offset contango is by being a net seller of options. Many options strategies are available that allow you to be a net seller of options while being bullish on the underlying instrument. Probably the most attractive strategy in my opinion is selling puts greater than 5% OTM and buying an ATM call spread.

For USO, January 2013 options are the only ones available to express a view past April 2012. January 2013 $25 put options are roughly 32% OTM but fetch a net credit of $2.45. The $34-45 January 2013 call spreads would cost $3.49. A net debit of $1.04.

The trade essentially would get you bullish on oil at $57 without factoring in contango. However, if one assumes that contango would be 15% (random) then one would be long oil at $70. The call spread gives one upside in oil prices up to $115 before getting called away from the trade if there was no contango. If one were to factor in a 15% contango rate, then oil prices would have to be $132 to get called away.

Total profits on the trade would be very high if one were to get called away at $45. The returns against total cash involved in the trade would be $9.96 net profits against a $1.04 net debit. However, that can be deceiving as margin requirements would be higher than the net debit but those vary across brokerage firms. The MVAR would be the better calculation and that would be the cost average one would be assigned USO at. $26.05 is the cost average of the total trade ($1.04 net debit added onto the $25 short puts) and a $9.96 net profit / $26.05 would still get one a 38.24%.

Overall, the trade is a good one for people speculating on much higher oil prices than $85 in a year's time, yet doesn't force one to take on shares at current prices.

Posted courtesy of Wolf Option Trading

Disclosure: The author does not have positions in any stocks mentioned, but may initiate a long position in USO over the next 72 hours.

J.W. Jones: Labor Day Special

If you are a regular reader here and have followed the amazing trades made in 2011 by our affiliate J.W. Jones, then it might be time to take him up on this Labor Special. Sign up now and get 3 months for the price of 1 with JW's options trading newsletter. And see for yourself how you can profit from his service!

JW's Options Trading Signals service provides Directional Based Trades, Time Decay Trades, and Earnings Based Trade alerts on ETFs and leading component stocks. He begins each session with a pre-market look at macroeconomic trends & indicators, plus overnight/pre-market chart analysis of the S&P 500, Bonds, Precious Metals and Oil using futures contracts.

For the ETF & stock trades, JW drills down to identify sectors and leading sector components likely to react most to a given trend, news event due out and or volatility levels. He then enlists a combination of pattern recognition and momentum indicators to pick winning option combinations.

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You ARE a Hedge Fund Manager.....So What Are The Most Successful Managers Buying?

Sometimes we don't see it, but every one of you reading this that have taken the step to manage your own money, your own fund....you are a hedge fund manager [you are hedging, aren't you?]. And like any business, yes you are in business to make yourself money, you should look at what your peers are buying.

Two of my favorite sites are Insider Monkey and Guru Focus. How can you even think about adding crude oil and energy stocks to your portfolio without looking at what the most successful people in our industry are buying.

I will let you do your own research, but I have been surprised at some of the small american producers that are showing up in the portfolios of the "great oil minds". Names like Plains Exploration and Production Company, ticker PXP, Sandridge Energy ticker SD, Murphy Oil Corp. ticker MUR and Gastar Exploration ticker GST. Gastar? A small company that just received permits to drill in Utah and should producing oil by October.

Markets are closed and it's a slow news period for the Labor Day weekend so take some time and see what these guys are buying.

Traders Always Let Us Know Where They Stand Before a Long Weekend...And it Doesn't Look Good!

The crude oil bears have a renewed advantage as bad news in employment numbers as well as a fresh round of "goal post moving" from Washington creates global investment anxiety. Falling the most it has in two weeks.

Crude oil closed lower on Friday due to the bad news and profit taking as it consolidates some of the rally off August's low. The low range close sets the stage for a steady to lower opening on Tuesday. Make sure you know when the world is trading as this is a holiday weekend. Check out our post Labor Day CME Hours so you won't get tripped up.

The oil companies themselves will not be taking a holiday weekend as Tropical Storm Lee has producers working around the clock to secure platforms, rigs and personal in the Gulf of Mexico. If the storm lives up to predictions it could limit product flow out of the gulf to 50% of normal production. And oil prices still fell today?

Stochastics and the RSI remain overbought and closes above the reaction high crossing at 89.19 are needed to confirm that a low has been posted. If October renews this summer's decline, the 75% retracement level of the 2009-2011 rally crossing at 71.72 is the next downside target.

