Commodities – Energy Crude Oil Falls on Profit Taking Crude Oil (WTI) - $81.61 // $0.60 // 0.73% Commentary: Crude oil fell Monday, shedding $0.45, or 0.54% after getting as high as $83.50 early in the session. As we indicated yesterday, this week’s trade will likely be influenced by the push-and-pull of a constructive economic landscape versus profit taking considerations after a huge run. With crude now testing the top of a 12-month range, traders are opting to take profits rather than buy at these relatively high levels and hope for a breakout. The correlation between crude oil and U.S. equities has been rising in recent weeks and this trend will likely continue. A 20-day correlation coefficient of 0.79 is the strongest relationship between crude and equities in a month. Many market watchers will be closely analyzing the Federal Open Market Committee’s latest minutes set to be released on Tuesday. Perhaps we will see indication of the Fed’s next moves, including any potential for more quantitative easing. Financial markets typically respond positively to easing and respond negatively to tightening or even lack of action (if easing is priced in). Technical Outlook: Prices are showing a well-defined Bearish Engulfing candlestick pattern following a test of resistance at Augusts’ swing high ($82.97), 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 Moves Higher Despite Dollar Rally Gold - $1349.35 // $4.70 // 0.35% Commentary: Illustrating just how powerful the upward momentum in gold is, the metal rallied $7.31, or 0.54%, on Monday, hitting yet another record despite a rise in the U.S. Dollar. While momentum has a lot to do with the latest move in gold, we have also seen that gold has often moved higher regardless of day to day fluctuations in the Dollar or any other asset for that matter. Traders are more focused on the long-term, and gold traders see a very bleak future given all the sovereign debt issues that are plaguing governments around the world. Gold is seen as the “anti-fiat currency.” Technical Outlook: In a similar fashion to oil, gold prices have formed a Bearish Engulfing candlestick pattern following a test of resistance at the top of a rising channel outlining price action since the beginning of the year, hinting a downward reversal is ahead. A break past initial rising trend line support – now at $1335.13 – exposes a longer term trend line set from July’s swing bottom (now at $1296.72). Silver - $23.19 // $0.19 // 0.43% Commentary: Silver moved slightly higher on Monday, adding $0.04, or 0.17%. Every time it looks like silver may be getting way ahead of itself and a correction seems imminent, the metal rallies some more. No one knows when the top will be; the only certainty is that there will be a significant pullback at some point. That doesn’t mean money can’t be made on this run, because this has been and may continue to be an extremely profitable move for traders. Stay long, but maintain an exit strategy for when the inevitable turn happens. Technical Outlook: Prices have stalled below the $24.00 figure, seemingly negating a Bearish Engulfing candlestick pattern but failing to resume their climb. Negative RSI divergence hints at losses ahead. Initial support lines up at $22.50, with a break below that clearing the way for a move below the $22.00 figure to challenge $21.80.
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