Crude Oil Technical Positioning Warns of Major Downturn Ahead Crude Oil (WTI) $78.33 +$0.33 +0.42% Oil prices consolidated in a narrow range between $77.67 and $78.48 in thin holiday trading around the Martin Luther King Jr. Day holiday, although a large Bearish Engulfing candlestick formation and negative RSI divergence on the weekly chart hints that a significant downturn is ahead. The correlation between crude and risk sentiment remains significant (74.8%), so tomorrow’s fourth-quarter earnings reports from Citigroup and IBM may prove market-moving. The economic calendar offers only peripheral releases, with the NAHB Housing Market Index being the only item of interest considering the US construction industry is the world’s largest crude consumer. Expectations call for the metric to rise to 17 in January from 16 in the previous month. Some secondary fallout may also come from commentary surrounding Canada’s interest rate decision considering the country is the foremost oil supplier to the US. Commodities – Metals Gold, Silver Look to Earnings as Key Catalyst on Risk Appetite Correlation Gold $1136.98 +$3.38 +0.30% Gold prices rebounded from rising trend line support, with near-term resistance lining up at $1143.54 from here. The correlation between gold and the MSCI World Stock index is now at a whopping 96.3%, suggesting tomorrow’s fourth-quarter earnings reports from Citigroup and IBM are the key items to watch in the near term. The former is of particular interest after analogous figures from JPMorgan sank risk appetite last week despite beating profit estimates as revenues disappointed. This hints that the blind optimism that held sway over financial markets through much of last year may have given way to a more cautious posture, with investors increasingly concerned about the continuity of economic recovery absent fiscal and monetary stimulus. This means that a good earnings outcome at this point requires revenue growth, not just profits achieved on the back of cost cutting (and in the case of the financials, trading amid market volatility). Silver $18.74 +$0.10 +0.51% Silver broke through resistance at the top of a Triangle bullish continuation pattern, clearing the way for a move to test near-term swing top resistance at $18.90. The correlation between prices and the MSCI World Stock Index is at a formidable 93.3%, so as with gold, the earnings calendar is likely to be the primary catalyst for the near-term.

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