Talking Points

  •  Crude Oil Likely to Fall as S&P 500 Futures Point to Risk Aversion
  •  Gold, Silver Fundamental Cues Conflict with Bearish Chart Setups

WTI Crude Oil (NY Close): $88.19 // +0.95 // +1.09%

Crude prices remain intimately tied to underlying risk appetite trends, with the correlation between the WTI contract and the S&P 500 nearing the highest levels in a month. With no top-tier scheduled event risk to derail momentum on the calendar as Wall Street comes online, this seems to point the way lower as futures tracking the stock index trade deeply in the red overnight. The preliminary API set of weekly inventory figures headlines the economic calendar.

On the technical front, prices are testing the top of a Flag chart formation, a barrier reinforced by the top of a larger rising channel set from early May. The Flag is typically a continuation pattern, which in this case would argue in favor of the downside. Initial support lines up at 83.12, the 23.6% Fibonacci extension level.

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Spot Gold (NY Close): 1815.30 // -40.40 // -2.18%

Gold continues to trade as a safe haven, with prices showing a significant inverse correlation with the S&P 500. Futures tracking the benchmark US equity index are pointing lower ahead the opening bell on Wall Street, hinting the yellow metal may rise from current levels. The technical picture offers a conflicting setup however.

A pair of Bearish Engulfing candlesticks may be marking a double top below the $1900 figure, with confirmation seen on a break of an upward-sloping neckline established since early August. Negative RSI divergence bolsters the case for a downside scenario. A breakdown at current levels would aim toward a measured target close to $1622.50, although an actual close below trend line support is needed before the implied objective can be calculated precisely.

Crude_Oil_Set_to_Resume_Selloff_Gold_Outlook_Appears_Conflicted_body_Picture_4.png,

Spot Silver (NY Close): $40.28 // -1.20 // -2.89%

As with gold, fundamental considerations seem to be conflicting with the technical picture. The decline in S&P 500 stock index futures ahead of the Wall Street open points to risk aversion that ought to weigh on silver prices. However the technical layout favors weakness, with what appears to be a Head and Shoulders top developing below the $44.00 figure. A break through rising trend line support set from late July (which doubles as the Head and Shoulders setups' neckline) exposes a measured target of $33.28.

Crude_Oil_Set_to_Resume_Selloff_Gold_Outlook_Appears_Conflicted_body_Picture_5.png,

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