Gold and Crude

Click charts to enlarge

The above charts are daily charts of December Gold and October Crude Oil. Both are trading considerably higher on the day as we are preparing this blog at 10:30 AM Chicago time (CDT); Tuesday Sept. 8. There has been a breakout in the gold as illustrated here which occurred during last week’s trading. Using what we believe to be a standard measuring technique using the base of the triangle added to the point of breakout the potential price objective comes to approximately $1105.

The Crude Oil chart shows that it is attempting to break over a near term down trend line but with a significant Fibonacci resistance at approximately 7195.

Many are asking what has gotten in to these markets today. We have seen a few factors that are providing influence. First is that the US Dollar is trading sharply lower. This typically has been supportive to commodities such as precious metals and crude oil.

We have heard that The UN is now talking about a new global currency. Also the G20 communique stated that monetary and fiscal stimulus would continue and this may help maintain at least the perception of a less risky environment therefore reducing the safe haven status of the US Dollar.

Goldman Sachs forecasts $85.00 per barrel crude oil and also, we understand that that a popular oil ETF is due to liquidate its crude assets which may be reallocating investment capital into gold. There has also been some chatter of Chinese interest in accumulating gold as an inflationary hedge.

We believe this will make for interesting price action particularly over the next few days. We are not suggesting here to either buy or sell either commodity but certainly noting that there could well be opportunities for trading ideas being presented.

As always this is something we discuss more in depth with our clients but we encourage any questions, comments or better still, any answers directed to us at:

jmajer@mfglobal.com

312 261-7380

800 321-5810

Jeff Majer

Diego Pilar

CB&S Division

MF Global Inc.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.

Crude Oil Top structure

This daily chart of October Crude Oil futures exhibits two potential double top set-ups. The parameters of the larger of the two are highs of 7527 and 7500 with the trough (low) in between the highs being 6043. Penetration of the 6043 level provides confirmation to the double top and gives a measuring implication to approximately 4550.

The smaller potential double top formation has parameters of 7444 and 7500 as the high points with 6742 as the trough in between. The measuring implication if the 6742 level is breached is approximately 6050.

Based on the parameters for the smaller of the two potential double top formations, if a short position were initiated with penetration of 6742 while the highs were still in tact (and within a reasonable period of time as to not distort the set-up structure) and the objective of 6050 was realized that would be approximately $6,900 potential per contract. Likewise, if the short position were to be initiated at 6740, for example, and the price were to go back through the 7500 before electing stop protection the potential LOSS would be approximately $7,600.

Remember that nothing is exact or for sure but double top formations can provide excellent trading strategies and guidelines.


We have included the monthly chart of the crude oil futures because it illustrates two potential areas of significant resistance. First is the 50 month moving average which shown here reads as 7418. The front month future has been unable to close above this level.

Also there is the .382 Fibonacci resistance at approximately 7605. The high of the rally off the December and January lows represented by this monthly data has been 7500.

Futures and options trading contain substantial risk of loss and may not be suitable for all investors.