Charts by: eSignal.com  3 June 2012 Paul A. Ebeling, Jnr.

The Overall Fundamentals

The World financial markets are being haunted by the sovereign debt conditions in the EuroZone and the disappointing economic indicators reported in US. The weaker-than-expected payroll additions in May renews the speculation that the US Fed will have to implement QE-3, likely just after the expiration of Operation Twist in June. This IMO is the Key driver for Gold's rebound back above 1600 US pit trade on Friday. Note: the precious metal complex outperformed all others in the raw commodity sector that I cover except the energy sector, the worst performer.

The weakness in the US job market raised the possibility of further easing by the US Fed.

Boston Fed President Eric Rosengren said that the report signals the Feds need to stimulate more. Remember that US Fed Chairman Ben S. Bernanke said in the April meeting that more accommodation would be required if unemployment fails to make sufficient progress towards its longer-run normal level.

In the EuroZone investors await the Greek election in June, and the problems in Spanish banking system led a sell off of risk assets.

It now appears that the Spanish government has negotiated with the ECB in purchases of the debt-ridden country's bonds, as massive net capital outflow was recorded last month.

The Economy Minister Luis de Guindos warned that the country is in now in a very, very, very difficult situation.

The ECB meeting on Wednesday will likely see the President give more guidance on the outlook of the crisis. Also, the RBA and the BOC will hold policy meetings Tuesday and the BOE will have meeting Thursday.

Precious Metals

Gold rebounded sharply in the US session on Friday as the disappointing US payroll report ignited hopes of further Fed easing. The benchmark Comex contract added +3.3% during the week, out performing both Silver and Platinum, but under performed Palladium which rose +4.1%.

Many pundits said the Gold's decline, its crack of 1600, the psych mark, was the of the loss of its safe-haven appeal. But, I saw the precious Yellow metal's trading as range-bounded, when compared with other commodities I cover.

Gold's decline has been driven somewhat by the fall of the EUR, the former fell less than 1.0% since the sovereign debt crisis in the EuroZone worsened after French and Greek elections in early May, while the EUR saw a 5.0% + loss.

The safe-haven appeal of Gold was still in place, though less prominent than during past few years.

I expect more funds will not to Gold in coming weeks as speculations of Fed's QE-3 rises that will eventually lead to massive inflation Worldwide.

Energy

Crude Oil prices fell with the front-month WTI Crude falling 8.4%, and the equivalent Brent Crude contract losing -7.9% on the week. The latter settled below 100 for the 1st time since October 2011.

Due to the uncertain outlook in the EuroZone, and the one step forward, 2 steps back economic developments in the US, we expect downside risks to stay and see WTI at 80 and then tapping at 74.95, and lower barring any bizarre outside events.

With regards to some questions about the seasonal impact in May, I do not see the monthly declines in May over the last 3 yrs as seasonal factors.

I now believe they were driven by the sovereign debt crisis in the EuroZone. The charts show that, over the 10 yrs from Y 2002, WTI Brude gained 5 times in May while Brent Crude rose 4 times. These signaled no indications of fundamental seasonal factors affecting Crude's falls IMO.

Nat Gas declined for a 2nd straight week after the 4-wk rebound from mid-April to mid-May.

The DOE-EIA reported that Nat Gas inventory increased +71 bcf to 2 815 bcf in the week ended 25 May. Stocks were +732 bcf above the same period last year and +724 bcf, or +34.6%, above the 5-yr average of 2 091 bcf.

Rig Counts: Baker Hughes reported that the number of Nat Gas rigs dropped by 6 units to 588 in the week ended 1 June. Oil rigs increased +3 units to 1 386 and miscellaneous rigs stayed at 6 units and the total number of rigs was down -3 units to 1 980 units. Directionally oriented combined oil, gas, and miscellaneous rigs slid -5 units to 217 while horizontal rigs decreased -8 units to 1 183 and vertical rigs gained +10 units to 580 during the week

The Overall Technicals

Comex Gold (GC)

Gold staged a strong rebound at the end of last week, and is back pressing 38.2% Fibo retracement of 1792.7 to 1526.7 at 1628.3.

