In the Energy Markets, Crude Oil ended the trade on Monday up $0.11 at $106.34. Monday was a rather strange day starting with a surge of buying at 0800 this morning that took futures as much as $3.50 higher on the day. At one point, crude was off over $5 from its high as the dollar continued to find strength. We have Hurricane Ike pointed at the Gulf and the market can't rally and hold. Energies as a whole are in a downtrend and strength is to be sold rather than weakness bought until the pattern changes.
Technical support in the October Crude Oil contract is around $104.50 with resistance near $113.00. Allendale recommends Selling 1 October Mini-Crude at $112.85 and risk to $116.10 with an objective of $104.85.
In the Metals Markets, both Gold and Silver were sharply higher overnight Sunday as the announcement regarding mortgage giants Fannie Mae and Freddie Mac came to surface over the weekend (more government bailouts). What should have been a bearish development in the dollar index turned out to be the fuel for the dollar to again make a new high for the move, forming an outside bar in the process. The strength the dollar is showing should have you looking at the charts searching for a selling opportunity in metals. Again, these markets are in a downtrend and strength is to be sold.
On a side note, the Gold/Silver ratio is currently around 66:1. This ratio is getting out of whack. Keep your eyes open as we may look to Buy Silver and Sell Gold as a spread trade in the near future.
Technical support in the October Gold contract is seen at $790 and then at $775 with resistance at the convergence of the 20 and 10 day moving averages at $820 and again near $840.
For a trading idea, Sell 1 October Gold at $824.20 and risk to $838.20 with an objective of $792.20.
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