Commodities – Energy

Crude Oil Looks to US Dollar to Set Direction

Crude Oil (WTI)       $73.40       +$0.75       +1.03%
Oil prices bounced from support at $71.46 and are now set to re-test the previous swing high at $73.55. A break above this juncture opens the door for a test of the psychological barrier at $74. The Baker-Hughes measure operational US oil rigs is the only item on the calendar, leaving prices to trade along the trajectory of the US Dollar heading into the week-end.

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Commodities – Metals

Silver to Resume Decline, Gold to Follow

Gold       $1105.70       +$6.80       +0.62%
Gold prices took out minor double bottom support at $1111.55 with the bears now in position to challenge the next hurdle at a major rising trend line established from the lows in August (now at $1091.98). A break below would mark a significant trend reversal, with the initial support emerging at $1070.80. The US economic calendar is empty, but prices remain closely correlated with the outlook Federal Reserve monetary policy (as expressed by the spread between Dec’2010 and Mar’2010 fed funds futures), leaving markets to digest the upward revision in the priced-in yield forecast into the week-end.

Silver       $17.26       +$0.13       +0.76%
Unlike leading gold, silver looks to have already made its major bearish breakout. Last week, prices broke below major rising trend line support from the swing low in mid-July and prices are now showing a very formidable Bearish Engulfing candlestick pattern having re-tested this trend line on the upside. A break below initial support at $17.15 opens the door for a move into the $16.13-16.70 congestion region. Significant support becomes harder to come by after this juncture, with a break lower exposing $15.05. In a similar fashion to gold, however, the 2010 fed funds futures spread is the key fundamental relationship behind price action.

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