Crash, Down Quarter, Major Correction—It’s All in the Cards

Crash, Down Quarter, Major Correction—It’s All in the Cards
Crash, Down Quarter, Major Correction—It’s All in the Cards
The appetite that institutional investors have had to bid the stock marketis diminishing.

Earnings estimates for the second quarter are actually being trimmed by corporations and Wall Street. It makes for a genuinely peculiar environment for the stock market—share prices at their highs on declining expectations for corporate earnings.

The lesson is clear: it doesn’t pay to fight the Fed.

Being a leading indicator, the stock market went up after employment numbers came in just slightly below consensus last week. Share prices going up on bad or weaker-than-expected economic news is powerful.

This has been going on for a number of months now. Even on days when equities open lower based on weak economic data or on technical metrics, the market has often fought its way back up.

The powerful stock market action since the beginning of the year has been a combination of renewed confidence, relative monetary certainty, the slow investment of new cash inflows, and good corporate health (strong balance sheets and solid earnings maintenance). (See “Stock Market Fake-Out: Where Is the Retrenchment?”)

But with the stock market now gyrating on the end of quantitative easing, it is distracted until second-quarter earnings season begins.

A massive stock market pullback is due anytime. Expect it. Be prepared for it. Equities have been due for a significant retrenchment for months.

The fact that stocks didn’t sell off during first-quarter earnings season really surprised me. It increases the likelihood that institutional investors will use this as the catalyst to book profits during or right after second-quarter earnings season.

Monetary policy will always be the great arbiter for the stock market. It is the most powerful catalyst for price changes. But after the Federal Reserve’s actions come earnings, and companies do have to perform in this area.

I continue to view the equity market as being very high-risk for new positions, recognizing that there are very few other asset classes for long-term investors to consider.

In each of the last three years, the stock market has taken a meaningful break over the summer months. It feels stretched and a repeat of previous summer performances is definitely in the cards.

I think the investment community itself is very surprised by the strength and fervor that institutional investors have bought this market. The earnings picture doesn’t particularly support a rising stock market. While it is true that valuations remain historically reasonable and corporations have done a good job improving their balance sheets, the lack of momentum in earnings growth and revenues over the last number of quarters is at odds with historical sentiment.

The stock market is due for everything—a down quarter, a major two- or three-day crash, and a massive correction. The system has earned it.

With big traders speculating on global monetary stimulus, fund managers are paid to play and are still nibbling.

But there definitely is pronounced fatigue apparent in the equity market now. As well, second-quarter earnings expectations are looking tired.

Capital markets are now searching for the equity correction. All that’s required is enough of a push and the sell button will be switched to “on.”

By Mitchell Clark, B.Comm. for Profit Confidential

Buying High the New Winning Investment Strategy?

Buying High the New Winning Investment Strategy?
Buying High the New Winning Investment Strategy?
When I evaluate potential stocks to trade, not only do I examine how well the company has done and delivered, but I also look at the stock’s chart potential and technical analysis.

In fact, I often will screen stocks based on my technical analysis system, and from there, I’ll take a closer look at the company’s underlying fundamentals. But the strategy I use for day trading and swing trading differ from the process I employ for longer-term buys.

For trading, I tend to rely on technical analysis more than I do for longer-term investments.

Stocks that I really like to look at are those trading at their 52-week highs. (Read “Denny’s Serves Up Grand-Slam Returns.”) Some of you might ask why I would bother to look at stocks that have already eclipsed their 52-week highs. The reason is that these stocks are trading at their highs, because they are delivering results to Wall Street. As a side note, I also look at stocks near their lows, but these are predominately viewed as contrarian picks.

An excellent example of a stock at a 52-week high that I suggested readers keep on their watch lists recently was Mannkind Corporation (NASDAQ/MNKD), a biopharmaceutical company that is making some great strides in developing therapeutic products for several diseases, including diabetes, cancer, and inflammatory and autoimmune diseases.

On the chart, Mannkind has made 26 new highs this year and has shot up 213% in that time, according to data from Barchart.com. Over the past year, the stock made 32 new highs and is up a sizzling 341%, based on my technical analysis.

Examining Mannkind’s stock chart through technical analysis, the company is excellent, showing successive highs this year, as indicated by the purple circle in the chart below.

The stock is pausing now, down eight percent from its high, so it may be taking a break. I would not be chasing the stock as the easy money has been made for now, based on my technical analysis.

Buying High the New Winning Investment Strategy-2

Chart courtesy of www.StockCharts.com

In addition to Mannkind, there is always a good buying opportunity to make money when examining stocks trading at their 52-week highs through technical analysis.

I look for high volume stocks trading above their 50- and 200-day moving averages (MAs). You want to look for a possible “golden cross” pattern, in which the 50-day MA is above the 200-day MA, as shown in the chart of Mannkind below. You also want to see strong or rising relative strength and a bullish moving average convergence/divergence (MACD).

Buying High the New Winning Investment Strategy -3

Chart courtesy of www.StockCharts.com

Another stock on the rise is Novatel Wireless, Inc. (NASDAQ/NVTL), which jumped 7.71% on June 7 and is edging higher on the chart.

Buying High the New Winning Investment Strategy - 4

Chart courtesy of www.StockCharts.com

Other potential candidates include MicroVision, Inc (NASDAQ/MVIS), Pacific Sunwear of California, Inc. (NASDAQ/PSUN), Flamel Technologies S.A. (NASDAQ/FLML), and TearLab Corporation (NASDAQ/TEAR).

By George Leong, B.Comm. for Profit Confidential

Breakdown: U.S. Economy and Its Cycles in 18 Brief Points

Breakdown: U.S. Economy and Its Cycles in 18 Brief Points
Breakdown: U.S. Economy and Its Cycles in 18 Brief Points
In a fascinating work on long-run economic cycles, J. Anthony Boeckh’s book The Great Reflation offers up some poignant research on the U.S. economy and its cycles.

The Great Reflation is a non-political, historical breakdown of inflation, monetary and fiscal policies, interest rates, and long-wave economic theory. It was completed in 2010 and made several predictions on the U.S. economy that have turned out to be correct so far.

Boeckh, former publisher of the Bank Credit Analyst, delves into past financial manias, asset inflation bubbles, asset allocation for the aftermath, the U.S. dollar decline, commodities, and the monetary future of the stock market and the U.S. economy.

