Commodities - Energy
Crude Oil Volatility Holds Steady, as Stock Volatility Soars
Crude Oil (WTI) $76.70 +$0.19 +0.25%
In the face of plunging stock markets, crude oil managed to eke out a gain in Thursday’s session. We have been alluding to crude oil’s relative strength, but the commodity’s performance on Thursday was particularly impressive. This divergence was also displayed in volatility; the VIX, which represents implied volatility in nearby S&P 500 index options, soared close to 10%, while the same measure of volatility in oil inched up a little over 2%. Crude oil is clearly reluctant to go down, but more steep losses in stocks will surely spill over into oil, and thus caution is warranted with regard to taking long positions in the commodity. From a technical standpoint, crude has twice bounced off former-resistance-turned-support at the $75.50 level. The level also corresponds with a rising trendline, thus this ‘double support’ area is looking like a tough nut to crack. On the upside, look for resistance at $78.50, followed by the psychological $80 level.
Commodities - Metals
Gold Tries to Regain its Footing
Gold $1245.10 +$0.55 +0.13%
Gold inched closer toward its all-time highs on Thursday. The metal has been trying to regain its footing after prices fell over $23 on Monday. The band between $1250 and the $1265 will need to be watched closely, for signs of stalling could be a signal for momentum traders to exit. On the other hand, these parabolic moves often end in spectacular spikes, which we have yet to see. The long side is still favored until shown otherwise. The last dip near $1225 should have been bought with tight stops; continue to move stops up incrementally. This is a classic buy the dips market for now.
Silver $18.75 +$0.05 +0.27%
Silver continues to act like gold’s hyperactive twin. The metal is mirroring gold’s moves, only with more volatility. There is no reason to believe that this relationship breaks down before the inevitable washout in gold. For now, those who want to trade this precious metal move can treat silver the same as gold: buy the dips with tight stops, but consider the additional volatility and the implications for your stops. Key resistance levels are $19.47, $19.83, and $21.36.
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