Talking Points

  •  Crude Oil Set to Follow S&P 500 Lower Amid Risk Aversion
  •  Gold Prices Torn Between Safety Demand, US Dollar Recovery

WTI Crude Oil (NY Close): $99.59 // +0.39 // +0.39%

S&P 500 stock index futures are dipping lower ahead of the opening bell on Wall Street, hinting the return of risk aversion is threatening to sink the WTI contract. Selling pressure began to emerge in Europe following disappointing earnings results from the likes of Swiss chemicals producer Clariant and German pharmaceutical giant Merck. The re-emergence of Euro Zone sovereign risk concerns is also not helping after Moody's said last week's EU bailout is likely to set a precedent for future bailouts and weaken the fiscal position of those nations doing the rescuing.

All eyes are pointed to the US Durable Goods Orders report as well as the Fed Beige Book regional economic survey, with traders still carefully calibrating their outlook for the second half of the year amid increasingly ominous signs of a looming global slowdown. Official DOE weekly inventory figures are also on tap, with confirmation of the swell in stockpiles telegraphed in yesterday's API report threatening to compound selling pressure.

Sizing up the technical picture, prices continue to test resistance at the psychologically critical $100/barrel figure, with a break higher exposing the familiar barrier at $103.30. Near-term rising trend line support is now squarely at the $97.00 figure. As we mentioned yesterday, the current setup is reminiscent of the Ascending Triangle formation carved out between early May and June, pointing to bearish continuation after a consolidation period, though confirmation on a break of trend line support is needed before that can be said with confidence.

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Spot Gold (NY Close): 1619.30 // +5.15 // +0.32%

The inverse correlation between the S&P 500 and gold prices continues to strengthen, reinforcing the yellow metal's safe-haven credentials and suggesting that the pullback in index futures ahead of the opening bell on Wall Street is hinting at a move higher over the near term. With that in mind, a recovery in the US Dollar (particularly in light of renewed EU stress against a backdrop of no new developments on the US debt ceiling front) may hinder meaningful gains, though it is unclear which of these forces will prove most significant.

Prices continue to test the top of a minor rising channel established from mid-July, with negative RSI divergence warning of fading bullish momentum and arguing for a pullback. Near-term support lines up at $1604.55, a former range top. Alternatively, a breakout higher exposes the underside of a larger channel set from the early July low, now at $1643.42. The longer-term setup is broadly bullish, but warning signs have started to emerge.

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Spot Silver (NY Close): $40.88 // +0.53 // +1.31%

Silver continues to broadly mimic the trading dynamics of its more expensive counterpart, carving out an increasingly defined inverse correlation with benchmark US stock indexes. Technical positioning remains indecisive however, with prices still locked in consolidation below resistance at $41.06. Negative RSI divergence does argue for a cautiously bearish bias however, with a break below initial trend line support exposing $39.01. Alternatively, a push above resistance targets $43.11.

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