Here is a summation of Boeckh’s observations:

1. The global financial system will always remain flawed and subject to price inflation and bubbles, so long as it is based on fiat paper money.

2. Before 1914, most Western countries had a monetary regime that legally restricted central bankmoney creation based on its holdings of gold.

3. Average interest rates fell throughout the 100 years leading up to 1914.

4. In the absence of a financial system based on discipline and restraint, all anchorless fiat money systems (especially the U.S. economy) are destined to suffer inflation and instability.

5. Investors will be playing cat-and-mouse with the Federal Reserve for years to come—a problem caused by excessive private and public debt.

6. Deleveraging of the private sector bodes well for the transition process to the next long-wave cycle (2015+).

7. If the U.S. economy can’t help reduce the debt-to-gross domestic product (GDP) ratio in a timely manner, investors will face a public-sector debt supercycle larger than the post-1982 private-sector supercycle.

8. In the short term, deficits and extreme monetary expansion help the private sector repair balance sheets, but they cannot raise the standard of living for the average person.

9. The real total return of the S&P 500, deflated for inflation, is remarkably consistent over a long period of time.

10. Tactical asset allocation is the key to wealth creation and capital preservation.

11. In a world of economic fragility, investors want stability in the U.S. dollar, but the long-term outlook is bearish.

12. Gold is a crowded trade, but it’s useful as an insurance/inflation hedge in portfolios. Gold is an emotional purchase. Financial/investment demand for gold differs greatly from consumption.

13. Long-term returns from commodities as an asset class are unreliable and they trade in manias.

14. Historically, rising fiscal burdens hasten the demise of empires. The U.S. economy can chart a positive new path, but only with the removal of the political stalemate of vested interests.

15. There will likely not be any effective reform of the global monetary system anytime soon. Greater price inflation is coming.

16. The stock market has proven it does well following long-wave troughs after major financial crises.

17. The long run in this investment world no longer exists. Wealth preservation and portfolio safety are critical.

18. The music has started playing again, but there aren’t enough chairs for when it stops.

The Great Reflation is a very thoughtful historical look at the long-run economic cycles experienced by the U.S. economy. (See “Equity Flux, The Stock Market’s Latest Problem.”)

The U.S. economy has been consistently swept away by asset bubbles and financial crises, and Boeckh clearly demonstrates how monetary policy so powerfully influences cycles with changes in interest rates and price inflation.

Looking at the data and tables presented, the inflation-adjusted long-term uptrend in the stock market (since 1929, including dividends) averages just under seven percent annually. This is littered with long periods of extreme undervaluation and overvaluation.

Boeckh’s best advice is to employ “tactical stock market reallocation” to continually adjust your exposure to equities as monetary policy perpetually changes the inflation/deflation cycles experienced by the U.S. economy.

By Mitchell Clark, B.Comm. for Profit Confidential

Action in Dow Jones Transports, Utilities Signaling Caution

Action in Dow Jones Transports, Utilities Signaling Caution
Action in Dow Jones Transports, Utilities Signaling Caution
The equity market and other capital markets are gyrating on the rise in 10-year Treasury yields. There’s been a lot of unusual movement in currencies as well.

Speculation regarding what the Federal Reserve is going to do about quantitative easing and the lull between earnings seasons are definitely factors.

There is always equity market uncertainty in the weeks before the end of a quarter (though the Dow Jones industrials have held up well). Investor sentiment reflects the collective ambiguity of whether earnings will hold up. In a sense, there’s not enough data to keep equity market speculators happy with their bets. When speculators can’t justify their positions, capital markets get cranky.

Both gold and oil prices have been bouncing off the weaker U.S. dollar. There’s always churn before a quarter ends.

I repeat my view that an equity market sell-off could occur at any time and that investors who are long should not be surprised by some pronounced downside (I wouldn’t sell Dow Jones blue chips).

The correction that both Wall Street and many investors expected did not transpire. The willingness of institutional investors to be buyers has been robust.

The equity market was led this year by a pronounced breakout in blue chips and components of the Dow Jones Transportation Average. It’s still very much worth following these companies and transportation stocks for overall market direction.

The Dow Jones Transportation Average is well off its high of 6,568.41, and this is meaningful. The retrenchment, while well deserved, is a sign that the rest of the equity market is ahead of itself.

Alaska Air Group, Inc. (NYSE/ALK) is down markedly (over 10 points) from its recent high of $68.00. This meaningful pullback is representative of what I consider fair game for the equity market on the whole and is just one more slight bit of evidence favoring a correction.

Following transportation stocks for the market’s overall direction is old school for sure, but I still think it’s worth doing. I’d like to see the transportation index stay above 6,000 for the medium-term health of this market, but if there is to be a pullback, 6,000 is an easy target.

The Dow Jones Utility Average has also blasted higher since January, but it began its retrenchment before transportation stocks. This index is down about 12% from its peak and components were fully priced.

The Dow Jones Industrial Average itself is only down slightly from its high, and this illustrates the zeal that big investors have for owning the equity market’s safest names. (See PC030613 “Big Investors Still Buying Big-Caps; Will They Be Right?”)

On the cusp of a new earnings season, the choppy trading action in all capital markets should continue until corporations report or there’s news from the Fed.

It does matter if the Dow Jones utilities and transports don’t turn back upward; they are now foreshadowing retrenchment.

Significant caution remains appropriate, and I would not be buying the equity market before solid confirmation from earnings reports.

By Mitchell Clark, B.Comm. for Profit Confidential

Political Tensions And A Shift In Distribution Hits Crude Oil

Political Tensions And Changes And A Shift In Distribution Hits Crude Oil
Political Tensions And Changes And A Shift In Distribution Hits Crude Oil

Crude oil eased 10 cents this morning as traders sold off to book profits after the strong rise in prices since Monday. With the FOMC meeting and press conference later today, there are possibility for strong volatility in prices, as traders moved to the side lines. Crude remains high at $98.58. Yesterday crude oil continues to climb as the heat is turned up in Syria. Crude oil is trading at $98.82 adding 74 cents.

President Barack Obama authorized support and arms for Syrian rebels, increasing tensions in an oil-saturated region. Although Syria is not a major oil-producing country, it does boarder Iran and Iraq which produce about one-fifth of OPEC’s oil output. The value of the dollar fell last week, providing further support for the increase in oil prices. Continued demonstrations in Turkey also supported prices as traders are stressed that there could be spillover into oil producing nations. Escalating tensions in Middle East after heavy fighting was reported in Aleppo, Syria’s biggest city also supported crude prices on fears of supply disruption if other Middle Eastern nations were drawn into the Syrian conflict.

