http://www.dailyfx.com/forex/fundamental/daily_briefing/daily_pieces/commodities/2011/01/04/Crude_Oil_Rises_but_Underperforms_Equities_Gold_Carves_out_an_Ascending_Triangle.html
Commodities – Energy
Crude Oil Rises but Underperforms Equities
Crude Oil (WTI) - $91.71 // $0.33 // 0.36%
Commentary: Crude oil hit a fresh 26-month high on Monday before falling back to settle up only $0.17, or 0.19%, to $91.55. Oil’s price action is best characterized as a grind higher, though we did see a noticeable underperformance relative to equities in the latest session. The S&P 500 rose by 1.1% to reach a 27-month high of its own.
With sentiment so bullish, risk assets have a tendency to gravitate to the upside with little resistance. That will change, of course. Once news flow turns negative, risk aversion will sweep the financial markets and that will be the time to initiate long positions. With regard to crude specifically, we believe that prices will have a tough time moving sustainably into the triple digits before there is more clarity with regard to supply and demand balances in 2011. With Brent printing over $96 on Monday, that leaves very little immediate upside from a fundamental standpoint.
Technical Outlook: Prices are showing a bearish Inverted Hammer candlestick below resistance at the upper boundary of a rising channel set from August, hinting a move lower is ahead. Negative RSI divergence bolsters the case for a downside scenario. Initial support lines up at $89.49.
Commodities – Metals
Gold Carves out an Ascending Triangle
Gold - $1415.45 // $0.65 // 0.05%
Commentary: Gold shed almost $6, or 0.42%, to settle at $1414.80 on Monday. Prices remain in a very rocky uptrend as the metal now has to compete with other assets for speculative capital. Overall, investment interest in gold remains firm as evidenced by the very gradual increase in ETF holdings, but there is no stamped like we witnessed during the middle of 2010.
Technical Outlook: Prices may be carving out a triple top below $1424.60, with clear negative RSI divergence on the weekly chart hinting a move lower is ahead. A daily close below $1374.82 exposes the bottom of a multi-year rising channel set from late 2008, now at $1290.46. With that said, positioning since late October has carved out an Ascending Triangle chart formation indicative of bullish continuation, so a push through $1424.60 to test the channel top (now at $1494.76) may be in the cards before the largerdownswing materializes.
Silver - $30.72 // $0.02 // 0.07%
Commentary: Silver fell a modest $0.22, or 0.71%, to settle at $30.70. Investor interest shifted dramatically in favor of silver at the expense of gold during the back half of 2010, and it looks like that trend is continuing here in 2011. Silver ETF holdings advanced 1 million troy from last Friday to 485.6 million, which is just shy of the record level of 487.8 set back in the middle of Dec.2010.
The gold/silver was steady at 46, near the lowest levels since April 2006. (The gold/silver ratio measures the relative performance of the two precious metals. A higher ratio indicates gold outperformance, while a lower ratio indicates silver outperformance).
Technical Outlook: Silver has set another 30-year high, but positioning hints a reversal lower is ahead withprices carving out a bearish Rising Wedge formation since early November.The setup is reinforced by clear-cut negative RSI divergence. Confirmation of a downward breakout requires a daily close below the wedge bottom, now at $29.51. More immediate support lines up at $30.17.
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