Crude Threatens to Test June Lows

Crude futures continued yesterday’s slide on rising volume with the futures crashing beneath our 1st tier uptrend line.  Crude, along with U.S. equities, is reacting negatively to today’s disconcerting unemployment data.  Crude futures are ignoring yesterday’s inventories coming in shallow for the 7th time in 8 weeks, and are focusing more on the impact of climbing unemployment on the demand side.  Furthermore, we can’t dismiss the IEA’s downward revision of global demand for crude over the next five years.  The defeat of our 1st tier uptrend line certainly gives us pause since this could be an important technical development for the near-term.  Crude futures are presently holding onto 6/23 and 6/3 lows with the S&P hovering around 900.  If the S&P can’t hold its own June lows, then we may see similar contractions in both crude and gold beneath their respective June lows.  Despite the negative technical developments taking place in the market, crude should have enough strength to hold onto June lows since it’s a holiday-shortened July 4th week.  Investors may wait to see how 2nd quarter corporate earnings fare before causing irreparable damage to crude’s uptrend.

Crude’s present downturn isn’t unexpected since the commodity has been on a tear so far this year with investors pricing in a global economic recovery.  The question now becomes whether investors take this as a temporary setback, or whether the pullback has the momentum to head towards $60/bbl.  If June lows don’t hold, crude may not experience substantial support until the $60-$61/bbl range.  Due to the failure of our 1st tier uptrend line and the rising volume on the sell-side, it seems pressure to the downside is increasing.  Therefore, while we may see a slight rebound Friday, it appears a new near-term downtrend is coming into play.  We will have to see how the S&P interacts with its 875-900 range before we can anticipate how protracted crude’s present pullback will be.

Present Price: $70.27/bbl

Resistances: $66.96/bbl, $67.37/bbl, $67.77/bbl, $68.07/bbl, $68.45/bbl

Supports: $66.61/bbl, $66.29/bbl, $65.93/bbl, $65.48/bbl, $64.86/bbl

Psychological: $65/bbl, $70/bbl

Gold Holds onto June Lows despite Pullback in Equities

Gold is behaving pretty well today considering the size of the selloff taking place in U.S. equities markets.  It seems the pullback in the S&P has already been factored into gold during the precious metal’s rapid decline in June.  Gold is holding onto June lows with the EUR/USD and GBP/USD fighting to keep their respective technical supports intact.  Though gold reacted negatively to the discouraging unemployment data out of the U.S., volume has been under control.  However, we will have to see how the 16:00 bar on the 4-hour fares volatility wise, and whether the precious metal chooses to retest June lows.  The technical key to the downside will be our 1st tier uptrend line.  Below here, gold has June lows and naturally the highly psychological $900/oz level.  Due to the July 4th holiday-shortened week, investors may not have enough ammo to send the S&P futures tumbling below their June lows.  Gold would need a technical statement to the downside such as this for the precious metal to compromise its own June lows.  Gold will likely take its cue from the S&P and its behavior between 875-900.  Therefore, investors should keep a close eye on U.S. equities and their reaction to upcoming 2nd quarter earnings reports.

Present Price: $928.18/oz

Resistances: $930.56/oz, $932.29/oz, $934.36/oz, $936.78/oz, $939.37/oz

Supports: $927.98/oz, $925.24/oz, $923.59/oz, $921.41/oz, $918.99/oz

Psychological: $900/oz

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