June 29, 2011

Fear pushes commodities higher; OPEC threatens Crude Supply & Dollar Tumbles

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All eyes are on crude oil futures this morning as OPEC threatens cutting its supply of crude oil after the IEA told us they would release more reserves to help lower prices of this ‘black gold’.

News this morning has crude oil prices rising on the fear that less supply will lead to higher demand ahead of today’s inventory report.

We’re also watching an interesting situation develop in Europe this morning.  It appears all the talk of ‘vigilance’ from the ECB regarding raising interests rates actually has traders with some confidence that they will make it out of this mess.

News this morning out of London shows the US Dollar Index falling compared to the Euro, which is contrary to what has been happening recently (Gold rising, Dollar Rising, Euro Falling) but this morning we have sentiment in the market that we may have a solution and that is causing less demand on the dollar, which is placing more demand on Gold, causing Gold futures to rise.

Its very interesting how nothing can actually be accomplished from one day to the next in this Greece credit crisis, however, the perception of a solution, and ‘hard talk’ from the ECB can make all the difference?  It will be interesting to see how the MARKET reacts today considering all of this speculation today that has brought down the demand for the US Dollar.

Looking forward at the news today, again, all eyes on crude oil futures this morning, with major news at 1030am.

We begin our day with the US Market open at 930am est, then followed by 10:00 Pending Home Sales.  The housing market is a definite leading indicator of the overall strength of the US economy so traders and investors will be watching closely at 10:00am.

Major news today is at 10:30 Crude Oil Inventories.  Wednesday’s are always a little different day for crude oil traders because we need to watch the 3 phases of crude oil to make sure we focus on the market personality at the right times before, during, and after the news is released.

Crude Oil Inventories SchoolOfTrade.com

Looking at the chart posted above you can see recently the inventories have been lower than expected, but this number has been getting closer to the zero line, and look at the past…it did the same thing.  Looking back at previous numbers you can see what happens when we have a ‘wedging’ of this data, it needs to ‘breakout’ of this wedge, and we may see this happen very soon.  Will we see inventories higher on lack of demand?  Will OPEC have its way and kill the supply in the market causing inventories to drop on lack of supply?  Only time will tell, but this example of the inventories report certainly makes us look for something big coming soon.

Once we get through our inventory number at 10:30 we go into the European Close at 1130am est and we hope to see a Golden Lunch before we wrap up our trading today.

The US Dollar Index tumbled overnight on perceived confidence in the Euro, which is also putting pressure on gold and silver to move higher out of fear of a falling US Dollar.  The 89Range chart shows us heading towards major support, with more room to fall today.  We will be looking for buying opportunities on commodities with this room for the dollar to keep falling into major support, then look for the dollar to reverse, and we will be watching for price reversals as well when we hit major support.
US Dollar Index 89Range SchoolOfTrade.com

Crude Oil Futures have made significant progress breaking above the highs of the bear price channel, and we can easily see our targets above us.  Leaving the sideways range behind, crude is pushing higher (swimming up-stream almost) into the resistance of the price channel, and looking to test the BMT and the 95.70 highs from middle of last week.  We can clearly see this trading range to use this morning, and we will be watching the support levels below us for buying opportunities when the market comes back down.  If the market takes off higher at 1030 this morning we will adjust and find levels of resistance above 96.00 up to 99.00 so stay tuned!

Crude Oil 89Range SchoolOfTrade.com

Gold Futures made some ground higher than 1500 for the first time in 5 days, so we have that going for us, but we’re surprised how it GOT THERE.  Fear out of Europe appears to be quieting down today (wait till later, who knows these days) and we don’t really know how long that will last.  It appears Gold is searching for something longer term to hold onto, and right now the US Dollar dropping has given it support from the fear in the market, while the confidence in the Euro keeps it propped down?  Very interesting, we will see how the day plays out, however, the charts are VERY CLEAR.
Gold Futures 89Range SchoolofTrade.com
Gold is trading in a narrow sideways range, and when it made new swing highs it really fails to make a move above the 1506.0 level, so we expect gold will likely come back down (look at the candlestick wick most recently on the 89range chart) to the 1500 level again, and we will look for trading opportunities along the way.

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    Joseph - June 29, 2011 Reply

    Crude Oil futures are rising into resistance, we are looking to sell this resistance.
    89Range chart shows the following:
    – Bear price channel
    – Sideways range
    – Price Wedge
    – BMT is above us
    – Major Resistance overhead
    Now open the 34range chart and lets get specific with our plan:
    – Strong bull price channel, we are above the highs and overbought
    – Price wedge, at the highs
    – PHOD is below us, OUTSIDE DAY
    – BMT and OPEN are below us, price magnets
    If price rises:
    – Im selling at resistance first, and then with new higher highs I will consider buying pullbacks
    – I do not buy at the highs
    – Im selling the HOD 94.30, selling 94.59
    – Avoid the 95.00 big round number
    – Selling major resistance at 95.70
    – We will find more levels as the day develops.
    If price falls:
    – Im buying at support first, and then selling retracements with new lower lows
    – I do not sell at the lows
    – Buying support levels at PHOD 93.40
    – Avoid the BRN 93.00
    – Buying 92.68
    – Avoid 92.00 big round number
    – Buying the support highs of the channel 93.50 and buying the lows of the channel around 92.20 area.

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