Yesterday the American Petroleum Institute’s weekly report showed a drop in supplies. Crude oil supplies dropped by 4.3mn barrels, while gasoline inventories increased by 900,000 barrels, and distillate stockpiles dipped by 600,000 barrels.

In international news Russia is steeply ramping up oil deliveries to China, with Asia now importing almost a fifth of oil exports from the world’s largest crude producer in a strategic shift meant by the Kremlin to end reliance on weak and saturated European markets. Russia will increase oil supplies to China by 13 per cent in July-September from the previous three months, a shipping schedule obtained by Reuters showed on Tuesday.

U.S. natural gas futures ended higher on Tuesday, driven by forecasts for hotter weather in the Northeast and Midwest that should increase the demand for gas for air conditioners. Forecasters upgraded their expectations for hot temperatures in the coming weeks, which can to a higher electricity demand. Natural Gas is expected to move up on back of increased cooling demand for gas. Gas futures on the New York Mercantile Exchange ended up 3 cents, or 0.8 percent, at $3.905 per million British thermal units after trading between $3.865 and $3.952. Natural gas is continuing to climb this morning adding 3 points to trade at $3.915 

Let’s Ignore The FOMC And Look At The Fundamentals

Let's Ignore The FOMC And Look At The Fundamentals
Let's Ignore The FOMC And Look At The Fundamentals
Japan’s trade balance for May showed the third-largest deficit ever for any month, with the red-ink streak extending to an 11th month as the depreciation of the yen continued to push up import prices despite a sharp rebound in exports, the government said Wednesday. The JPY is trading at 95.28, but in May the currency was valued in the low 100’s which will have a negative effect come June’s data. The higher the yen the less competitive exporters can be. Ever since the Bank of Japan decision last week to hold its current policy, the stock market and the currency markets have reacted, as they were expecting more aggressive action by the BoJ to support the turnaround in their economy which is beginning to show positive signs many investors think the Bank slowed down too soon, especially after receiving the backing of the World Bank, the IMF and the OECD combing with the blessing of the G8, the G20 and the G7. The dollar was firmer versus the yen in Tokyo after it slid as low as around ¥94.30 in late New York trading Monday night on a Financial Times article that Fed Chairman Ben Bernanke was likely to signal that the U.S. central bank is close to tapering down its asset purchases. The greenback was backed by purchases by Japanese importers as well as solid U.S. economic data released Monday, traders said.

Yesterday the dollar’s upside was capped by the lack of upward momentum in Tokyo stock prices, traders said. But after European players joined trading in late hours, the dollar gained ground in line with the euro’s rise. Market players were focusing on a news conference by Bernanke due later today following the end of the Federal Open Market Committee meeting, after he said in a congressional hearing late last month that the Fed could slow down asset purchases over the next few FOMC meetings.

The euro climbed to a 4-month high versus the dollar, to trade at 1.34 after a survey showed German analyst and investor sentiment rose for a second consecutive month in June, suggesting Europe’s largest economy is on track for a modest recovery. The euro closed at 1.3394 and remains flat this morning. The ICE dollar index, which tracks the greenback against six major rivals, edged higher to 80.64 from 80.619 on late Monday and remains flat this morning.

German Bunds declined on Tuesday, in line with US Treasuries on speculation that the Federal Reserve might signal trimming its bond purchases at a meeting this week.

The big mover and shaken on Tuesday was the Great British Pound that at one time had tumbled close to 120 points. The latest headline UK inflation figure lead the way in the early part of the session, providing a fair wind for the Pound. The May Consumer Price Index figure revealed that rate of British price increases jumped from 2.4% in April to 2.7% last month. The release appears to make a vote by the Bank of England monetary policy committee to add to its £375bn Quantitative Easing program an unlikely prospect in the short term. However, new Bank of England Governor, Mark Carney, takes over at the next meeting. The pound is trading this morning at 1.5630 off its recent highs in the upper 1.57 range.

Stock Markets Prepare For Mr. Bernanke

Stock Markets Prepare For Mr. Bernanke
Stock Markets Prepare For Mr. Bernanke
Let’s face it, speculators, analysts, economists as well as anyone associated with the world of finance is being blinded by the upcoming Federal Reserve decision and statement by Mr. Bernanke due later today at the conclusion of their two day meeting. Since mid-day yesterday the news flow and traders actions have all been in preparation to today’s big speech. U.S. Treasuries were little changed before the Federal Reserve started their two-day policy meeting at which investors will be looking for signals as to when the central bank will begin to slow bond purchases.

The US markets showed a strong upward move on Tuesday, adding to the gains posted in the previous session. The rally came despite the uncertainty ahead of Federal Reserve’s announcement on Wednesday. The strength on US markets was bolstered by a report from the Commerce Department which showed a notable rebound in housing starts in the month of May. The report said housing starts climbed 6.8% to a seasonally adjusted annual rate of 914,000 in May from the revised April estimate of 856,000. The Dow gained 138 points, or 0.9%. That marks the sixth day in a row that the Dow moved up or down more than 100 points. The S&P 500 edged up 0.8%, while NASDAQ added 0.9%.  A report on consumer prices showed that inflation remains subdued. European markets were mixed on Tuesday, as they awaited the outcome of U.S. Federal Reserve’s meet on quantitative easing. European shares closed mixed on Tuesday, after better-than-expected economic data from Germany.

The Federal Reserve is due to end a pivotal two-day meeting later today. Markets are keenly waiting to see if Chairman Ben Bernanke comments on when and how the Fed will start reducing the third round of its bond-buying program known as “quantitative easing”. Foreign institutional investors have been sellers of Indian shares for five consecutive sessions, totaling 28.95 billion rupees, according to exchange and regulatory data. It seems that Investors may continue to use rallies to lighten their positions ahead of Fed’s decision. However, the unemployment level in the Unites States is still above 7 percent, indicating that Fed pulling out in the near future is unlikely.

