Since its breakout on July 15th, silver established medium-term resistance at $42 before retracing to test the new support level at $38/ounce. With gold in an exponential up-trend, support is likely to hold and recovery above $40 would re-test $42. In the longer term, breakout above $42 would signal an advance to $45/ounce*.
* Target calculation: 39 + ( 39 – 33 ) = 45
CME Group, owner of the world’s largest futures market, raised margins on gold by 22 percent. The minimum amount of cash that speculators must keep on deposit for an initial account increased to $7,425 on a 100- ounce contract from $6,075.
via Gold Falls Most in 7 Weeks on Stocks, Margins – Bloomberg.
…..time for caution on gold/gold miners until the market adjusts to the higher margins.
Spot gold is testing resistance at $1800. A short retracement would indicate that a test of $2000* is imminent.
* Target calculation: 1800 + ( 1800 – 1600 ) = 2000
The Gold-Oil Ratio is headed for the overbought level at 20:1.
Brent crude is still hesitant about joining Light (WTI) crude in a primary down-trend. After breaking through support at $105/barrel, the stock market bounce fueled a rally to test the new resistance level. The hourly chart is currently whipsawing around $105 without clear direction. Follow-through above $107 would warn of a bear trap, but target for the breakout is $90*.
* Target calculation: 105 – ( 120 – 105 ) = 90
Today’s bounce on world markets caused a rally of Brent Crude on the hourly chart, testing the former primary support level at $105/barrel. Institutional buying of stocks does not change the fundamentals: high crude oil prices will cause a double-dip recession. No action by the Fed can change this.
* Target calculation: 105 – ( 120 – 105 ) = 90
Retreat below resistance at $105 would confirm that Brent Crude has joined Light (WTI) Crude in a primary down-trend. Target for the down-swing is $90*.
We need a major re-adjustment of crude oil prices to set the global economy on a sound footing.
Posted August 3, 2011 8:00 p.m. ET (10:00 a.m. AET) on Trading Diary.
Markets are approaching the tipping point at which they will confirm a primary down-trend. The probability of a bear market is around 75 percent, with 80 about as high as you can get at a turning point. As highlighted in May, every significant spike in crude oil prices in the last 50 years has been followed by a recession — and the current spike is likely to prove no different. Ben Bernanke will modestly decline to take the credit, but the initial groundwork for higher oil prices was laid by QEII. Prices had started to rise well before the conflict in Libya.
Investor flight to safety is clearly signaled by the sharp fall in 10-year treasury yields.
Other safe havens such as gold and the Swiss franc display a corresponding spike over the last few days.
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