Crude Oil Fails to Break Resistance Gold Slides on Traders Lock in Gains

Crude Oil Fails to Break Resistance

Crude Oil (WTI) - $80.73 // $0.52 // 0.64%

Commentary: Crude oil is lower in the overnight session as traders continue to take profits after a blistering run from the low-$70’s. The push-pull dynamic between a bullish global economic outlook and ample supplies continues. So far these two factors have offset each other, which has allowed crude oil to stay within its 12-month range between the high-$60’s and low-$80’s. With prices now at the top end, it is only natural that traders would look to lock in gains. The question now becomes, is oil now poised to head toward the lower end of the range or will it breakout to the upside?

While another trip into the $70’s is possible, we would look for opportunities to buy rather than sell. Risk assets are overbought, which will likely lead to a round of profit taking, but the global economy seems to be on firm footing. Surging demand for commodities including crude should begin eating into the supply surplus. We wouldn’t be buyers here mind you, but things begin to look interesting in the mid-$70’s.

Technical Outlook: Prices continue to consolidate, with positioning effectively unchanged for the past ten days after prices put in a Bearish Engulfing candlestick pattern following a test of resistance at Augusts’ swing near the 83.00 figure, hinting that a move lower is ahead. A break below initial support at $81.20 – the 23.6% Fibonacci retracement of the latest upswing – exposes the 38.2% and 50% levels at $79.21 and $77.60, respectively.

Commodities – Metals

Gold Slides on Traders Lock in Gains

Gold - $1358.55 // $9.85 // 0.72%

Commentary: Gold is continuing lower to kick off the new week after tumbling almost one percent on Friday. But even with Friday’s decline, gold rallied almost $35 last week, so a bit if giveback is to be expected. There is no way to tell whether this is the start of the next major correction in the metal, but we sure would not be buying this dip. It was only a few weeks ago that prices first surpassed $1300 and yet prices are still well above that level.

Gold’s recent correlation with U.S. equity markets is extremely strong at 0.93, suggesting that if stocks sell off from here, gold will come along for the ride. And as gold has risen much farther and much faster than stocks, it is likely that it will fall much farther and faster as well.

Technical Outlook: Prices have turned lower to meet support at the bottom of a minor rising channel in place since late September at $1354.99. Negative RSI divergence points toward the likelihood of a larger downswing ahead, with a break of the channel bottom exposing $1332.99, the 23.6% Fibonacci retracement of the 7/28-10/14 advance.

Silver - $23.81 // $0.51 // 2.12%

Commentary: With gold selling off, it is no surprise that silver is as well, only to a much larger degree. The metal fell 1.32% on Friday and is now down another 2%+ on overnight trade. This market has literally gone parabolic so prices could fall extremely hard once the correction begins. The gold/silver ratio stands at 57, near the levels of August 2008.

Technical Outlook: Prices are pushing lower though support at the bottom of a rising channel set from late September, eyeing the $23.50 level. A break below this juncture targets rising trend line support at $22.61.

Posted in: World News