Crude oil - Gold Spread at Historical High

Spread is going big - something has to give.

Dr. Copper & Emerging Markets

The tightest correlation of Copper is with the S&P and Brazil looks like digging deeper after the yesterday's market rout.

Sell in May and Go Away?

S&P broke important support and technicals already signal a reversal - at least in the short term. A move below the 50-Day MA will accelerate the move.

Silver is breaking painfully down towards the important area of support around 30-34 levels.

Looks like a bubble unwinding but let's see what the end of QE2 brings as inflation is still not on the radar of CBers.

As indicated in the previous Global Macro update, Copper is moving toward 408-410 area which is a 'make or break level'. Below it the 200-Day MA will hold the move, however we might see a major exodus out of commodities once a snowball effect takes place as too many players jumped on the bandwagon of the inflation theme and maybe overstayed their welcome. Let's see how Copper will trade at the 400 level.

QE2 seems to come to an end and yet again deflationary fears are rising.

Rates are dipping down towards the 3.2% Support and if broken they will target again below 3%.

Are you ready for a bounce?

It is always important to wait for a confirmation and not jump in anticipation so I'm just making this observation that the trend is already overextended and technicals are in Oversold conditions for quite some time so a reversal is highly probable. When, how much, and whether it will be a Major reversal is to be seen.

Global Macro Update - Asset classes consolidate after the recent moves

10-Year USTs need to fill the Gap and break out of the current ranges to initiate a decisive trend. Until ranges hold I remain cautiously monitoring the price action ahead of the end oof QE2.

Copper is consolidating inside a tight range and looks like a Descending Triangle is in the making.

It is a bit early to call a breakdown, however if we see a close below 407, Copper should slide to the next support at ~360.

On the upside the Major trendline (RED) is the important Resistance guide to price action.

Gold seems weary of the slow grinding higher and at a trendline Resistance with technicals screaming for a pullback if not Reversal.

Silver produced a large DOJI. Could be a blow-off top of just a temporary indecision.

Next Support comes around 42 and then will see which one is the case.

S&P 500 coils higher on low volume.

USD is trending inside the down channel.

Compalcency rules the market.

CRUDE OIL (NYMEX:CL) IS BREAKING OUT - ENERGY SECTOR OUTPERFORMS

Crude Oil is the major market theme today with Energy sector companies the leaders in the S&P 500 and continuing to outperform YTD.

Crude is breaking above the most recent high today on the back of the weakening USD and the trend is accelerating as the indicators are signalling.

Global Macro Trends persist unnerved by the political tensions

Weekly S&P 500 chart has a pending Golden Cross (50 x 200 Week MA upside crossing).

FED's QE2 is fueling cash in the equities market. The index is a bit overstretched above the 50-Week MA and a possible test of the Golden Cross levels - approximately 10% correction to 1175 - 1200.

Dr. Copper is alive and kicking as global growth is recovering boosted by the Central Banks' persistence in keeping the loose money policy.

Crude Oil is sustaining a break above the psychological $100 mark. Next target lies at around $112 with technical indicators supporting the bullish case for Oil.

Gold is testing the all time High around $1440 and might correct till $1360-80 to test the long term trend line Support.

Silver is a bit overstretched above the 50-Week MA and testing the Trendline Resistance at current levels ~ 34.50. At this level I'd watch for a possible fake break and correction to 26-24 levels where the Long term Support should hold the present Trend.

US Dollar Index (DX) is trading right at the Long term Support trend line at 76.40-50.

FED's policy isn't signalling any hints of tightening and the debt buying program is weighting on the USD value. Below 76 level the trend should accelerate.

The 30-Year UST Bond is trading right at the 200-Week MA which held the last 5 tests on the downside. QE2 program is still in action so I'd be cautious on breaks below as I see limited downside until June '11 after which it will important to see the market reaction as the bond king Bill Gross asked who will buy the US debt after FED stops the POMOs.

The 2Year - 10Year Bond Spread is currently Bullishly steepened which suggests more economic growth and spell bullish sign for the equities.

The longer end of the yield curve - the 10Year-30Year Bond Spread has also violently reversed and steepened in the end of 2010 which supports the bullish case for the equity markets so far.

Global Macro Update

S&P 500 started to decline after reaching overextended level of complacency. While the pullback was much expected we must see 1235/40 broken to look for a bigger slide.

