DY: Oil May Correct Higher, Gold Vulnerable to Further Losses
Crude oil technical positioning suggests prices may correct a bit higher in the near term before the larger down trend resumes. Meanwhile, gold and silver may suffer further losses if the upcoming set of fourth-quarter earnings reports from top financial firms prove disappointing.
Commodities – Energy
OIL MAY SEE CORRECTIVE UPSWING BUT TREND BIAS REMAINS BEARISH
Crude Oil (WTI) $77.80 -$1.22 -1.54%
Oil prices continue to consolidate above $77.67, but positive divergence on the RSI oscillator suggest that a near-term bullish upswing may be ahead. Initial resistance lines up at $79.04. Importantly, any such move is likely to be corrective considering the large Bearish Engulfing pattern on the weekly chart that warns of a larger downturn. December’s US Housing Starts as well as weekly inventory figures from the American Petroleum Institute top scheduled event risk. Economists expect the former to show a second consecutive monthly increase, while traders are sure to scrutinize the latter as a leading indicator amid expectations that Thursday’s official DOE inventory figures will see inventories rise by another 2.5 million barrels. The near-term correlation with the MSCI World Stock index has continued to fade, suggesting supply/demand considerations rather than risk appetite are likely to remain the dominant catalyst for now.
GOLD, SILVER VULNERABLE TO FURTHER LOSSES ON Q4 EARNINGS
Gold $1129.58 -$8.63 -0.76%
Prices continue to test rising trend line support set from December’s swing low, with a downside break exposing support at $1118. Near-term resistance lines up at $1142.76. The correlation between gold and the MSCI World Stock index has leveled off a bit but remains at a very formidable 94.5%. This means today’s barrage of fourth-quarter earnings reports from top financial names like Bank of America, Wells Fargo and Morgan Stanley are going to be critical to watch after JPMorgan sank risk appetite last week and Citigroup fell short of expectations yesterday. US equity index futures are pointing to a lower open ahead of the opening bell in New York, hinting that the path of least resistance is to the downside.
Silver $18.53 -$0.22 -1.17%
Prices seem to be forming an Ascending Triangle bullish continuation pattern below resistance at $18.87, but fading momentum on relative strength studies bodes ill for the upside scenario. Further, the correlation between the metal and the MSCI World Stock Index has pushed higher to 93.9% and has resisted fading (as with gold), suggesting a disappointing round of earnings releases may spark a considerable sell-off. Triangle bottom support is at $18.49, with a break below that exposing the $18.00 figure.
