July 6, 2011
Crude Tumbles on Demand Concerns, Gold Falls on Strong US Dollar Index as Day Traders Prepare for Jobs and Manufacturing news
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Traders around the world are reacting to reports this morning from London that has sent the US Dollar Index higher off support, bringing down crude oil and gold prices.
Crude oil made progress on Tuesday after rumors flew about lack of inventories for the busy summertime month, but as of this morning crude oil fell off new highs overnight after news came out regarding debt downgrades in Portugal, which are giving traders concerns over lack of demand, causing prices to drop. The rollercoaster ride they call crude is always fun to watch.
Similar news about debt concerns from Europe is giving the US Dollar Index some much-needed buying activity at the lows of its wedge, and bringing gold off its new swing highs of 1518.
Looking forward to the day’s news, traders are preparing for economic news that is a little out of the ordinary today, with Monday a holiday, many of the standard news reports have been moved around this week. Today, for example, there is no crude oil inventories, which have been moved to Thursday morning. This may get interesting.
We also have minor news out of Canada this morning @ 8:30am, and we have more news this week out of Canada so trade crude along with it.
The big news of the morning will be 10:00 ISM Non-Manufacturing Index, which you can see by the chart posted below that we’ve seen consistent higher readings for quite some time.
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| ISM Non-Manufacturing |
The composite index from the ISM non-manufacturing survey in May rose 1.8 points to 54.6 with strength centered where it should be, that is in new orders which rose more than four points to 56.8. Also, the employment index accelerated nicely, up 2.1 points to a 54.0 level that for this report is very strong.
This report is very interesting to read, especially considering the dramatic fall in manufacturing activity over the past 6 month in the US. We’ve heard reports recently that more and more new jobs are happening in non-manufacturing sectors here in the US, and this is another clear confirmation of that. Traders will be using this info along with the sister-report of this, the ISM Manufacturing Index to make educated decisions this week.
After we finish up our last news event at 10am this morning we will look for volume extending into 1130am for the European close.
Once price action slows down today we have our private members-only training.
Looking at the charts this morning…
The US Dollar Index is trading a bull wedge pattern making the long side higher percentage and you can see we’ve just held at the lows of the channel/wedge at 74.500. With the BMT at 75.420 this market may slow down and chop around for a while.
The US Dollar trading around the 89Range BMT is a big clue from the market, and we will discuss this in our trade room today.
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| US Dollar Index 89Range |
With the US Dollar rising off the lows this morning, that is putting selling pressure on commodities.
Crude Oil tested the lows of the price wedge above it (we expected that on Tuesday afternoon if you recall) and new heads back down into the range below it. Crude Oil appears to be trying to head back to 100.00 again, even after all the attempts to provide more supply to the market, this is another sign of the clear disconnect between actual supply and demand, and the PERCEPTION of lack of supply or demand. These markets are clearly based more on fear than on reality.
The 89Range chart shows the price wedge above us, and we are trading in a strong bullish price channel from last week.
100.00 is on the target list on the Daily chart (see below) and this puts us back up into the center of the price wedge on the 89range chart.
After seeing price fail at breaking above 98.00 overnight we can tell this move to 100.00 may take the rest of the week, but you can see the writing on the wall ahead of inventories on Thursday morning this week, im looking at this pullback as a pit-stop on the way up to 100.00. I may be wrong, I may be right, either way we will be watching price action looking for clues in our live trade room today.
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| Crude Oil 89Range SchoolOfTrade.com |
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| Crude Oil Daily Continuous Contract |
Gold Futures are trading in the middle of this new bear price channel on the 89range chart. You can easily see we are at the highs of the trading range, right around the BMT, and in the middle of this bear channel.
We can also see a potential swing trade triggering short using the momentum indicators at the bottom of the chart (we will review this with members in training today) so lets keep an eye on that for a possible clue for intra-day selling opportunities today.
The biggest clue we got was from the US dollar index this morning, it too trades just around the BMT I the middle of the range, and this tells me it may be a sloppy day trading gold futures. I want to get away from the BMT as far as possible, and with gold at the highs we can certainly look for a price reversal to head back down to the lows.
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| Gold Futures 89Range SchoolOfTrade.com |
The highest percentage trade will be to sell the highs of this channel (89range), which is unlikely to see happen today, so lets focus on the sideways range from 1515.0 down to 1478.5.
Ive noticed a triple-bottom on the Gold Daily chart (see below) and you can see another opportunity to sell the area of 1560. So this does look like it will be worth the wait to sell the highs of the channel on the 89range and the highs of the range on the daily chart.
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| Gold Futures Daily Continuous Contract |
We will plan our specific attack this morning with our group in the live trade room
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