10-Year Notes have been in an oversold state for quite some time and need to hold above 119 for a move higher. There is a case for higher yields on the back of better employment data released this week however with the pending slide in Equities I'd look for a flight to quality pushing the Notes higher into the 121 level.

Increased Volatility in Precious Metals suggests a possible Distribution phase is in progress.

Price action around 1355 would determine the Short term sentiment in Gold.

Dr. Copper as traders call it is leading the Equities cycle and is still strong however just like S&P it is in pullback mode and we should monitor 420 and then 410 levels to offer support.

Last week's news of the large trader holding approximately 85% of LME's Copper is interesting and points to a possible squeeze just like the large exposure of the GLD ETF to physical Gold price might severely affect the price action once the public participation starts to fade and the holdings are started unwinding.

Silver & Gold poised for reversal based on Trend Momentum Divergence

Silver had a stellar rise with a 73.5% YTD performance and still holding above the steep Uptrend line support. Momentum studies are DIVERGING with current trend and pointing to a waning strength in the move. Waiting for the pending Short signals in DMI and ROC to unfold.

Gold has performed rather bleak given all the media attention as a main inflation wealth protection vehicle reaching 26.3% YTD return.

Momentum studies are showing falling strength in the current trend and I'm watching for similar pending technical Short signals.

Interesting chart here is the Gold-to-Silver ratio and its relationship with the US Dollar Index.

Since June till November there was a loose positive correlation that dissipated after the FED announced its QE2 plans.

Based on this chart I would look for a bounce in the Gold/Silver ratio which would come with a strong pullback in Silver which outperformed strongly Gold since August 2010.

Momentum Divergence in GOLD: Pending Short signal

GOLD is Media's favorite anti-inflation play. Inflation expectations for 2011 are predominantly Flat as I watched a GS economist on CNBC today. So what happens in an overcrowded position?

Technically I see a Momentum Divergence. Rate of Change and RSI are ticking down while the price is consolidating with a slight upward Tilt.

ADX has been indicating a strong Trend however with +/-DIs closing the Spread it develops intoa classic Short signal based on Welles Wilders's own work.

Reuters/Jefferies CRB Index near its 200-Week MA

Weekly chart shows CRB is on a Breakout mode and near its 200-Week MA.

Momentum is rising and trend strength is slowly kicking in.

Inflationary times are coming and judging from the chart they will have a long way to go.

Equities, Bonds, Commodities and FX Markets Update

EUR/USD found support above 1.27 at around 38.2% Fib (1.1860 - 1.3350) and is close to the Trendline support - a close below 1.27 confirms a trend reversal.

SPY broke heavily through the Trendline support and is leaking badly to the downside with first target around 105 which contained the trend in the previous test. A break lower would show high risk of making new lows and possibly reverting to new bear market.

TLT - Bond markets are creeping higher in a mighty trend style while long term yields are depressed and deflationary pressure is rising - FED's move into Quantitative Easing 2.0 is definitely in progress but seems there will be more pain until Inflationary theme kicks in - possibly 6 to 9 months if the first stimulus campaign and its results from March 2009 could be any guide.

GLD - Gold is trending higher again after the correction in July. We need to see 120 broken for a test of the all time highs. There are plenty of rumors and research on gold manipulation and price suppression however until deflationary pressure is cooled off I assume it's pretty normal for Gold to correct its price. On the other side John Paulson and David Einhorn which are high level hedge fund professionals have large allocations in GLD and physical Gold so I keep na eye on the trend strength.

Copper has been bullish despite the stock corrections. Its chart seems like a large swing graphic of the economic tides and its over sensitivity to the industrial activity. I expect it to go down until we have new stimulus measures from the global governments as it seems the first stage of the stimuli-induced growth is already losing strength and austerity measures are not of great help.

Crude Oil is near support as ween from the trend channel - I would expect however to see it lower as inflationary pressures are pretty far away and economic growth is not on the main list for the time being.

VXX the short term VIX fund is basing and creeping higher as stocks decline and markets are going back i to Risk OFF modus operandi. I expect VXX to rally along with the Bond market and the SPY decline since September is usually a pretty volatile month and it's time to shake off the complacency of the markets that has been ruling as of late.

GOLD Trend - 21&72 DMAs Dead Cross ahead of the 200 Resistance-Day MA

Volatility Breakouts usually signal trend reversal and so far we witness one in GOLD.

