The Overall Fundamentals
This week, the focus will be on the FOMC meeting. At the annual Jackson Hole symposium, Chairman Bernanke indicated that further easing measures are needed to stimulate the job market.
The precious metals complex gained across the board driven by the ECB's commitment of buy bonds to contain the sovereign debt crisis in the 17-nation region and the heightened speculations of US Fed's QE-3 coming after disappointing US payroll data. Silver was the best performer with a +7.21% gainer. Gold added +3.14%, similar to PGMs. Gold to Silver ratio has declined rapidly since mid-August. This is likely not sustainable as Silver's recent rally lacks fundamental supports.
The failure of the US ISM to move above the 50 mark is negative for Silver, undermining its momentum to go up further. PGMs resumed recent rally with Platinum and Palladium gaining +3.84% and +4.03% respectively. Lonmin's Marikana mine has not yet return to normal operation since miners' strike on 10 August. Despite peace accord and the company's agreement on wage negotiation, less than 2% of workers returned to work Thursday. So, expect PGM prices to remain firm in the near-term.
Crude Oil closed the week at 96.34 just above last Monday's open at 96.16. Crude Oil was unable to take advantage of the ECB program and the likelihood of FOMC stimulus, as the prices were already trading at highs, which have attracted the Obama administration and the possibility of the release of the Strategic Reserves. Crude Oil prices rose Friday in volatile trading after a disappointing US August jobs report weakened the USD and fueled expectations for stimulus from the US Federal Reserve, even while denting the outlook for Petroleum demand.
Brent Crude and WTI Crude futures posted small weekly losses, after 5 straight weekly gains and a surge of more than 9% in August.
Nat Gas according to the DOE-EIA, Nat Gas storage increased +28 bcf to 3 402 bcf in the week ended 31 August . Stocks were +395 bcf higher than the same period last year and +329 bcf above the 5-yr average of 3 073 bcf.
Baker Hughes reported that the number of Nat Gas rigs fell -21 units to 452 in the week ended 6 September. Crude Oil rigs gained +10 units to 1 409 and miscellaneous rigs rose +1 unit to 3 and the total number of rigs was down -30 units to 1 864 units. Directionally oriented combined oil, gas, and miscellaneous rigs slipped -5 units to 214 units while horizontal rigs decreased-14 units to 1 135 and vertical rigs slipped -11 units to 511 during the week.
The Overall Technicals
Comex Gold (GC)
Gold rose to 1745.4 with a strong close at 1737.6.
My initial bias remains on the Northside and this rally should extend to 1792.7/1804.4, the Key resistance zone next.
On the Downside: a move below 1689.3, the minor support, turns the bias Neutral and bring on consolidations. A clear break of 1647.1 is needed to indicate near term reversal IMO. Barring that I am staying Bullish Gold.
The Big Picture: Gold's price actions from 1923.7, the high, are seen as a medium term consolidation pattern. There is no indication that this consolidation is finished, and more range trading could be seen. The downside of any falling leg should be contained by 1478.3/1577.4, the Key support zone, and bring on a rebound. A clear break of the resistance at 1792.7 is needed to be the 1st signal of the up-trend's resumption. Barring that, the consolidation will extend further.
The Long Term Picture: with 1478.3, the Key support intact, there is no change in the long term Bullish outlook in Gold. While some more medium term consolidation cannot be ruled out, I anticipate an eventual break of 2000 psych mark sooner or later. Stay tuned...
Comex Gold Continuous Contract Weekly Chart
Comex Silver (SI)
Silver's rally extended to 33.77 last week with a strong close at 33.725.
My initial bias remains on the Northside and current rise from 26.105 could now continue to the resistance at 37.58.
But, one must be cautious and look for reversal signal at it approaches 37.58.
On the Downside: a move below 32.00, the minor support, will turn the bias Neutral and bring on consolidation, and a break of 30.195 is needed to confirm a near term reversal. Barring that I am cautiously Bullish Silver
The Big Picture: Silver's price actions from 26.15 should be a consolidation pattern only. The current development indicates that it is still in progress with rebound from 26.105 as a leg. Overall, Bearish on Silver as long as 37.58, the resistance holds and expect fall from 49.28 to extend lower eventually. But, a break of 37.58 will negate this Bearish situation, and could bring on stronger raise back to 49.82, the high.
The Long Term Picture: the Big Q remains, is 49.82 is a medium term or long term top? With 61.8% retracement of 8.4 to 49.82 at 24.22 intact, price actions from 49.82 could eventually turn out to be just a consolidation, and a break of 37.58,the Key resistance, will increase the odds of a new high above 49.82. Stay tuned...
Comex Silver Continuous Contract Weekly Chart
Nymex Crude Oil (CL)
Crude Oil's consolidation from 98.29 continued last week and my outlook is unchanged.
With 92.94 support intact, further rally is still expected, a move above 98.29 will extend the rise from 77.28 to 100, the psych, and higher. But, as I have said before the rise could be the 4th leg inside the triangle pattern from 114.83. So, be cautious on topping between 100 and 110. And, a clear break of 92.94 will be the 1st indication of a reversal and turn focus to 86.92 support for confirmation.
The Big Picture: price actions from 114.83 are viewed either a 3 wave consolidation pattern that has completed at 77.28, or a 5 wave triangle pattern that is unfolding. A break of the resistance at 110.55 will suggest that whole rebound from 33.29 has resumed for a move above 114.83. But, another fall could be seen before an eventual upside breakout, downside should be contained above 77.28, the Key support.
The Long Term Picture: Crude Oil is in a long term consolidation pattern from 147.27, with the 1st wave completed at 33.2. The corrective structure of the rise from 33.2 indicates that it is the 2nd wave of the consolidation pattern. While it could make another high above 114.83, I anticipate strong resistance ahead of 147.24 to bring reversal for the 3rd leg of the consolidation pattern. Stay tuned...
Nymex Crude Oil Continuous Contract Weekly Chart
Paul A. Ebeling, Jnr.
Paul A. Ebeling, Jnr. writes and publishes The Red Roadmaster's Technical Report on the US Major Market Indices, a weekly, highly-regarded financial market letter, read by opinion makers, business leaders and organizations around the world.
Paul A. Ebeling, Jnr has studied the global financial and stock markets since 1984, following a successful business career that included investment banking, and market and business analysis. He is a specialist in equities/commodities, and an accomplished chart reader who advises technicians with regard to Major Indices Resistance/Support Levels.