July 12, 2011
Crude Oil Tumbles on Low Demand, Gold pulls back on Dollar Strength, Traders Prepare for FOMC Meeting Minutes
—————————————————-
Traders are watching crude oil futures slide again this morning after hearing more news out of Europe and Asia that demand is slowing, causing prices to continue to tumble. We’ve been watching the US Manufacturing sectors slow down, inventories have been rising, and demand is clearly slowing down on fears over debt around the world.
Gold futures have come off their highs this morning after a strong US Dollar Index (compared to the Euro) gave traders less incentive to seek shelter from the ‘storm’ in the gold market. News out of London this morning says the European crisis is giving the US Dollar strength, and pushing down Gold.
Looking at the news this morning…
We begin our day with International Trade at 830am this morning, along with news out of Canada regarding Trade Balance.
 |
| International Trade News |
The U.S. international trade gap in April shrank to $43.7 billion from $46.8 billion in March. rose 1.3 percent after jumping 4.9 percent in March. Imports slipped 0.4 percent after gaining 4.2 percent the prior month. The improvement in the trade deficit was led by the petroleum gap which narrowed to $26.1 billion from $30.2 billion in March. The nonpetroleum goods differential expanded to $31.2 billion from $30.2 billion the month before. The services surplus improved marginally to $14.4 billion from $14.3 billion in March.
The most important news of the day comes later in the afternoon.
We have FOMC Meeting Minutes at 2:00pm EST today, which will have traders sitting on hands late in the morning ahead of this major news.
From the Fed’s press release June 24, 2011 on the change in release date:
“The minutes of the Federal Open Market Committee (FOMC) meeting of June 21-22, 2011, will be released at 2 p.m. EDT on Tuesday, July 12, 2011, a day earlier than usual. The release date was rescheduled in light of the timing of the House Financial Services Committee hearing on July 13 to receive the Federal Reserve Board’s Monetary Policy Report to the Congress.”
The minutes of each regularly scheduled meeting of the FOMC are ordinarily made available three weeks after the day of the policy decision. A summary of economic projections made by the Federal Reserve Board members and Reserve Bank presidents for the June 21-22 meeting will be included as an addendum to the minutes.
Understanding where today’s news is, we will look to get in early with opportunities around the 830am news, and then look to take our money out of the market early ahead of the news this afternoon. You can expect traders will be sitting on hands after 1130am this morning so watch the clock.
Lets review the charts this morning…
The US Dollar Index has been on a strong bullish trend the past few days, but this morning we can see signs of weakness at these range highs.
Look at the 89range chart below and you can see we are trading at the highs of the price channel, price wedge, and with the BMT and Trigger Lines below us with Momentum indicators overbought and looking to confirm short entries on the way down.
Then you look closer at the short term trend on the 13range of the US Dollar Index and you can see that we have a strong bull channel medium term, however, short term we see a clear sign of bearishness off the highs. I also notice that the highs of the bull channel, the highs of the 89range price wedge, and the lows of the new bear channel are all going to collide around 76.400, which makes for an excellent location for price to bounce or break.
Look for the dollar to either bounce off 76.400 support, trade sideways and sloppy around that level, or keep going lower into the price wedge below 76.400, and we will use the US Dollar Index Correlation to make educated trading decisions based on what happens.
 |
| Us Dollar Index 89Range |
 |
| US Dollar Index 13Range |
Crude Oil Futures are trending sharply lower this morning after lack of demand stalled the attempt to re-test the 100.00 area late last week.
You can easily see the 89range chart we have a medium term bear price channel, and then a sharp short term bear price channel off the highs. We are in the middle of the larger price channel, and the short term channel at the highs, but it is very narrow.
You can also see a sideways range from 99.45 down to 93.46 and we are at the lows of this range, with the BMT above us.
The middle of any trading range is always higher risk, so keep that in mind, and the BMT is always going to be the last place I want to enter a trade around, so this area will be considered higher risk this morning. We ideally want crude to move higher or lower, just not in the middle of the larger range and around the BMT.
Look even closer at the crude oil charts (34range below) and you can see we are sitting on the PLOD, making this an inside day, but perhaps an outside day. You can see the strong downtrend channel in green so we will be looking to sell retracements and sell at resistance with new highs and new lows. Also keep an eye on the PLOD and PHOD, these levels are always great trading opportunities when we break above or below those levels.
 |
| Crude Oil 89Range |
 |
| Crude Oilk 13Range |
Gold Futures are continuing to be difficult to predict what will happen. Fear has really taken hold of this market (for good reason we think) over Europe, China, and the US debt issues.
The 89range chart shows gold is at the highs of the price wedge, near the highs of the price channel, and in the middle of a sideways range with very little confirmation coming from the momentum indicators at the bottom.
In this case im looking to sell the highs of this wedge, sell the highs of the range, and the price channel. If price drops down to the 1525.0 im looking to buy at the lows of the range, however, it becomes higher risk as we get into the middle of any trading range. I want to avoid trading around the BMT and the middle of this 89range price wedge/channel.
Look closer on Gold and you can see the 34range chart bull price channel got us up to these highs, and now we have the makings of a price reversal (head and shoulders there?) and I will be looking for a bear price channel forming off the highs giving us opportunity to start selling these highs. You can also see the PHOD and PLOD make this an inside trading day, so look to trade inside the range we are in.
 |
| Gold 89Range |
 |
| Gold 34range |
