Brent crude Archives - Page 7 of 16

July 24, 2014

Gold retreats as Dollar strengthens

Treasury yields weaken further
The Dollar continues to strengthen
Inflation target remains at 2% p.a.
Gold retreats

Interest Rates and the Dollar

The yield on ten-year Treasury Notes broke support at 2.50 percent, indicating a test of 2.00 percent*. 13-Week Twiggs Momentum below zero warns of a primary down-trend. Follow-through below 2.40 would confirm. Recovery above 2.65 is unlikely, but would indicate the correction is over, with a medium-term target of 2.80 and long-term of 3.00 percent.

10-Year Treasury Yields

* Target calculation: 2.50 – ( 3.00 – 2.50 ) = 2.00

The Dollar Index followed-through above 80.50 and is headed for another test of 81.00. Recovery of 13-week Twiggs Momentum above zero suggests a primary up-trend. Breakout above 81.00 would strengthen the signal; and 81.50 would confirm. Breach of 80.00 is unlikely at present, but would warn of another test of primary support at 79.00.

Dollar Index

Low interest rates and a stronger dollar suggest inflation expectations are falling, but this is not yet evident on the TIPS spread. The 5-year Breakeven rate (5-Year Treasury Yield minus 5-Year Inflation-Indexed Yield) remains at 2.0 percent.

5-Year Treasury Yield minus 5-Year Inflation Indexed (TIPS) Yield

Gold

Gold is nonetheless falling, in line with weaker inflation expectations. Breach of short-term support at $1295/$1300 would test $1240/$1250. And breach of $1240 would signal another primary decline, with an intermediate target of $1100*. Oscillation of 13-week Twiggs Momentum around zero, however, suggests hesitancy, with no strong trend. Recovery above $1350 is unlikely at present, but would indicate another test of $1400/$1420.

Spot Gold

* Target calculation: 1250 – ( 1400 – 1250 ) = 1100

When we compare long-term crude prices (Brent Crude) to gold, it is evident that crude prices tend to lead and gold to follow. The main reason is the impact that higher crude prices have on inflation, increasing demand for gold as an inflation hedge. Crude prices currently remain high, but it remains to be seen whether gold will follow as usual.

Gold and Crude

Gold prices adjusted for inflation suggest the opposite. There are two enormous spikes on the chart, both flagging times of great financial uncertainty. The first is spiraling inflation of the early 1980s and the second is the all-in balance sheet expansion (also known as quantitative easing) by central banks after the global financial crisis. Gold prices remain elevated and are likely to fall further as central banks curtail expansion.

Gold and CPI

July 3, 2014

Enough to make Gazputin grin

Chinese stocks drift lower
Crude oil rising
Other commodities weak

China’s Shanghai Composite Index continues to drift lower on the long-term, monthly chart.

Shanghai Composite Index

Apart from crude oil, commodity prices have fared little better. But crude plays such a dominant role in most commodity indices that they appear more buoyant. Dow Jones-UBS Commodity Index rallied to 140 before retracing for another test of primary support. Oscillation of 13-week Twiggs Momentum around zero, however, does not suggest a significant trend.

Dow Jones UBS Commodities Index

Crude oil is doing a lot better, heading for another test of $110/barrel on the back of supply threats from geo-political tensions. The ascending triangle is very large, but breakout would suggest a long-term target of the 2008 high at $145*.

Brent Crude and Nymex Crude

* Target calculation: 110 + ( 110 – 75 ) = 145

…Enough to make even Gazputin grin.

May 3, 2014

Crude and commodities retrace

The Dow Jones-UBS Commodity Index is again retracing to test support at 133/134, but is clearly in a primary up-trend (with breakout above 134 following earlier recovery of 13-week Twiggs Momentum above zero). Target for the advance is 144*. Reversal below 133 is unlikely, but would warn of a bull trap.

Dow Jones UBS Commodities Index

* Target calculation: 134 + ( 134 – 124 ) = 144

Crude oil, the most highly-traded commodity, is also retracing, with Nymex Light Crude headed for a test of primary support at $98/barrel*. Breach of support would signal a primary down-trend. Respect of support would indicate another test of $105. Brent crude, while declining slightly, would need to penetrate support at $104/barrel to signal a down-trend.

Brent Crude and Nymex Crude

* Target calculation: 105 + ( 105 – 98 ) = 112

April 14, 2014

Crude and commodities rising

Nymex Light Crude is headed for a test of resistance at $105/barrel*. Recovery of 13-week Momentum above zero indicates a primary up-trend. Breakout above $105 would confirm, offering a target of $112*. Brent crude, however, continues to range between $104 and $112/barrel.

Brent Crude and Nymex Crude

* Target calculation: 105 + ( 105 – 98 ) = 112

The Dow Jones-UBS Commodity Index respected its new support level at 134, confirming a primary up-trend. The signal reinforces earlier recovery of 13-week Twiggs Momentum above zero. Target for the advance is 143. Reversal below 134 is now unlikely, but would warn of a bull trap.

Dow Jones UBS Commodities Index

* Target calculation: 134 + ( 134 – 125 ) = 143

March 26, 2014

Depleting Putin’s war chest

From Quartz:

The “First Law of Petropolitics,” coined by New York Times columnist Tom Friedman… states that when oil prices are high, the leaders of petro-states can become demanding and belligerent; when they are low, they are more prone to be pussycats.