This morning the Asian indices are trading on a mix note. The Nikkei and Taiwan are up by 1.9% and 0.2% respectively. However, the Shanghai and the Hang Seng are trading lower by 1.1% and 0.6% respectively, while the Strait Times and the Kospi are down by 0.1% and 0.7% respectively. Japan posted a merchandise trade deficit of 993.916 billion yen in May, the Ministry of Finance said on Wednesday – slipping into the red for the 10th consecutive month. The headline figure beat forecasts for a shortfall of 1.22 trillion yen following the downwardly revised deficit of 881.9 billion yen (originally 879.9 trillion yen) in April. Exports surged 10.1 percent on year to 5.767 trillion yen, topping forecasts for a gain of 6.4 percent after adding 3.8 percent in the previous month. Exports to China added 8.3 percent on year to 1.046 trillion yen

Weak U.K. Inflation Data Fuels British Pound Sell-off

The GBP/USD fell sharply after U.K. inflation data failed to support the recent rally in the Sterling. The Office for National Statistics said the annual Consumer Price Index rose to 2.7 percent in May from April’s 2.4 percent. This was higher than the 2.6 preliminary forecast.

A high CPI reading is generally seen as bullish, but traders reacted differently because of lower inflationary data in other sectors. May’s Producer Price Index came in below expectations at 1.2 percent. Analysts had been looking for a reading of 1.5 percent. The Producer Prices Index Core Output also showed less price pressure than expected. This reading came in at 0.8 percent, slightly below expectations for an increase of 0.9 percent.

UK

Given the below expectation numbers, traders are looking for the Bank of England to take some action to stimulate the economy. This was the catalyst behind today’s weakness.

The EUR/USD rallied sharply higher after the ZEW economic-sentiment indicator in Germany rose 2.1 points. The rise to 38.5 in June beat economist forecasts of 38.1. The move was somewhat of a surprise because many traders were expecting a lackluster trade in front of the release of tomorrow’s Fed’s monetary policy statement.

With traders committing to the long side before the Fed policy announcement, this could be sending a signal that sentiment has shifted toward the central bank leaving its current stimulus pace unaltered.

August gold futures fell sharply on Tuesday as investors increased bets the Fed would announce a reduction in its aggressive monthly bond purchasing program. If it makes this move, interest rates would rise, making the U.S. Dollar a more attractive investment.

Technically, the main down trend was reaffirmed when the market took out the recent swing bottom at $1364.50. This move made $1394.40 a new main top. If downside momentum continues, traders should look for a test of a trend line at $1350.75 over the near-term.

August crude oil futures rebounded after bearish traders failed to confirm Monday’s closing price reversal top. Today’s inside move is a sign that investors remain unsure about the Fed’s next move. Much of the recent rally was triggered by tensions in Syria. For the most part, bearish traders have given in to speculative buyers.

The bearish supply and demand situation remains the main reason why traders don’t expect the recent rally to continue.  However, tomorrow’s Fed monetary announcement could move the market if it has a dramatic influence on the dollar. If the Fed decides to slash its stimulus then the dollar could strengthen. This would put the dollar-based crude oil contract under pressure. 

Gold Range Bound While Silver Climbs

Gold Range Bound While Silver Climbs
Gold Range Bound While Silver Climbs
Gold is trading flat this morning following yesterday’s trend. Gold remains in a tight range from 1380 to 1385. Gold and silver futures declined on Monday, as traders positioned themselves ahead of a Federal Reserve policy meeting that begins later today and that will be closely watched for clues to the central bank’s next monetary-policy step. Gold is 17 percent lower this year, tumbling into a bear market in April, as some investors lost faith in bullion as a store of value, and on concern that the Fed may taper asset purchases. The central bank, which begins a two-day meeting today, currently buys $85 billion a month of Treasury and mortgage debt. The US Federal Reserve meets today with speculation rife of an imminent paring of pumping cash into the economy. The US Fed buys treasury and other bonds worth $85 billion every month. The speculation has already resulted in the dollar gaining slightly this morning.

Although traders are fairly sure that the Fed will continue its current policies and hold rates in the near term, they are looking for Mr. Bernanke to give guidance into the future tapering of the Fed asset purchase plan. Traders are expecting Mr. Bernanke to indicate that the FOMC would consider beginning its tapering plan at its next meeting.

The majority of U.S. homebuilders view conditions in the industry as favorable for the first time since the start of the housing crisis seven years ago, with an industry report showing confidence in the sector surged in June.  Any scale-back of the stimulus would hurt gold, which is typically seen as a hedge against inflation. Bullion is down 17 percent so far this year as investors have shunned its safe-haven appeal, while global stocks have rallied.

Holdings in SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, stood at 1,003.17 tonnes on Monday — their lowest in more than four years. Moreover, reports suggest that physical buying in Asia may be waning as well. Gold imports into India, the world’s No. 1 gold consumer, are plunging following the government’s move to increase import duties from 6% to 8% earlier this month, according to sources. The most recent increase in duties on gold, curbing of gold financing and restrictions on gold imports by banks and state-run trading companies to a consignment basis in India have led to the expected short term decline in demand which may be contributing the gold’s inability to close above $1,400/oz.

Silver this morning is diverging from gold, although there is not shift in fundamentals to support price movement in industrial or precious metals. The lower US dollar and the low price for silver, which was trading at the bottom of the 21.00 range made the metal attractive to buyers looking for deals on the bottom. Silver has gained 67 points to trade at 21.825.

 

Turkey and Syria Drive Oil Prices

Turkey and Syria Drive Oil Prices
Turkey and Syria Drive Oil Prices
On Tuesday morning WTI crude oil is trading on a positive bias but flat to Monday’s close. WTI crude traded near the highest price in more than 4 months at 98.07, before a government report that will probably show U.S. stockpiles declined and refinery rates increased. The dollar strengthened against the majority of its 16 most traded counterparts amid speculation about when the Federal Reserve will begin to taper its monetary stimulus.

Geopolitical tensions are the only supporting factor for crude oil which is trading well above its expected range. Crude oil futures hit a 9-month high near $99 per barrel, but reversed gains to close lower, as investors turned cautious ahead of the start of the US Federal Reserve’s two-day policy committee meeting on Tuesday. Brent crude oil futures touched a 10-week high of around $107 per barrel, as tensions in the Middle East rose, but prices finished slightly lower for the day after a late sell-off in US gasoline futures.

Syria on Monday dominated the start of the Group of Eight summit in Northern Ireland amid fears of a broader Middle East conflict. Prices jumped last week after US officials said they had evidence of the use of chemical weapons by forces backing Syrian President Bashar al-Assad and signaled that Washington could begin arming the opposition. Concern over events in Turkey, which warned on Monday that it may bring in the army to help quell nearly three weeks of nationwide anti-government protests helped add to the volatility of crude oil.  Tensions between the U.S. and Russia over the Syrian Civil War helped boost oil prices. The U.S. West Texas Intermediate benchmark rose as high as $98.74 a barrel in intraday trade, clearing a February high and hitting its highest mark since September.

