Crude futures (Light Crude January 2016 – CLF2016) are headed for another test of primary support at $40/barrel. Breach is likely and would signal another decline, with a target of $30/barrel*.
* Target calculation: 40 – ( 50 – 40 ) = 30
Crude futures target $32/barrel
Crude futures (Light Crude March 2016 – CLH2016) are consolidating in a narrow band below the former support level at $45/barrel. Breach of $43 is likely and would indicate a test of the August low at $41.20. Follow-through below $41 would warn of another decline, with a target of $32/barrel*.
* Target calculation: 42 – ( 52 – 42 ) = 32
Crude tests $40/barrel
Crude futures (Light Crude December 2015 – CLZ2015) are testing primary support at $40/barrel. Breach is likely — and would signal a decline to $30*. Respect of support would indicate another bear rally.
* Target calculation: 40 – ( 50 – 40 ) = 30
Crude heading for $40/barrel
Crude futures (Light Crude December 2015 – CLZ2015) broke support at $44.70 per barrel, warning of another test of primary support at $40. Follow-through below $43 would confirm. Supply continues to exceed demand and breach of $40 would offer a (long-term) target of $30*. Recovery above $50 per barrel is most unlikely unless there is a serious disruption to supply.
* Target calculation: 40 – ( 50 – 40 ) = 30
Crude testing support
Crude futures (Light Crude December 2015 – CLZ2015) are testing support at $44.50 per barrel. Follow-through below $44.00 would signal another test of primary support at $40. Supply continues to exceed demand with the Saudis and Russians cranking up production and cutting prices to secure key markets in the US and China. Breach of $40 would offer a (long-term) target of $30*. Recovery above $50 per barrel is most unlikely unless there is a serious disruption to supply.
* Target calculation: 40 – ( 50 – 40 ) = 30
Oil market showdown: can Russia outlast the Saudis?
Dalan McEndree writing in Oilprice.com :
While the sharp decline in crude prices has saved crude consuming nations hundreds of billions of dollars, the loss in revenues has caused crude exporting countries intense economic and financial pain. Their suffering has led some to call for a change in strategy to “balance” the market and boost prices. Venezuela, an OPEC member, has even proposed an emergency summit meeting.
In practice, the call for a change is a call for Saudi Arabia and Russia, the two dominant global crude exporters, which each daily export over seven-plus mmbbls (including condensates and NGLs) and which each see the other as the key to any “balancing” moves, to bear the brunt of any production cuts…….
Despite the intense pain they are suffering in the low price Crudedome, both the Russian and Saudi governments profess for public consumption that they are committed to their volume and market share policies.
This observer believes the two countries cannot long withstand the pain they have brought upon themselves — and this article only scratches the surface of the negative impact of low crude prices on their economies. They have, in effect, turned no pain no gain into intense pain no gain and set in motion the possibility neither will exit the low price Crudedome under its own power.
Read more at Oil market showdown: can Russia outlast the Saudis? | Oilprice.com
Crude: Another bear rally
Crude futures (Light Crude November 2015 – CLX2015) are testing resistance at $50 per barrel. Respect is likely and would indicate another test of support at $40. Breach of medium-term support at $44 would confirm. Failure of $40 would offer a (long-term) target of $30*. Recovery above the descending trendline and resistance at $52 per barrel is unlikely, but would suggest that a bottom is forming.
* Target calculation: 40 – ( 50 – 40 ) = 30
Gold: No flight to safety
US inflation remains subdued with core CPI hovering below 2.0 percent.
Treasury yields remain weak, with the 10-year yield testing support between 1.85 and 2.0 percent.
That gives a real yield, after deducting core CPI, of close to zero on a 10-year investment.
Abraham Maslow wrote in the 1960s: “I suppose it is tempting, if the only tool you have is a hammer, to treat everything as if it were a nail.” His description certainly applies to the Fed who have used monetary policy extensively to fix a problem for which it was not intended. Interest rates were driven down to unsustainable levels, with questionable results. My concern is that maintaining rates close to zero for close to seven years could breed a host of unforeseen problems.
What is really needed is a Keynesian solution: government investment in productive infrastructure. But neither party is likely to succeed in winning approval for this.
The Dollar Index is ranging between 93 and 98. Increased interest rates or falling inflation would suggest an upward breakout. Flight to safety would drive yields downward. But the biggest factor that may drive up yields could be a Chinese sell-off of foreign reserves (largely Treasury investments) in order to support the Yuan or spend on infrastructure to revive their economy.
There is no flight to the safety of gold as yet. The Gold Bugs Index, representing un-hedged gold miners, is testing primary support at 105. Twiggs Momentum (13 week) peaks below zero indicate a strong down-trend.
Spot gold fared a little better, but is likely to test primary support at $1080 per ounce. Again, declining 13-week Twiggs Momentum, with peaks below zero, signals a strong down-trend. Breach of support at $1080 would offer a target of $1000/ounce*.
* Target calculation: 1200 – ( 1400 – 1200 ) = 1000
Crude at $30 per barrel?
Crude futures (Light Crude November 2015 – CLX2015) are testing short-term support at $44 per barrel. Breach is likely and would indicate another test of the recent low at $38.50. Failure of that level would offer a (long-term) target of $30*. Recovery above the descending trendline and resistance at $52 per barrel is unlikely, but would suggest that a bottom is forming.
* Target calculation: 40 – ( 50 – 40 ) = 30
Gold: The next leg down
Spot Gold respected resistance at $1180/ounce and is headed for another test of support at $1080. Declining 13-week Twiggs Momentum with peaks below zero confirms a strong primary down-trend. Breach of support at $1080 would offer a target of $1000/ounce*.
* Target calculation: 1200 – ( 1400 – 1200 ) = 1000
Barrick Gold, one of the largest global gold producers, has already broken support at $6.50, signaling another decline (with a target of $4.50).
The Gold-Oil ratio remains in overbought territory above 20, suggesting continuation of the bear market for gold.
Long-term crude prices have resumed their fall, with June 2017 (CLM2017) futures headed for another test of support at $48/barrel after a bear rally respected the descending trendline. If long-term crude prices break support at $48, gold is not likely to hold above $1000/ounce.
