Crude Stays Strong Ahead of Holiday But Yet to Confirm Correction is Over
Despite thin trading ahead of long holiday, crude oil price's near-term outlook remains strong. Currently trading at 77.2, the February contract is hovering around the highest level in 3 weeks. After plummeting to as low as 68.59 on December 14, the black gold has rebounded steadily as inventory levels from developed economies declined, showing signs of demand recovery. However, we are yet to confirm if crude oil has resumed the rise from 33.2 (January 2009) until price can trade sustainably above 80. On monthly basis, December will be a volatile month but actual gain or loss will be minimal.
Natural gas soars for the third consecutive day and has gained +1.4% so far this week. The market sentiment has turned after gas inventory dropped in the past 2 weeks. Later today, the US Energy Department will probably report that gas storage declined -171 bcf to 3395 bcf in the week ended December 18.
Gold rises above 1100 for the first time in 2 days as USD retreats. After climbing +0.7% to 1094 Wednesday, the benchmark contract for the yellow metal extends gains to 1106 in European session today. However, it will probably record loss for a 4th consecutive week, indicating correction of recent rally to record high at 1227.5 (December 3) is still underway. After breaking above 2008-high at 1033.9 in October, rally in gold futures accelerated. Propelled by aggressive Asian central bank purchases in November, the precious metal surged +15% during the month. The 2 months' relentless rally had brought gold to overbought territory. At the same time, strong US non-farm payrolls that spurred speculations of earlier Fed rate hike as well as sovereignty risks in Dubai and Greece triggered buying in USD. These factors were prominent reasons for gold's sharp selloff in December.
Medium-term (1-3 months) outlook for gold remains dependent on the dollar's movement. If payrolls in December surprise the market to the upside, the dollar will likely move higher. This is negative for gold.
Data to watch today include jobless claims and durable goods orders in the US. In the week ended December 19, initial jobless claims probably dropped -10K to 470K while continuing claims are expected to have declined -100K to below 5.1M. Recent jobless claims data have suggested stabilization in the job market.
Moreover, durable goods orders should have risen +0.4% mom in November after falling sharply in October. Excluding transportation, the growth should even be higher (consensus: +1%) as Boeing reported only 9 orders in November, compared with 14 units a month ago.
GOLD TECHNICAL OUTLOOK
Gold dropped further as reached as low as 1068.7 so far, meeting mentioned target of 50% retracement of 931.3 to 1227.5 at 1079.4. Further fall is still expected with 1120.8 resistance intact, towards 61.8% retracement at 1044.4. On the upside, though, break of 1120.8 will indicate that fall from 1227.5 has made a short term bottom already and stronger rebound should then be seen to retest 1227.5 resistance as consolidations from there continue.
In the bigger picture, rise from 681 is expected to develop into a set of five wave sequence with first wave completed at 1007.7, second wave triangle consolidation completed at 931.3. Rise from 931.3 is treated as the third wave and has possibly completed at 1227.5 after missing 100% projection of 681 to 1007.7 from 931.3 at 1258. Deeper pull back could now be seen to 1026.9/1072 support zone, or even further to retest 1000 psychological level. But downside should be contained well above 931.3 support and bring up trend resumption to another high above 1227.5.
SILVER TECHNICAL OUTLOOK
Silver's break of 16.90 support argues that fall from 19.50 is resuming and intraday bias is flipped back to the downside for the moment. Further fall should be seen towards 61.8% projection of 19.50 to 16.90 from 17.81 at 16.20, which is close to 16.12 support. ON the upside, though, above 17.52 minor resistance will suggest that consolidations from 16.90 is still in progress and will delay the bearish view. Nevertheless, in case of another rise, upside is still expected to be limited by 61.8% retracement of 19.50 to 16.90 at 18.50 and bring fall resumption.
In the bigger picture, rise from 12.435 should have completed at 19.50 on bearish divergence condition in daily MACD, after just missing 19.55/21.55 resistance zone. Break of 16.12 support will confirm this case and should target lower trend line support at 13.88 level. This will also be the another signal that whole medium term rise from 8.4 has finished too. Sustained break of the lower trend line support will confirm this medium term bearish case and bring further fall towards 8.4 low.
Also, note that whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Hence, even in case of another rise, upside is expected to be limited inside this 19.55/21.44 resistance zone and bring another medium term fall
CRUDE OIL TECHNICAL OUTLOOK
rude oil's recovery from 68.58 is still in progress and further rise cannot be ruled out. But still, upside is expected to be limited by 61.8% retracement of 82.0 to 68.58 at 76.87 and bring resumption of the fall from 82.0. On the downside, below 71.21 will indicate that recovery from 68.58 has completed and will flip intraday bias for this support first. Break will target 65.05 key support next. However, decisive break of 76.87 fibo resistance will argue that fall from 82.0 has completed and will turn focus back to this resistance.
In the bigger picture, at this point, crude oil is still limited by 55 days EMA (now at 74.47) and hence, we're favoring the case that medium term rise from 33.2 has completed at 82.0 with bearish divergence condition in daily MACD. Another fall is expected after finishing the current recovery from 68.58 and a break there will target 58.32 cluster support (50% retracement of 33.2 to 82 at 57.60). Break there will confirm this bearish case and indicate that the down trend from 147.27 might be resuming for another low below 33.2. However, sustained trading above mentioned 76.87 will dampen this bearish view and argue that another high above 82.0 might be seen before crude oil tops in 76.77/90.24 fibo resistance zone.