Data due out later today are projected to show U.S. commercial crude-oil stocks declined 1 million barrels for the week ended June 14, according to a survey of analysts. The decline is expected to stem from a reduction in crude-oil imports, which have been volatile recently.

The American Petroleum Institute is scheduled to issue its weekly report. More closely watched figures from the U.S. Energy Information Administration (EIA) are due tomorrow.

A drawdown of 1 million barrels would be “more than double seasonal norms,” with the EIA’s five-year average showing oil stocks typically fall by about 400,000 barrels during this reporting period, according to Platts. Reports on crude-oil inventory released last week were bearish, with both the API and EIA reporting supply increases, even as analysts had expected no change in inventory levels.

Natural gas seems to be overshadowed by political tensions and the FOMC meeting and remains flat at 3.889 subject to the whims of the weather forecasts. Natural gas futures rose almost 4%, lifted by forecasts for hot weather in the coming weeks and a possible tropical storm in the Gulf of Mexico.

Market Focus On Superstar Bernanke

Market Focus On Superstar Bernanke
Market Focus On Superstar Bernanke
Market focus remains on the upcoming FOMC meeting beginning later today. The lead up to this event has been nothing short of a Hollywood Premier, with Mr. Bernanke, once again the superstar. Although most traders at this time believe that the Fed will maintain its current programs and rates, the main focus is Mr. Bernanke’s statement following the release. The turnout for this conference could go beyond the scope of the Academy Awards and the Superbowl. The headlines from regional, national and international papers all mention the Fed meeting while a Google search for FOMC meeting brings back staggering numbers of online comments, blogs and postings. There is a lot of fundamental data due today, which might be overlooked. Already this morning Chinese data has hit the wires. FDI in China rose in May by the least in four months, a sign of concern that growth is slowing. Inbound non-financial investment increased 0.3% from a year earlier to $9.26 bn, after a 0.4% gain in April. China’s outbound investment rose 20% in the first five months of the year to $34.3 bn, compared with a 27.4% pace in Jan-April. China’s new home prices rose in almost all cities in May, led by major centers, as the government’s latest property measures failed to deter buyers. The southern business city of Guangzhou posted the biggest gain with prices rising 15% from a year earlier. Beijing prices climbed 12%, while they advanced 10% in Shanghai.

Japanese PM Abe’s pledge to end 15 years of deflation has prompted the nation’s biggest banks to raise mortgage rates, mobilizing people to buy a home four years earlier than he had planned.

Demand for Treasury securities most vulnerable to inflation is climbing to an almost two-year high as pension funds and insurance companies snap up discounted debt with consumer prices rising at the slowest since 2010. Investment banks have increased Treasury Strips — zero-coupon securities created by separating the interest and principal payments of a bond and selling them at a fraction of their face value — by 4.8% to $203.2 bn from Dec through May. The outstanding amount had dropped to as low as $171.7 bn in Nov 2009 from as high as $231.5 bn in April 1996.

As markets become volatile ahead of the meeting while traders begin to position themselves, the euro seems to be a major beneficiary, trading at 1.3356 this morning while the Great British Pound remains close to a 4 month high at 1.5702. Chinese data weighed on the Australian and the New Zealand dollars this morning with the AUD trading in the red at 0.9512, while the kiwi is holding at 0.7982.

The Japanese yen is trading at 94.82 gaining this morning as the Bank of Japan seems to be stepping up their stimulus programs. The US dollar gained a few pips after the Empire State Index showed a surprising jump in manufacturing yesterday. The US dollar index is trading at 80.87.

Speculators Betting Fed Stays the Course

The Euro, British Pound and crude oil traded higher on Monday as sentiment is slowly shifting in favor of the Fed leaving its current monetary policy unchanged. Some traders are beginning to price in the possibility the central bank will not change its aggressive bond-buying program. Others are pricing in the possibility the Federal Open Committee will likely taper the monthly purchases amount, starting with a small $20 billion reduction to a $65 billion purchases rate, and assess the market reaction.

The Fed is also expected to continue to monitor the labor situation. If it continues to remain sluggish then the central bank will have the opportunity to turn up its bond purchases once again.

With the market beginning to believe the Fed is going to stand pat this time around, interest rates are falling. This is making the U.S. Dollar a less-than-attractive investment. Foreign currencies are rallying versus the dollar as demand falls for the Greenback.

Besides concern about the U.S. escalating role in Syria, the weaker dollar is also contributing to the rise in crude oil prices. A weaker Greenback makes U.S. dollar-based crude oil more attractive to foreign investors.

Technically, the market is accelerating to the upside after taking out a pair of tops late last week at $97.35 and $97.38. This morning the new trigger point was the late March top at $98.22.

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Despite the weaker U.S. Dollar, the developing August gold rally failed to gain traction. It doesn’t mean the potential for a rally is over. In fact, the longer the market stays in a range without breaking to a new low, the greater the possibility sentiment is shifting back to the upside.

Currently, August gold is trading inside a major triangle chart pattern on the daily chart. This chart indicates that a sustained move through $1403.00 will likely trigger a volatile breakout to the upside.

Keep in mind that the longer these markets remain range bound, the greater the strength of the breakout, once investors decide which way they want to move it 

Gold Moves Between Small Gains & Losses

Gold Moves Between Small Gains & Losses
Gold Moves Between Small Gains & Losses
Gold gained this morning in the Asian session as it usually does, adding $3.05 to trade at $1390.65. Gold futures closed higher on Friday, to eke out a modest weekly gain, supported by a data showing larger-than-expected rise in wholesale prices, a day after news report indicated that the Federal Reserve will try to calm fears over tapering its monetary stimulus program. Gold traded in the green in Asian trading on Monday as investors awaited indications from a key U.S. Federal Reserve meeting later this week on the outlook for the central bank’s bond buying program. The Fed meets on June 18-19 against a backdrop of stronger-than-expected data on U.S. retail sales and the job market, with markets looking for clues to any tapering of its economic stimulus program. Markets have been volatile since Fed Chairman Ben Bernanke said last month the bank could scale back its stimulus measures if the economy improves. A cut in the Fed’s $85 billion monthly bond purchases could hurt gold, which has benefited from its role as a hedge against inflation.

