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Commodities - Energy

Crude Oil Relatively Strong

Crude Oil (WTI)        $77.38       -$0.47        -0.60%
Crude oil is down again after losing close to 1% on Tuesday, but the commodity is significantly outperforming other risk assets. The S&P 500 shed 1.6% on Tuesday; such a large reversal would typically be good for $2-4 drop in crude oil, but that was not to be. This price action is even more surprising considering oil has rallied extremely strongly off the lows under $70.00, thus one would have expected prices to easily sell off a few dollars from these levels. Tomorrow we get news on U.S. petroleum inventories and if the API survey is any indication, a bearish report is due (API: Crude +3685K, Gasoline +810K, Distillate +1078K). Though the relative strength in oil prices is encouraging, continued bearish physical fundamentals and shaky equity markets should keep a lid on prices. The risk/reward from the long side is not compelling at these prices. Look for the first level of support at $75.50, while resistance remains $80.00.

commodityupdate06232010oil
                                                                                                                                                                                                    

Commodities - Metals

Gold May Retest Highs

Gold      $1239.55       -$0.55        -0.04%
Gold is flat after regaining some of Monday’s losses in Tuesday’s session. As stated previously, the gold bull market is a function of investment demand driven by a host of fears. In recent months, gold has been rallying when stock markets have fallen and it has rallied when stock markets have risen, which indicates that this investment is not paying attention to short-term gyrations in broad financial sentiment, but rather longer-term issues related to sovereign debt and the implications for the purchasing power of fiat currencies. Throw momentum traders into the mix and you have the ingredients for a parabolic move. Given these circumstances, for those who want to be involved in the short-term, the only way to trade gold is to buy the dips with tight stops. The rising trendline near $1230 is the first level of support, while the all-time highs above $1265 provide resistance.

Silver      $18.81        -$0.01       +0.05%
Like gold, silver regained a bit of Monday’s losses in the prior session. Silver and gold have been tied to the hip on this latest up move and there is little chance that relationship breaks down in the near future. For traders looking to play the precious metal theme, silver is will provide greater gains, as well as greater losses. Key resistance levels are $19.47, $19.83, and $21.36.

commodityupdate06232010gold
                                                                                                                                                                                                        
Please send any questions/comments about this article to ispivak@dailyfx.com