Talking Points

  •  Crude Oil Follows Stocks Lower as Confidence Evaporates
  •  Gold Hits New Record High, Silver Inching to H&S Target

WTI Crude Oil (NY Close): $82.38 // -5.20 // -5.94%

Risk sentiment remains on the defensive, with growth-sensitive assets including the WTI contract sharply lower in European trade as the region's exchanges pick up where Wall Street and Asian traders left off. Yesterday's batch of US economic data sparked the latest blood-letting as the Philly Fed measure of business confidence unexpectedly slumped to the lowest level since March 2009 while CPI ticked higher, scattering hopes for more Fed stimulus in the near term.

Looking ahead however, a bare economic calendar may give scope for a bit of a correction amid profit-taking into the week-end. Indeed, economic data has been broadly disappointing across the G10, so the absence of major event risk may be good news in and of itself. Still, S&P 500 stock index futures are pointing aggressively lower ahead of the opening bell in North America, hinting the bears may not be ready to take a break just yet.

Prices retraced 50% of the 7/26-8/9 decline, put in a bearish Shooting Star candlestick, and sank to Fibonacci extension support at $79.42. This barrier is reinforced by the lower boundary of a falling channel in place since early May (now at $77.63), with a break below it exposing $76.48 and $73.43. A bounce sees initial resistance at $83.07.

Crude_Oil_Suffers_with_Stocks_Gold_Hits_Record_High_on_Risk_Aversion_body_Picture_3.png,

Spot Gold (NY Close): 1823.80 // +32.55 // +1.82%

Safety-seeking capital flows amid deepening market turmoil have continued to drive gold higher in Europe, with the yellow metal setting another record high. S&P 500 stock index futures positioning point to more of the same on Wall Street, but as noted above, a relief rally in risky assets seems like a distinct possibility and may trim gold's advance.

Prices are probing above the 76.4% Fibonacci extension level at $1856.98 to challenge Andrew's Pitchfork resistance at $1880.44, with a break above that exposing the 100% extension at $1898.36. Near-term support lines up at $1831.38 as the 61.8% Fib.

Crude_Oil_Suffers_with_Stocks_Gold_Hits_Record_High_on_Risk_Aversion_body_Picture_4.png,

Spot Silver (NY Close): $40.61 // +0.27 // +0.68%

The Head and Shoulders bottom we began to monitor at the start of the week continues to play out after prices took out the formation's neckline at $39.82 yesterday. The setup's measured upside target stands at $42.64. The rout sweeping across financial markets seems to have jolted silver back into the safe-haven camp, with short-term correlations studies between the metal and gold rapidly on the mend. With that in mind, deep losses on S&P 500 stock index futures point to further gains but as noted above, a corrective bounce in risk appetite remains a clear possibility in the absence of major event risk.

Crude_Oil_Suffers_with_Stocks_Gold_Hits_Record_High_on_Risk_Aversion_body_Picture_5.png,