No Lid Yet On Volatility
There’s nothing like scads of excess supply to drive down the price of a commodity. That’s what happened today when it was revealed that there were record stockpiles of crude oil. Consequently, West Texas Intermediate fell around 8%, Brent was down 5.5%, and wagging its tail behind them, natural gas was off by 3.4%. But, wait a minute before you think of buying a gas-guzzler. Energy is going to remain as volatile as the economic recovery is uncertain.
The U.S. dollar was up again, perhaps testing now if it can resume its long rally. That rise tripped up an even larger gain that was on tap for gold, silver – indeed the whole precious metals complex. The dollar took about three dollars and forty cents worth of sheen off of gold’s uptick today. Gold nevertheless was up at 4:00 PM in New York a touch over $5 an ounce.
In a struggle against those lower crude prices, U.S. equities were up, the Dow surprisingly the leader on the plus side by about 0.60%. The S&P and NASDAQ were up marginally, mostly on topical news concerning a handful of their component stocks.
Regarding world news, Ukraine again seems calmer. The war of fits and starts is indeed puzzling. Ukraine spooks markets, then the fighting pauses. Jordan is seething mad at ISIS, justifiably, of course, threatening the barbarians who decapitate and burn their murder victims. The Jordanian anger should spur delivery of more and better U.S. and European weapons. The weaponry will be financed by the Japanese, most likely. They are more subdued than the Jordanians verbally but no less resolved to strike back in a supporting role given the nature of their relatively pacifistic constitution.
The dollar was interesting to watch today. It fell precipitously, on panic selling it seems, but then greenback bulls stepped in and drove it back up. That contributed to oil’s decline, and to putting of the lid on precious metals prices.
Friday we will see the new U.S. job numbers for January. Many investors and traders are awaiting that data before committing to very much. Perhaps gold is mildly a haven on that account.
Fundamentally, in the world of oil nothing has changed. In fact, most economic fundamental indicators have been steady to slightly off in the last few months. However, a small rollback in growth in the midst of a recovery is completely normal, especially during the northern hemisphere’s winter.
If the Saudis’ power play of lowering crude prices in order to get the Russians to back out of Syria is a reality instead of some stranger-than-fiction insider’s analysis, it’s not worked very well so far. The Russian bear is willing to risk almost anything to keep its remaining world prestige from slipping any more.
As we stated yesterday, oil is looking for its next breakout. We’re just not sure which way that break is going to turn. Wishing you as always, good trading,
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Gold Forecast: Proper Action
Last night we sent out a special "Trade Alert": Recommendation to Buy Gold At Market.
Maintain long gold position @ 1267.50
Maintain sell stop @ 1251.50
Gold Market Forecast
Last week we began to explore our current model and Elliott wave count clearly identifying that we were in a third wave when gold hit an intraday high at 1308. The question we raised at that point was whether we would see higher pricing in a continuation of wave three. However, as the market began to correct it became quite clear that gold had most likely concluded a third wave, and wave four traded to a 38% retracement of wave three. These factors initiated our current model and assumption that we might in fact have begun the fifth wave. Based upon that model we sent out a special trade alert with a buy recommendation last night.
Today’s report will detail factors which led to our decision to initiate a buy recommendation. More importantly, we will look at our upside targets and projections and outline our current exit strategy for this trade.