First resistance is Thursday's high crossing at 89.90. Second resistance is the May-July downtrend line crossing near 93.88. First support is the 20 day moving average crossing at 85.51. Second support is August's low crossing at 76.15.

Labor Day CME Hours

The CME stock indexes close at 10:30 a.m. CST on Monday, September 5, 2010. If you intend on daytrading please make sure you are flat before this close as the market does not open up again until Tuesday night at 5 p.m. CST!

Here is a link for the upcoming CME holiday hours

Be very careful and aware of early closes. Every holiday we talk to experienced traders that get stuck in trades because they did not pay close enough attention to the CME holiday hours. And again, if you are using daytrade margins please make sure you are flat at the early close time.

Weak Unemployment Numbers Drive Markets Lower

Crude oil was lower due to profit taking in overnight trading as it consolidates some of this week's rally. Of course disappointing unemployment numbers have contributed to commodities and equities falling hard in early Friday trading.

Thursday trading formed a temporary top at 89.54 with the 4 hour MACD crossed below signal line. Of course the crude oil bears are thrilled with 89.61 support turned resistance remaining intact, and Friday mornings sharp decline [-3.39 as we go to press] is all the prove we need. We will remain bearish.

Closes above the reaction high crossing at 89.61 are needed to confirm that a short term low has been posted. Closes below the 20 day moving average crossing at 85.58 would signal that a short term top has been posted. 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 Thursday's high crossing at 89.54. Second resistance is the May-July downtrend line crossing near 93.95. First support is the 20 day moving average crossing at 85.58. Second support is the reaction low crossing at 82.95. Crude oil pivot point for Fridays trading is 89.01.

Sharon Epperson: Where is Commodities Headed on Friday?

With a new storm brewing in the Gulf of Mexico being front and center in traders minds going into Friday trading, Sharon Epperson discusses the today's activity in the commodities markets and looks at where crude oil and precious metals are likely headed tomorrow.

Fridays Open Becomes Critical For Oil Bulls to Gain The Upper Hand

Crude oil closed slightly higher on Thursday as it extends the rally off August's low. The mid range close sets the stage for a steady to higher opening on Friday. Stochastics and RSI are overbought but todays bullish close signals that the oil bulls have gained some momentum. Solid follow through is a must on Friday if the bearish trend is to come to an end anytime soon.

Oil companies with workers in the Gulf of Mexico helped to push prices to a 4 week high as evacuations started on rigs operating in the Gulf. Traders appear to be pricing in supply disruption well ahead of the storm.

Crude oil is at the top of the Donchian Trading Channel and is heavily overbought. We would not be surprised to see a pullback from current levels. At the present time our long term monthly Trade Triangle is negative, while our short term daily and weekly Trade Triangles are positive. This is creating a mixed picture for crude oil.

However, the longer term monthly Trade Triangle must be given more weight than either the daily or weekly Trade Triangles. We expect this market to pull back from current levels and from the top of its Donchian Trading Channel.

Closes above the reaction high crossing at 89.19 are needed to confirm that a low has been posted. If October renews this summer's decline, the 75% retracement level of the 2009-2011 rally crossing at 71.72 is the next downside target.

First resistance is the reaction high crossing at 89.19. Second resistance is the May-July downtrend line crossing near 94.26. First support is the reaction low crossing at 79.38. Second support is August's low crossing at 76.15.

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 = + 70

Crude Oil Bears Enjoying Strong Resistance at 89.54

Crude oil was slightly lower in overnight trading as it consolidates some of this week's rally. Stochastics and the RSI are overbought and we remain bearish with 89.54 support turned resistance still providing crude oil bears with some of the strongest resistance we have seen in some time.

Closes above the reaction high crossing at 89.19 are needed to confirm that a short term low has been posted. Closes below the 20 day moving average crossing at 85.52 would signal that a short term top has been posted. 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 89.54. Second resistance is the May-July downtrend line crossing near 94.35. First support is the 20 day moving average crossing at 85.52. Second support is the reaction low crossing at 82.95. Crude oil pivot point for Thursday trading is 88.67.

Dollar’s On the Verge of a Relief Rally...... Look Out!

From Chris Vermeulen of The Gold and Oil Guy.Com........