Gold prices were supported by some buying in China, the No. 2 bullion consumer in the world after India. Shanghai gold futures were up 0.4 percent on Monday. However, demand in Asia has cooled from peak levels seen after the mid-April sell-off in gold. Bullion is down 17 percent for the year after 12 years of annual gains. Indian purchases of gold have fallen since an import duty hike earlier this month. The government is trying to narrow its current account deficit by reducing gold imports.

Gold holdings of SPDR gold trust, the largest ETF backed by the precious metal, increased to 1,003.53 tons, as on June 13.

Gold eased 0.2 per cent to $1,387.24 on Friday. Bullion closed up about 0.5 per cent for the week on Friday helped by strong demand for coins and bars, a pullback in US stocks and rising tensions in the Middle East.  US gold fell slightly to $1,386.9. Markets have been on the edge since May 22 when Fed Chairman Ben Bernanke said the bank could scale back its stimulus programme if the economy improves. A reduction in the $85 billion monthly bond purchases could hurt gold, typically seen as a hedge against inflation. The Fed meets on June 18-19. Hedge funds and money managers slashed their bullish bets in gold and silver futures and options in the week to June 11, a report by the Commodity Futures Trading Commission showed on Friday.

Gold output in Australia, the No. 2 producer behind China, fell 5 per cent in the first quarter on weather-related disruption to 63.5 tons, according to the latest Gold Quarterly Review.

HSBC lowered its platinum price forecasts for this year and next, even though supplies are tight, because the metal has been influenced by the sharp sell-off in gold. Silver forecasts were also lowered and are now expected to remain in the $22.00 price range until the end of the month. Silver is trading at $21.945 down by 9 points this morning. 

Crude Oil Supported By Geopolitical Tensions But Limited By Fundamentals

Crude Oil Supported By Geopolitical Tensions But Limited By Fundamentals
Crude Oil Supported By Geopolitical Tensions But Limited By Fundamentals

Press coverage that US had authorized sending US weapons to Syrian rebels increased the tensions regarding Middle East and fear of supply glitch and pushed crude oil prices higher. The increased geopolitical tensions sent crude oil skyward. President Barack Obama authorized arming rebels in Syria after the White House said it had proof the Syrian government had used chemical weapons against them. Crude oil climbed on Friday to trade slightly above the 98.00 price level. This morning the commodity has eased by 20 cents trading at 97.88. WTI crude rose to a four-month high after President Obama was said to authorize arming Syrian rebels groups, ratcheting up tensions in a region home to about a third of the world’s oil supply. Western diplomats said the United States is considering setting up a no-fly zone in Syria, which would represent its first intervention in that civil war, after the White House said Syria had crossed a “red line” by using nerve gas.

Also reports that a pipeline burst between US and Canada which could crate temporary supply glitch also supported price increases for WTI crude oil. Although supplies in the US are abundant at this time, the delay should not cause any attention in the markets in the long term.

The US Dollar on Friday pared gains versus the euro after a survey showed U.S. consumer sentiment retreated this month after reaching its highest in nearly six years in the previous survey.

US shale production forecasts and Chinese demand fears were weighing on energy demand earlier in the day. Other commodities were dented somewhat by weak Chinese data and after the World Bank slashed its growth forecast for China’s economy this year to 7.7 percent from 8.4 percent. Markets were also roiled by fears of central banks pulling the plug on their extraordinary stimulus measures that are aimed at supporting global economic growth.

US shale oil extraction continues at very high levels, and the Energy Information Administration nearly doubled its estimates for US shale oil reserves from 32 billion barrels to 58 billion barrels. This, added to the Chinese economy suffering from a slowdown in growth rates and high US oil stockpiles, pulled oil back down to below 95.00 per barrel on Tuesday. However, since that point, the market has rebounded sharply on growing worries about the oil-rich Middle East.

Natural gas fell, on signs of rising supplies and little chance of a jump in near-term demand as moderate temperatures hold across much of the US. Natural gas is trading at 3.763 recovering almost 20 cents this morning. U.S. natural gas futures ended lower as cooler US weather forecast in US reduced Air Condition demand in Natural Gas. Natural Gas is expected to move further down over further milder weather and excess inventories. Front-month gas futures on the New York Mercantile Exchange ended down 8.1 cents, or 2.1 percent, at $3.733 per million British thermal units after trading between $3.729 and $3.83

What Is In Store For The EURUSD This Week

What Is In Store For The EURUSD This Week
What Is In Store For The EURUSD This Week
This morning the euro is trading in the red, as Asian markets sold off pushing the euro to trade at 1.3322 down by 20 pips. At the end of the week, the euro touched above 1.33 as the dollar fell to its lowest level of 80. The euro settled at 1.3347 on a weekly basis and appreciated 0.98%. The euro-zone’s June Sentix investor confidence index improved from -15.6 to -11.6 backed by improving economic growth, supporting the shared currency. However, the German consumer price index and industrial production increased at a slower pace. The euro-zone’s consumer price index increased more than the before on the back of an increase in the demand for goods which supported the euro against the dollar. However, European equities remained on a negative note last week, backed by the World Bank lowering the global growth forecast for 2013. Later today markets are anticipation of an improving euro-zone trade balance, which should cap the euro’s losses. In the North American session, the US will release its Empire manufacturing and NAHB housing market index data which may have a mixed impact on the dollar.

Although regardless of eco or fundamental data, the marquee event and the main market mover will be the anticipation of the FOMC decision. The key focus is on what Fed Chairman Ben Bernanke will say following the U.S. central bank’s June 18-19 meeting as expectations that the Fed will soon start tapering markets off its stimulus roiled global equities markets. The Fed will most likely hold rates and its current policy; markets will be looking for any indication of a plan to begin tapering, which will mean that Mr. Bernanke’s conference will be the highlight. The media conference will give Chair Bernanke an opportunity to better communicate the timing of how and when the Fed will begin stepping out of QE. It is encouraging that nonfarm payrolls have averaged just below 200k over the last 6‐months; however the month‐to‐month variance is significant. This combined with inflation is likely to see a reiteration that the Fed will flirt with stepping out of QE in the late fall; but leave the door open to stepping back in should the data weaken and highlight that a decrease in monthly buying still leaves policy as loose.   The forecasts, which could include an improved outlook for employment, potentially offset by a lower forecast for inflation will be a major focus.

