Crude oil continues to build a wedge on an important slope dating back to July, stay above outlook remains favorable, fall below and another leg lower looks set to ensue. Gold remains constrained, big resistance, modest support. Global indices mixed but buoyed by steady risk sentiment.
- Crude oil continues to coil, July slope very important
- Gold continues to trade heavy, shorts favored on upswings
- DAX bouncing, but conviction still low in sustainability
- U.S. indices strongest, globally, Dow coiling up
Check out the DailyFX Top Trading Opportunities for 2018 on the DailyFX Trading Guides page.
Crude oil continues to coil, July slope very important
Crude oil continues to remain tied to risk as the charts of the commodity and S&P 500 resemble one another, however; the relationship is beginning to break down in the near-term. Not long ago the one-month correlation between the two was at a strong +80%, however, it has quickly diminished to +30%.
Looking at crude oil by itself, a wedge is forming and doing so on a very important slope line dating back to July. We’ve discussed this angle quite a bit in recent weeks/months, but it could soon become an important factor to the intermediate-term outlook.
Hold above and longs still remain in play, break below and we could start to see a material unwind of the 700k+ contracts held in the futures market by large speculators. The one-way speculative positioning is poised to cause a sharper decline than rise. Whether oil breaks higher or lower, the contracting price action suggests a strong move is on its way.
See how current positioning in various markets/FX pairs could signal their next moves on the IG Client Sentiment page.
WTI Crude Oil Daily Chart
Gold continues to trade heavy, shorts favored on upswings
Gold is generally a mess and favors traders fading price swings. On the top-side, the 2013 trend-line continues to be a focal point for sellers while the area just above 1300 a spot which buyers are stepping in. Overall, gold is heavy, but shorts remain favored on upswings as choppy market conditions prevail.
Gold Daily Chart
DAX bouncing, but conviction still low in sustainability
The DAX, as discussed earlier this morning, continues to rally but not in the most convincing fashion. Looking ahead, ~12600 stands in the way of resistance. If a turn down develops soon, another lower-high could be in store, but U.S. markets may keep risk sentiment buoyed for the time-being.
DAX Daily Chart
U.S. indices strongest, globally, Dow coiling up
U.S. indices are leading the way, globally, but looking across the group of major indices, the Dow Jones is lagging behind the Nasdaq 100 (at record highs), Russell 2k near highs, and the S&P 500 trading somewhere in between.
Price action is contracting towards the apex of a triangle, which may soon spring the Dow free. If it goes the way of the rest, then it could be a run for a new record soon. However, if the other indices begin to falter and the Dow is a leader on the down-side, then look for it to weaken quicker than the others.
Dow Jones Daily Chart
Resources for Index & Commodity Traders
Whether you are a new or an experienced trader, DailyFX has several resources available to help you; indicator for tracking trader sentiment, quarterly trading forecasts, analytical and educational webinars held daily, trading guides to help you improve trading performance, and one specifically for those who are new to forex.
---Written by Paul Robinson, Market Analyst
To receive Paul’s analysis directly via email – SIGN UP HERE
You can follow Paul on Twitter at @PaulRobinsonFX