Let’s talk about the dollar for a moment… The US Dollar has been stuck in a very large trading range during the past 4 months. But when the dollar actually breaks out of this pattern in either direction we should see some big price movements across the board in stocks and commodities.

From July through mid-August I was bearish on the dollar. But over the past 2 weeks the price action has become more neutral/bullish in my opinion. Its clear there is still indecision with the dollar value because every surge in price either up or down is quickly followed by a surge in the opposite direction. The key here is that the support level down at the 73.50 area has held more than three times and now I think the downward momentum is about to shift. The UUP bullish dollar etf is a good option.

Dollar Index Chart

Gold Chart:
Looking at the gold chart I see potential for another sharp drop to the low $1600’s. While I like the look of this chart for lower prices there is still a wild card which is the Euro-Land issues… I’m not willing to bet on lower prices because we could wake up any day to some poor news which instantly sends gold higher. Rather I am waiting for things to unfold then look to buy again for another 10-20% gain on the next rally.

Crude Oil Chart:
This chart is straight forward… The trend is down and at this time all bounces are to be looked at as shorting opportunities.

SP500 Index:
The equities market has broken down sharply over the past couple months and now we are seeing a rebound and small cap stocks are making big gains. With the dollar looking bullish and stocks trading up at resistance I have a feeling we may see another downward move within the next week or so to test the lows or make a new low before putting in a real bottom.

Mid-Week Trend Trading Conclusion:

In short, I feel the market overall is leaning towards lower prices in the coming week or two. After that we will have to re-analyze because it may be a fantastic buying opportunity for stocks and commodities. Consider joining me at The Gold And Oil Guy for ETF trade ideas on the SP500, Oil, Gold, and Silver with great accuracy. 

Commodity Corner: Crude Oil Edges Lower on Government Data

Crude oil futures reversed yesterday's upward move on government reports indicating a rise in oil stockpiles. Light, sweet crude ended a four day winning streak Wednesday, settling 9 cents lower at $88.81 a barrel. Meanwhile, its European counterpart gained 83 cents to settle at $114.85 a barrel.

The U.S. Department of Energy reported an increase in oil inventories by 5.3 million barrels and a 2.8 million barrel drop in gasoline stockpiles. The build in oil inventories was outweighed by the draw in gasoline stockpiles, stifling the drop in crude prices.

In a choppy trading session, crude traded within a range of $87.67 to $89.54 while Brent crude fluctuated between $113.68 and $115.14. Traders remain wary of Tropical Storm Katia, located in the Caribbean Sea. The National Hurricane Center said Katia has a 30 percent chance of becoming a hurricane later Wednesday.

Front month natural gas passed the $4 mark for the first time Wednesday since Aug. 15. Natural gas advanced 14.5 cents to end the trading session at $4.05 per thousand cubic feet. Prices received a boost Wednesday as the Destin Pipeline, a major pipeline that transports gas from offshore wells in the Gulf of Mexico to processing facilities in Mississippi, was shut down. Owner BP did not say how long the pipeline would remain offline.

September gasoline gained 4 cents, or 1.2 percent, settling at $3.03 a gallon at expiration. The intraday range for gasoline prices was $3.002 to $3.057.

Posted courtesy of  Rigzone.Com

Oil N Gold: Crude Oil Technical Outlook For Wednesday Morning

Crude oil's choppy recovery extends further by taking out 89.00 resistance and reaches as high as 89.21 so far. Intraday bias is back on the upside and further rise could be seen. Focus is now on 89.61 support turned resistance We'll stay bearish as long as this resistance holds and expect reversal soon. Below 82.95 will flip bias back to the downside for 75.71 support first. Break will resume whole decline from 114.83 towards 70 psychological level. However, sustained trading above 89.61 will argue that the near term trend in crude oil might have reversed and will bring stronger rebound towards 100.62 resistance instead.

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.

Nymex Crude Oil Continuous Contract 4 Hours Chart at Oil N Gold.Com

Sharon Epperson: Where is Gold and Commodities Headed on Wednesday

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.

Adam Hewison: Is The Market Ready For A Rally?

The equity markets put in a very strong performance yesterday, pushing to their best levels since August 5th. We would not be surprised to see this very overbought market possibly rally to the 1230 area and 1250 zone.

The gold market once again bounced over the $1,800 an ounce hurdle and is currently trading at $1,822. This market needs to regroup further if it is going to challenge the $2000 level. The trend is in a positive mode despite the recent $200 pullback.

