Crude rallies while gold and commodities stall

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

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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*.

* 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.

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.

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.

* 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.

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

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