GOLD is developing a Falling Wedge pattern which has a Bullish implication if broken on the upside so I remain cautious in the meantime since we see a logical bounce off the important 1160 Support as marked on the chart. Lower stands 1140 Support area along with the 200-DMA at 1146 which is a very tough layer of Support to crack at least on the first attempt, IMHO.

I expect a retreat to 1200 Resistance first marked by the Trend line and the 21-Day MA.

The Bearish scenario is supported by the 21 & 72 - Day MAs Dead Cross, the sustained fall in the Rate of Change and the rise in the ADX reading above 26 which signal trend acceleration and at the moment the Trend is DOWN until proven otherwise.

GOLD Trend - Momentum is Fading

GOLD has been actively watched in the last months as it has been making new highs and touted as the ultimate Inflation protection vehicle. Inflation is not easy to find right now as several measures of the monetary velocity show a deflation threat is still intact and FED seems reluctant to signal end of QE with dismal Industrial Production data released a week ago.

Technically speaking GOLD tested the Trend line Support below 1200 and is now reaching a confluence of Resistance levels: the former Dec'09 Close and Open around 1216 and the 50-Day MA sitting on the same level. The Momentum since the May '10 top is fading and we could see how the Labored move failed with a volatility break which is a good signal of a possible Trend change. ADX has already given a Short signal.

GOLD: 'Trend Is Your Friend'

Moving nicely inside the Up-Trend channel.

Note that the Commercials' and the Large Speculators' positions has been perfectly aligned for this trend continuation to run smoothly since the Lows in early 2004. It is important to note that Commercials are actually increasing their hedging short positions and close to the size when they first probed the 1248 High in late 2009. A basic view would be that they try to lock in as much volume at the present price levels as they are able to.

Interesting fact is that according to The World Gold Council the largest Gold Reserves holder is the US with 8 133 tonnes which represents 70.4% of its reserves.

This chart reminds every trend has an end where it bends. No way I would call it as we never know where a trend might end up especially as I wouldn't rule out a squeeze and a blow off top phase once the 1260 level is decisively taken out. Both RSI and Momentum show strength in the trend now and MAs are confirming the strong inertia the move has gathered. That's why as Physics laws rule we shouldn't go in the way of a body that has gathered such power along its motion course.

Now I mentioned the END as this Rising Wedge I have drawn is just an assumption and should be monitored for confirmation as it has strong Bearish implications. However I would look for a blow-off top first.

Gold, Crude Oil & Copper trend update

Crude is developing inside a Bearish Rising Wedge and the 200-DMA caps the ascent at $77.

Rate Of Change is showing the Momentum is topping.

Gold is either gathering strength to breakout to new High or to drop as a stone as it is the only commodity still in rising trend. Trend lines are still keeping is bid however the pivotal short term 21-DMA is turning flat.

RSI and Momentum are waning in accordance to the failure to take out the 1250 level twice.

Copper is going down in the trend channel and momentum and RSI are confirming the price action. The industrial metal down trend is signalling bad for the economy and the emerging markets overheating.

Crude oil & Gold - Trend update

Violent slide in Crude was even more violently reversed off the $67 lows for a quick ~38.2% pullback. Now that we had that tight range day on Friday my take is a new test of the Lows.

Interesting to observe is how Friday's price action is confined inside the chart points markets by the horizontal levels. DMI has a pending Long signal and trend strength is going down so I expect more range trading for the time being.

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Last Friday's slide was bough up and closed near the Open but trend strength is on its lowest level.

Spike in traded volume is similar to the previous 1228 peak and while timing is tricky I still monitor price action for a continuation of the Reversal move at least until the 1248 high hasn't been challenged again. The thing is however price is swinging above the 8-MA which I use for short-term momentum indication - so I assume bulls will make an attempt for a new push higher.

Metals are giving mixed signals while Gold's trend is still intact

Platinum broke the trendline support but still above the long term horizontal Support which is key to its present trend.

Palladium had the most Bullish trend and the steep selloff is giving sharp alarm of exit. The horizontal Support is key to the current direction just like in Platinum but the signal here is far more acute.

Gold - the ultimate safe haven... Still trend channel is intact and holding above 2008 Highs. However the Leaders in Metals complex are in alarm mode and here is a real test for the dominant assumption that Gold will save your wealth.

Copper is the prime industrial indicator and as such we gotta be prepared to see industrial contraction since it broke the prime trendline support and now as in the first 2 metals the horizontal Support is key to the market sentiment and needless to say a breach below would be a major Bearish sign.