Crude oil is now very much overbought and approaching the upper levels of the Donchian trading channel. We expect that this channel and the fact that this market is overbought will provide enough resistance to any halt any further upside action.

The dollar index continues to bounce off the support level of 73.50 which we have outlined on numerous occasions. Currently this market is trading at 74.00. The CRB index has rallied quite dramatically after making a low on August 9th. This market is largely reflective of the move in crude oil.

Now, let’s go to the 6 major markets we track every day and see how we can create and maintain your wealth in 2011.

S&P 500
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 = + 70

The S&P 500 index rallied to its best levels since August 5th. However, this market is heavily overbought and we still view the longer term trend, based on our monthly Trade Triangle, as negative for this market. We would not rule out a potential rally to the 1230 level or even the 1259 level, both of which represent Fibonacci retracements. You may remember that the 1250 area was key support in this index. It would not be unusual for the market to go back up and test this level now as resistance.

SILVER
Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trend = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = + 85

The silver market is definitely the stepchild of the metals market and would appear to be regrouping around the $41.00 level. Both of our intermediate and long term indicators are friendly to the silver market and we would not rule out further strength in the near term. The Williams % R indicator is trading around –50 and it is neither oversold nor overbought at this time.

GOLD
Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = + 85

The gold market appears to be settling down around the $1,800 an ounce level and with our intermediate and longer term indicators still positive, we must remain in the bullish camp for now. It would appear as though the $1,770 level should provide some support on any pullbacks in this market.

The goal market is in the mid range of its major oscillator, the Williams % R, and therefore is not giving us any clues as to its next swing direction. We would imagine a move over $1,850 will be a very positive indicator for gold. Both intermediate and long term traders should maintain long positions with money management stops in place.

CRUDE OIL
Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = – 65

Please note that our comments are based on the October contract. The 89.19 level we mentioned yesterday was enough to stop the current rally today. The crude oil October contract is very close to the top of the Donchian trading channel. On top of that, the market is extremely overbought and we would not be surprised to see a pullback from current levels. At the present time our long term indicator is negative and our short term weekly Trade Triangle is positive, sending a mixed picture for crude oil. However, the longer term monthly Trade Triangle must be given more weight then the two shorter term ones.

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

Once again the dollar index bounced from the support level at 73.50. The market traded over the 74 level after finding support at 73.50. With a Chart Analysis Score of –60 we would want to trade this market using our Donchian Trading Channels and our Williams %R indicator. The index remains below its 200 day moving average while our longer term Trade Triangle remains positive.

REUTERS/JEFFERIES CRB COMMODITY INDEX
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

This index has put in a good performance largely through the move up in crude oil and other commodity type markets. At the moment our indicators are mixed, indicating the absence of a strong trend in either direction. The CRB index is overbought and also at the top of the Donchian trading channel.

We would not be surprised to see some profit taking coming in to this market and a pullback from current levels. Our bias is towards inflation in the future, but I’m expecting to see more of a two way market in this index in the next week or so. Intermediate and short term traders should be out of the market and on the sidelines at the present time.

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Federal Reserve Statements Give Bulls the Upside Momentum

Crude oil closed up $1.49 a barrel at $88.76 today. Prices closed near the session high today and hit a fresh three week high as the bulls gained some more upside technical momentum today. Prices have been trending higher for three weeks. Today, the crude market got a boost when a U.S. Federal Reserve governor hinted at more quantitative easing, which would be bullish for commodities.

Natural gas closed up 8.4 cents at $3.914 today. Prices closed near the session high today and did hit another fresh contract low early on. Short covering in a bear market was featured. Bears still have the solid near term technical advantage. The next upside price breakout objective for the bulls is closing prices above solid technical resistance at last week's high of $4.024.

Gold futures closed up $37.40 an ounce at $1,829.00 today. Prices closed nearer the session high today and saw bargain hunting and some fresh safe haven buying interest after a U.S. Federal Reserve Board governor said he wanted aggressive easing of monetary policy by the Fed and was worried about the U.S. economic recovery.

The gold bulls have made a strong recovery from last week's spike low on the daily chart, to suggest last week's low will become a "reaction low" on the daily bar chart. If prices can continue to work sideways to higher in the near term, then bulls would gain confidence the uptrend on the daily chart has been restarted.