Despite thin trading ahead of long holiday, crude oil price's near-term outlook remains strong. Currently trading at 77.2, the February contract is hovering around the highest level in 3 weeks. After plummeting to as low as 68.59 on December 14, the black gold has rebounded steadily as inventory levels from developed economies declined, showing signs of demand recovery. However, we are yet to confirm if crude oil has resumed the rise from 33.2 (January 2009) until price can trade sustainably above 80. On monthly basis, December will be a volatile month but actual gain or loss will be minimal.
Natural gas soars for the third consecutive day and has gained +1.4% so far this week. The market sentiment has turned after gas inventory dropped in the past 2 weeks. Later today, the US Energy Department will probably report that gas storage declined -171 bcf to 3395 bcf in the week ended December 18.
Gold rises above 1100 for the first time in 2 days as USD retreats. After climbing +0.7% to 1094 Wednesday, the benchmark contract for the yellow metal extends gains to 1106 in European session today. However, it will probably record loss for a 4th consecutive week, indicating correction of recent rally to record high at 1227.5 (December 3) is still underway. After breaking above 2008-high at 1033.9 in October, rally in gold futures accelerated. Propelled by aggressive Asian central bank purchases in November, the precious metal surged +15% during the month. The 2 months' relentless rally had brought gold to overbought territory. At the same time, strong US non-farm payrolls that spurred speculations of earlier Fed rate hike as well as sovereignty risks in Dubai and Greece triggered buying in USD. These factors were prominent reasons for gold's sharp selloff in December.
Medium-term (1-3 months) outlook for gold remains dependent on the dollar's movement. If payrolls in December surprise the market to the upside, the dollar will likely move higher. This is negative for gold.
Data to watch today include jobless claims and durable goods orders in the US. In the week ended December 19, initial jobless claims probably dropped -10K to 470K while continuing claims are expected to have declined -100K to below 5.1M. Recent jobless claims data have suggested stabilization in the job market.
Moreover, durable goods orders should have risen +0.4% mom in November after falling sharply in October. Excluding transportation, the growth should even be higher (consensus: +1%) as Boeing reported only 9 orders in November, compared with 14 units a month ago.
GOLD TECHNICAL OUTLOOK
Gold dropped further as reached as low as 1068.7 so far, meeting mentioned target of 50% retracement of 931.3 to 1227.5 at 1079.4. Further fall is still expected with 1120.8 resistance intact, towards 61.8% retracement at 1044.4. On the upside, though, break of 1120.8 will indicate that fall from 1227.5 has made a short term bottom already and stronger rebound should then be seen to retest 1227.5 resistance as consolidations from there continue.
In the bigger picture, rise from 681 is expected to develop into a set of five wave sequence with first wave completed at 1007.7, second wave triangle consolidation completed at 931.3. Rise from 931.3 is treated as the third wave and has possibly completed at 1227.5 after missing 100% projection of 681 to 1007.7 from 931.3 at 1258. Deeper pull back could now be seen to 1026.9/1072 support zone, or even further to retest 1000 psychological level. But downside should be contained well above 931.3 support and bring up trend resumption to another high above 1227.5.
SILVER TECHNICAL OUTLOOK
Silver's break of 16.90 support argues that fall from 19.50 is resuming and intraday bias is flipped back to the downside for the moment. Further fall should be seen towards 61.8% projection of 19.50 to 16.90 from 17.81 at 16.20, which is close to 16.12 support. ON the upside, though, above 17.52 minor resistance will suggest that consolidations from 16.90 is still in progress and will delay the bearish view. Nevertheless, in case of another rise, upside is still expected to be limited by 61.8% retracement of 19.50 to 16.90 at 18.50 and bring fall resumption.
In the bigger picture, rise from 12.435 should have completed at 19.50 on bearish divergence condition in daily MACD, after just missing 19.55/21.55 resistance zone. Break of 16.12 support will confirm this case and should target lower trend line support at 13.88 level. This will also be the another signal that whole medium term rise from 8.4 has finished too. Sustained break of the lower trend line support will confirm this medium term bearish case and bring further fall towards 8.4 low.
Also, note that whole medium term rise from 8.4 is is treated as part of the long term, wide range, consolidation pattern that started at 21.44 back in Mar 08. Hence, even in case of another rise, upside is expected to be limited inside this 19.55/21.44 resistance zone and bring another medium term fall
CRUDE OIL TECHNICAL OUTLOOK
rude oil's recovery from 68.58 is still in progress and further rise cannot be ruled out. But still, upside is expected to be limited by 61.8% retracement of 82.0 to 68.58 at 76.87 and bring resumption of the fall from 82.0. On the downside, below 71.21 will indicate that recovery from 68.58 has completed and will flip intraday bias for this support first. Break will target 65.05 key support next. However, decisive break of 76.87 fibo resistance will argue that fall from 82.0 has completed and will turn focus back to this resistance.
In the bigger picture, at this point, crude oil is still limited by 55 days EMA (now at 74.47) and hence, we're favoring the case that medium term rise from 33.2 has completed at 82.0 with bearish divergence condition in daily MACD. Another fall is expected after finishing the current recovery from 68.58 and a break there will target 58.32 cluster support (50% retracement of 33.2 to 82 at 57.60). Break there will confirm this bearish case and indicate that the down trend from 147.27 might be resuming for another low below 33.2. However, sustained trading above mentioned 76.87 will dampen this bearish view and argue that another high above 82.0 might be seen before crude oil tops in 76.77/90.24 fibo resistance zone.