Oil prices at elevated levels explain Russian belligerence. The graph below shows Brent Crude prices adjusted by the (US) consumer price index to reflect growth in real crude prices over the last decade. To bring crude prices down to pre-2005 levels will be no small feat.

Real Crude Oil Prices

February 20, 2014

Crude and commodities signal recovery

The Dow Jones-UBS Commodity Index followed through above resistance at 128, after breaking its descending trendline, completing a double bottom reversal with a target of 134*. Breakout above 134 would confirm a primary up-trend.

Dow Jones UBS Commodities Index

* Target calculation: 128 + ( 128 – 122 ) = 134

Nymex Light Crude followed, completing a large double bottom reversal, with a target of $110/barrel*. Recovery of 13-week Momentum above zero indicates a primary up-trend. Brent crude continues to range between $106 and $112/barrel.

Brent Crude and Nymex Crude

* Target calculation: 100 + ( 100 – 90 ) = 110

Rising commodity prices suggest that the global economy is recovering, but copper (widely considered a bellwether for the global economy) has yet to follow. Bullish divergence on 13-week Twiggs Momentum favors an upward breakout. Breakout above $7500/tonne (and the descending trendline) would signal a primary up-trend.

Copper

February 5, 2014

Crude: Nymex WTI down-trend

Nymex Light Crude is headed for another test of resistance at $100/barrel. Respect of resistance is likely, given the primary down-trend, and would suggest another test of primary support at $92/barrel. Breach of primary support would offer a target of $84/barrel*. Recovery above $100 is unlikely and another 13-week Twiggs Momentum peak below zero would strengthen the bear signal. Brent crude is headed for another test of support at $104/barrel. Breach would join Nymex crude in a primary down-trend.

Brent Crude and Nymex Crude

* Target calculation: 92 – ( 100 – 92 ) = 84

January 29, 2014

Light crude finds support

Nymex Light Crude found support at $92/barrel. Penetration of the descending trendline would suggest trend weakness, while respect would signal another test of primary support at $92/barrel. Breach of primary support would offer a target of $84/barrel*. Recovery above $100 is unlikely and another 13-week Twiggs Momentum peak below zero would indicate a strong down-trend. Brent crude continues to drift sideways, reflecting global supply constraints; breach of $104 would warn of a down-trend.

Brent Crude and Nymex Crude

* Target calculation: 92 – ( 100 – 92 ) = 84

January 22, 2014

Crude and commodities still bearish

Nymex crude continues its downward trend. Respect of the descending trendline would warn of further weakness, while breach of support at $92 would indicate a decline to $84/barrel*. Recovery above $100 is unlikely, with 13-week Twiggs Momentum declining below zero. Brent crude continues its consolidation above $105, reflecting global supply constraints. Breach of $105 would warn of a down-trend.

Brent Crude and Nymex Crude

* Target calculation: 92 – ( 100 – 92 ) = 84

Commodities also continue their primary down-trend, encouraged by a falling Shanghai Composite Index. Bullish divergence on Dow Jones-UBS Commodity Index 13-week Twiggs Momentum, however, warns that a bottom is forming. Breach of the descending trendline would strengthen the signal — as would recovery of Momentum above zero. Breakout above 128 would signal a primary up-trend: a bullish sign for resources stocks.

Dow Jones UBS Commodities Index

December 4, 2013

Gold support at $1200

Gold

The long tail on this week’s candle reflects buying support for spot gold at $1200/ounce. Recovery above $1250 would suggest another rally to $1350. But the 63-day Twiggs Momentum peak below zero warns of a down-trend. And breach of primary support at $1200 would confirm.

Spot Gold

* Target calculation: 1250 – ( 1350 – 1250 ) = 1150

Often a leading indicator of spot prices, the Gold Bugs Index, representing un-hedged gold stocks, continues in a primary down-trend after breaking support at 210. Completion of a 13-week Twiggs Momentum peak below zero would strengthen the signal.

Gold Bugs Index

Dollar Index

The yield on ten-year Treasury Notes broke through medium-term resistance 2.75, suggesting a primary advance to 3.50 percent*. Breakout above 3.00 percent would confirm. Reversal below the rising trendline is unlikely, but would warn of trend weakness and another test of 2.50. Higher yields are likely to strengthen the dollar.

10-Year Treasury Yields

* Target calculation: 3.00 + ( 3.00 – 2.50 ) = 3.50

The Dollar Index shows evidence of strong support at 80.50, consolidating in a narrow band between 80.50 and 81.00 over the last 2 weeks. Upward breakout would suggest a primary advance; confirmed if resistance at 81.50 is broken. Breach of support at 80.50 remains as likely and would warn of another test of primary support at 79.

Dollar Index

* Target calculation: 81.5 + ( 81.5 – 79 ) = 84

Higher interest rates and a stronger dollar would increase downward pressure on gold.

Crude Oil

Nymex crude penetrated its downward trendline but this first bear rally may not be the last. Expect resistance between $98 and $100/barrel. Respect remains likely and would indicate another test of support at $92. Brent crude reflects global supply constraints and is likely to find strong support at $100/barrel.

Brent Crude and Nymex Crude

Commodity Prices

A rising Shanghai Composite Index is supporting commodity prices. Recovery of the Dow Jones-UBS Commodity Index above 126 would indicate a bear trap. Breakout above 130 would suggest reversal to a primary up-trend; and cross-over of 13-week Twiggs Momentum above zero would strengthen the signal. Respect of resistance at 126 and a primary decline now appear unlikely.

Dow Jones UBS Commodities Index