Traders can expect the euro to continue its positive trend against the dollar. European leaders will meet to discuss the record high unemployment and find the way to overcome this problem. This may create optimism in the market and may support the euro. Europe’s trade balance is expected to improve, backed by the slowdown in imports, comparatively higher than export trades. The euro-zone economic sentiment and Germany’s consumer confidence and current situation are likely to improve along with the PMI, backed by the improvement in investor’s sentiments. 

Crude Soars on Syria Concerns

August crude oil surged on Friday to its highest level in several weeks as the U.S. stepped up its involvement in Syria. The news that the U.S. government is taking a more active role in arming rebels in Syria raised concerns about potential supply issues in the oil-rich region.

Although Syria is not a major oil producer, it is important for the stability of the entire Middle East. This event comes at the right time for bullish traders. Over the past several weeks, investors have been hit with bearish supply/demand forecasts as well as bleak outlooks for the global economy. The action by the U.S. government shifts the focus from broader economic issues to possible military activity.

oil refinery

Other outside influences that could underpin prices or even trigger a spike higher are tensions between Sudan and South Sudan over oil exports, and protests in Libya that have led to a drop in crude oil production.

Technically, aggressive buyers took out two tops today at $97.28 and $97.46, putting the market in a position to challenge the mid-March high at $97.94. The subtle nature of this rally and the quiet breakout could draw the attention of technical buying programs that could drive this market to $100 per barrel rather quickly.

Concerns that the U.S. involvement in Syria could escalate into something major also helped drive August gold prices higher. With the market severely oversold, bullish investors have been waiting for something to reignite the market. Speculators seem to be willing to go back to the traditional way to trade gold, that is, buy it when there is international turmoil.

Technically, the market appears to be forming a support base or a triangle chart pattern. Both of these patterns are non-trending, but also often signal impending volatility.

The EUR/USD held its ground on Friday despite reaching a potential Fibonacci resistance level at 1.3389. The trend is up on the daily chart but like other markets, traders are waiting for the Fed’s decision on June 19.

This morning’s U.S. economic numbers seem to have had very little impact on today’s price action. The reports which some traders described as lackluster failed to generate any meaningful price action. Industrial Production remained unchanged and the Thomson Reuters/University of Michigan consumer sentiment index fell to 82.7 in June from 84.5 in May.

Generally overbought market conditions helped to put in a temporary top in the GBP/USD. Sterling traders remained mixed about whether the Fed will begin curtailing its stimulus program. The recent run-up in the Pound may have been triggered by the thought that the Fed would maintain its current bond buying spree. 

Forex Markets Trading with Higher Volume and Volatility

Forex Markets Trading with Higher Volume and Volatility
Forex Markets Trading with Higher Volume and Volatility
Markets were volatile, with equities lower, bond yields lower, market volume higher and the USD broadly weaker. In terms of central banks, South Korea, the Philippines and the RBNZ left rates on hold as expected; however surprising was the decision by Indonesia to raise interest rates. Yesterday the pattern shifted to a broader USD weakness trend, with the majors as well as THB, SGD, MXN, AUD and NZD all gaining ground. Traders are tempted to argue that this reflects a shift from previous sessions; potentially a shift from the fears of Fed tapering towards the realization that market pricing will create limits to what the Fed can do. Weak equity markets with the S&P is down 5% since May 22nd weighs on the wealth effect; higher mortgage rates up 60bpts since the beginning of May risks dampening the housing market recovery. The US dollar is trading at 80.94 this morning gaining 5 pips in the Asian session.

U.S. consumers demonstrated a renewed willingness to open their wallets for retailers in May, easing worries about a slowing economy heading into the summer. Overall retail sales increased 0.6% last month, putting those 4.3% higher over the past year, the Commerce Department said Thursday. The strong gain after two sluggish months returned consumer spending to a pace that has helped power much of the four-year-old recovery.

Traders shifted to the euro pushing it to trade at 1.3375 at the close. Data from the world’s largest economy have been in the spotlight after Fed Chairman Ben Bernanke in May said the central bank could start tapering its bond purchases in coming months if data continue to improve. The policy-setting committee meets next week, but is widely expected to keep its easing program on hold. If the selloff continues, speculators might get some soothing comments out of the Fed about QE and might get comments from Bernanke that ‘I did say sustainable improvement and we haven’t seen that yet. The prime focus for the euro has been the German Constitutional Court hearing which will open its last day of hearing later this morning. Yesterday the top judge at Germany’s constitutional court questioned on Wednesday whether the strings attached to any bond purchases by the European Central Bank would be strict enough to protect German taxpayers.On the final day of hearings into the legality of the ECB’s main measure for dealing with the euro-zone debt crisis, Andreas Vosskuhle, president of the court, said there were certain promises that can’t always be kept.

The pound hit a four-month high against a faltering dollar, with firmer UK economic indicators reining in foreign exchange players’ expectations of further easing of monetary policy by the Bank of England. The pound rose as high as $1.5734 during yesterday’s session – its strongest level against the greenback since February. Sterling’s strength against the dollar has also been attributed by market players to growing doubts the US Federal Reserve will pare back its monetary stimulus for the world’s largest economy in the short term. The pound gained ground against the euro yesterday. In spite of the recent improvement in UK economic indicators, some commentators continue to highlight the scale of the challenges facing the country as it struggles to mount a convincing recovery five years after the onset of the Great Recession of 2008/09 amid severe fiscal austerity.

 

 

 

 

Gold Speculators Key In On Fed Stimulus

Gold Speculators Key In On Fed Stimulus
Gold Speculators Key In On Fed Stimulus
This morning gold is trading at 1383.25 gaining $5.45 in the Asian session. This has been the typical trend for the shiny metal, adding in the Asian session to give back gains throughout the European session. Spot gold lost ground on Thursday following the release of better-than-expected US economic data. Retail sales rose 0.6% in May, beating forecasts for +0.4%. Initial jobless claims, meanwhile, fell to 334,000 last week, the second straight decline; economists had expected 350,000. Gold investors have been closely monitoring recent US economic data for clues as to how long the Federal Reserve may deem it necessary to continue its growth-boosting stimulus program. Gold speculators are paying very little attention to the basis of economic data but reacting to what is perceived as clues to the central bankers thought processes. Gold investors are single mind when it comes to gold and the upcoming FOMC meeting.

