Talking Points

  •  Crude Oil Set for a Rebound as Fed Stimulus Speculation Heats Up
  •  Gold Losing Steam Below $1900 Figure as Safe-Haven Flows Ebb

WTI Crude Oil (NY Close): $82.26 // -0.12 // -0.15%

The absence of significant economic data has allowed markets to dwell on the prospect for additional stimulus as traders await Friday's speech from Federal Reserve Chairman Ben Bernanke at the central bankers' summit in Jackson Hole, Wyoming. Last year, the central bank chief's speech at Jackson Hole marked a critical turning point as he first floated the idea of a second round of quantitative easing (the so-called QE2). With the globalrecovery on the defensive, investors hope for the Fed will ride to the rescue once again.

As such, S&P 500 stock index futures are pointing firmly higher ahead of the opening bell on Wall Street, pointing to a broadly risk-on session that sees the WTI contract follow share prices higher. The Chicago Fed National Activity Index is the only bit of noteworthy economic data set to cross the wires, with expectations falling for a drop in July to snap two consecutive months of improvement in May and June.

Prices retraced 50% of the 7/26-8/9 decline, put in a bearish Shooting Star candlestick, and sank to 38.2% Fibonacci extension support at $79.43. A shallow recovery is being mounted from here, with a break above the 23.6% Fib at $83.07 exposing the 14.6% level $85.32. Alternatively, renewed selling pressure through interim support exposes a key channel bottom at $77.24.

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Spot Gold (NY Close): 1852.10 // +28.30 // +1.55%

The inverse correlation between gold and the S&P 500 remains significant, suggesting the yellow metal continues to trade as a safe-haven asset (which we point out at the risk of stating the obvious because this has not been in a given in the past). To that end, the recovery in risk appetite being alluded to in stock index futures is likely to sap demand, arguing for weakness in the near term.

Prices are showing signs of weakness below the $1900 figure, with a reversal through interim support at $1856.98 - the 76.4% Fibonacci extension level - exposing the 61.8% Fib at $1831.38. The 100% extension at $1898.36 remains as key near-term resistance.

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Spot Silver (NY Close): $42.91 // +2.30 // +5.67%

The Head and Shoulders bottom we began to monitor last week played out as expected, with prices hitting (and surpassing) the measured upside target at $42.64. Resistance now looks to have been found at $43.78, the intersection of the 76.4% Fibonacci extension level and an Andrew's Pitchfork top. A reversal lower from here sees initial support at $42.48. Alternatively, a break higher promises to challenge an extension target at $45.87. The metal appears to be trading a safety play once more, with a recovery in risk appetite to bode ill for prices.

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