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Crude rallies while gold and commodities stall

By Colin Twiggs
July 18th, 2013 3:00 a.m. EDT (5:00 p:m AET)

These extracts from my trading diary are for educational purposes. Any advice contained therein is provided for the general information of readers and does not have regard to any particular person's investment objectives, financial situation or needs and must not be construed as advice to buy, sell, hold or otherwise deal with any securities or other investments. Accordingly, no reader should act on the basis of any information contained therein without first having consulted a suitably qualified financial advisor. Full terms and conditions can be found at Terms of Use.



Gold is consolidating in a narrow range below resistance at $1300 — a bullish sign. Upward breakout would penetrate the descending trendline, suggesting a bottom is forming. Reversal below $1270, however, would indicate another test of $1200. Failure of support at $1200 would offer a medium-term target of $1100*.

Gold

* Target calculation: 1200 - ( 1300 - 1200 ) = 1100

The monthly chart shows a primary trendline some way above current price action. Even a rally to $1400 would not disrupt the primary down-trend.

Gold

Dollar Index

The Dollar Index retreated after a false break above 84.00. Respect of the rising trendline would indicate the primary up-trend is intact, while reversal below 79.00 would signal a primary down-trend. Recovery above 84.50 would signal an advance to 89.00.

Dollar Index

Crude Oil

Nymex WTI light crude is in a clear primary up-trend, with Brent crude lifting in sympathy. Rising Nymex crude prices reflect a stronger US economy. Target for the Nymex advance is the 2012 high of $110/barrel*. Expect the spread with Brent crude to narrow.

Crude Oil

* Target calculation: 98 + ( 98 - 86 ) = 110

Commodities

The Shanghai Composite Index rebounded weakly above long-term support at 1950, but is likely to re-test in the next few weeks. Failure would indicate a decline to test the 2008 low at 1400. China is the primary driver of commodity prices and another decline on the Shanghai Index would drag prices even lower. Dow Jones-UBS Commodity Index reversal below long-term support at 125 would confirm, targeting the 2009 low at 100*. Not good news for Australian resources stocks, even if the impact is cushioned by a falling Aussie Dollar.

Dow Jones-UBS Commodity Index

* Target calculation: 125 - ( 150 - 125 ) = 100



Life is short. God's way of encouraging a bit of focus.

~ Robert Brault

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