Precious metals declined for a second day as holdings in the largest bullion backed exchange-traded product dropped to the lowest level in more than four years amid speculation the Federal Reserve will curb stimulus. Gold for August delivery climbed 0.4 percent to $1,383.60 an ounce on the Comex after falling 1 percent yesterday when a report showed fewer Americans than forecast filed applications for jobless benefits.

Assets in the SPDR Gold Trust fell 0.6 percent to 1,003.53 metric tons yesterday, according to data on the company’s website. That’s the biggest fall since May 21 and the lowest level since February 2009. Fed Chairman Ben S. Bernanke said on May 22 the central bank could reduce its $85 billion monthly bond purchases if the employment outlook shows a sustainable improvement. Gold traders turned bearish for the first time in a month as investors reduced holdings in exchange-traded products and India, the biggest buyer, announced curbs on imports. Eighteen analysts surveyed by Bloomberg expect prices to fall next week, with 14 bullish and four neutral, the largest proportion of bears since May 17.

The weaker US dollar has done little to help increase prices, but has limited the drop in prices. The US dollar is trading at 80.94 climbing 5 pips on Friday morning but well off its recent highs above the 84 level. Weakness in the greenback has helped the euro climb to trade at 1.3356 as market focus is on the Japanese yen, which has gained momentum against the greenback to trade at 95.00 this morning.

Silver is tracking changes in gold to trade at 21.67 gaining 92 pips as traders take advantage of a weak US dollar and low prices to buy it on the cheap. Silver is expected to continue its climb during the day as traders look for a large amount of eco data due in the eurozone and the US later today with consumer confidence the main event schedule for late in the North American session.

 

Natural Gas Surges On EIA Inventory Surprise

Natural Gas Surges On EIA Inventory Surprise
Natural Gas Surges On EIA Inventory Surprise
Thursday’s natural gas storage inventory stated: Working gas in storage was 2,347 Bcf as of Friday, June 7, 2013, according to EIA estimates. This represents a net increase of 95 Bcf from the previous week. Stocks were 587 Bcf less than last year at this time and 58 Bcf below the 5-year average of 2,405 Bcf. In the East Region, stocks were 102 Bcf below the 5-year average following net injections of 57 Bcf. Stocks in the Producing Region were 2 Bcf below the 5-year average of 915 Bcf after a net injection of 25 Bcf. Stocks in the West Region were 46 Bcf above the 5-year average after a net addition of 13 Bcf. At 2,347 Bcf, total working gas is within the 5-year historical range.

The report took speculators by surprise as traders were expecting to see a much larger increase and helped the commodity make an about turn to trade over the 3.81 price level after declining to the upper 3.75 range. According to data provided by Nanex, $17 million worth of futures contracts changed hands in the moments leading up to the report’s release, sending prices higher.

The report, released every Thursday, details how much natural gas the government holds at that time. Markets typically react instantly to the information. This week, the report showed an increase of the commodity in storage, in line with expectations. Milder weather across the US as summer temperatures still have not arrived which helps increase residential demand and spare capacity production by electric companies, who turn to cheap natural gas for their extra production. Also supporting prices were comments from the new energy honcho in the US. U.S. Energy Secretary Ernest Moniz pledged to speed reviews of applications to export natural gas and told lawmakers he supported development of all types of power, including from alternate sources.

Moniz, confirmed by the U.S. Senate a month ago, defended government spending on clean-energy projects that Republicans have faulted, saying climate change is a risk and the investments would give the U.S. an advantage in a burgeoning global renewable-energy market.

Moniz said the department would expeditiously act on requests from producers to export natural gas. The department is reviewing about 20 applications from companies including Dominion Resources Inc. (D) to sell liquefied natural gas to nations without free-trade agreements with the U.S., a reflection of how rising gas production from hydraulic fracturing, or fracking, has shifted the energy debate.

Crude oil is trading this morning at 96.68 flat today after trading in the green yesterday. Crude-oil futures ticked lower earlier on the day Thursday despite a better-than-expected report on U.S. jobless claims as investors remained uncertain about global economic conditions. Late in the day on Thursday markets made a U-turn to see crude oil climb back to the 96.68 level. Prices remain high as speculators push them up with no grounds and no ties to fundamentals as recent reports show a global glut and a surge in production. U.S. oil production growth was the largest in the world last year, showing that despite some suggestions to the contrary, crude is plentiful, BP Chief Executive Bob Dudley said Wednesday. The real challenge for the industry, he said, is how much money and where in the world to invest to reap the greatest rewards from the changing landscape.

“The supply of energy is coming from an increasing diversity of sources as the world’s energy market continues to adapt, innovate and evolve,” Dudley said.

 

Negative World Bank Forecast Pressures Euro and British Pound

The GBP/USD and EUR/USD fell on Thursday after the World Bank announced it had cut its global growth forecast, fueling demand for safer assets. A pair of friendly U.S. economic reports also helped support the Greenback against the British Pound and Euro.

According to the World Bank, the global economy is predicted to expand only 2.2 percent in 2013, less than a January forecast for 2.4 percent growth and slower than last year’s 2.3 percent. This put fear in investors since both the U.K. and Euro Zone economies are struggling. In the meantime, the U.S. economy continues to post slight improvements, prompting the Fed to consider winding down its aggressive bond-purchasing program.

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Early Thursday, the U.S. Commerce Dept. reported May retail sales rose at the fastest rate in three months, spiking a seasonally adjusted 0.6%. Retail sales were expected to rise 0.5% in May after a small 0.1% increase in April.

A drop in weekly jobless claims also helped underpin the dollar. Weekly claims fell by 12,000 to 334,000 for the week-ended June 8. This beat the estimate by 350,000.

The uncertainty created by the turmoil in Japan and the upcoming Fed stimulus decision created enough concern to drive August Gold higher. Today’s action has formed a new main bottom at $1364.50. If momentum continues to build, the main trend may turn to up if traders can take out the last swing top at $1423.30.

The triangle chart pattern taking place is considered a non-trending pattern. This pattern typically indicates impending volatility. The situation in Japan seems to be potentially explosive. This could trigger a sharp rise in gold if speculators decide to pile in. A sharp sell-off in the stock market may also send traders into gold.

A generally weaker dollar helped boost crude oil prices. The move, however, has not changed the longer-term outlook for lower prices. Oversupply is still an issue and the bigger picture suggests the market is likely to remain in a range until the economy heats up and demand increases.

Key resistance is at $97.35 and $97.38. On the downside, renewed selling pressure could drive the market into a retracement zone at $93.81 to $93.20.