Crude Oil Extends Losses, Stocks and the US Dollar Test Key Barriers

MSCI WORLD STOCK INDEX – Prices continue to test resistance-turned-support at a previously broken rising trend line set from May’s swing top, now at $1090.87. Support is reinforced by the 50% Fibonacci retracement of the 7/1-8/5 upswing at $1092.60. Continued selling targets the 61.8% Fib at $1076.93. Near-term resistance lines up at $1120.55.

US DOLLAR INDEX – Prices continue to push up against resistance at 83.37, the 38.2% Fibonacci retracement of the 6/7-8/6 downswing. From here, a break higher will see the bulls challenge resistance at the 50% Fib (84.40). The 23.6% level at 82.12 marks near-term support.

CRUDE OIL – Sellers have overcome support at $73.66, the 61.8% Fibonacci retracement of the 5/19-8/4 really, clearing the way for a decline toward the 76.4% Fib at $71.46. The 61.8% level has now been re-cast as resistance.

GOLD – Positioning is little changed from yesterday, with prices tracking higher in a narrow rising channel en route to test horizontal resistance at $1243.27. A break past this boundary exposes the record high at $1265.30. The previously broken horizontal barrier at $1215.47 is now acting as support. As we mentioned yesterday however, longer-term positioning reveals bearish cues with clear negative RSI divergence hinting that a major top may be taking shape. Confirmation of a downward reversal in line with our fundamental outlook requires a weekly close below a rising trend line set from the swing bottom in late 2008.

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