The strength of the rebound augurs that the near term trend might have reversed here. Sustained trading above 1628.3 Fibo mark should show the way to 61.8% retracement at 1691.1 and above. But, a move below 1583.6, the minor support, will turn my focus 1526.7, the next support mark.

The Big Picture: Gold price actions from the 1923.7 high are still seen as a medium term consolidation pattern. There is no indication that this consolidation is finished, and more range trading could be seen, and any Southside falling leg should be contained by 1478.3/1577.4, the support zone, and bring on a rebound. A clear break of 1792.7, the Key resistance, is needed as the 1st signal of the up-trend's resumption. Barring that, the consolidation will extend IMO.

The Long Term Picture: with 1478.3, the Key support intact, there is no change in my long term Bullish outlook for Gold. Some more medium term consolidation cannot be ruled out, I still see an eventual break of 2000, the psych mark, in the long run, Stay tuned...

Comex Gold Continuous Contract Daily Chart

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Comex Silver (SI)

Silver staged a strong rebound at the end of last week, but is in its range above 26.73. More consolidative trading should be seen. A clear break of 28.895, the Key resistance, cannot be ruled out.

However, I expect strong resistance at the 38.2% Fibo retracement of 37.48 to 26.73 at 30.83 to limit the Northside and bring on the fall's resumption. A clear break of 26.145/73, the support zone, will confirm resumption of the decline from 37.48.

The Big Picture: Silver's price actions from 26.15 should be viewed as a consolidation pattern only, and has completed with 3 waves to 37.48. The fall from there is tentatively treated as resumption of the medium term decline from the 49.82 high, and should extend through 26.145 to 61.8% retracement of 8.4 to 49.82 at 24.22 and below. But, a clear break of 30, the psych mark, will add to the chance of one more rising leg before consolidation from 26.15 finishes.

The Long Term Picture: the Big Q remains on whether 49.82 is a medium term or long term top. The action we have been seeing favors the latter. Though, I prefer to see sustained break of 61.8% Fibo retracement of 8.4 to 49.82 at 24.22 to confirm.

Barring that, price actions from 49.82 could just be guiding Silver into a sideways pattern. Stay tuned...

Comex Silver Continuous Contract Daily Chart

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Nymex Crude Oil (CL)

Crude Oil's decline extended last week reaching 83.29. There is no sign of bottoming yet, and my initial bias remains on the Southside for 80, the psych mark 1st. A clear break there target a test on 74.95, the Key support.

On the upside: a move above 85.86, the minor resistance, turns my bias Neutral, and bring on consolidations, any recovery should be limited by 92.21, the Key resistance, and bring on another decline.

The Big Picture: Crude Oil price actions from 114.84 are developing into a 3 wave consolidation pattern. And, the 3rd leg should have already started at 110.55. Deeper fall should eventually be seen to 74.95, and possibly lower. I would like to see strong support from 64.23, the cluster level, 61.8% Fibo retracement of 33.20 to 114.83 at 64.38, and bring another medium term rise. So, I will look for a reversal signal below 74.95.

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. Crude Oil could make another high above 114.83, but, I see strong resistance ahead of 147.24 to bring reversal for the 3rd leg of the consolidation pattern. Stay tuned...

Nymex Crude Oil Continuous Contract Daily Chart

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Nymex Natural Gas (NG)

Nat Gas fell to 2.313 last week, and this development suggests that the rebound from 1.902 is finished. Initial bias remains to the Southside this week, and deeper fall would be seen to 61.8% Fibo retracement of 1.902 to 2.759 at 2.229 or below.

On the Upside: a move above 2.540, the minor resistance, will turn my bias Neutral, and bring on consolidations, any recovery should be limited below 2.759 and bring on another decline.

The Big Picture: the down trend from 6.108 is in progress as Nat Gas stays well inside the long term falling channel. The rebound from 1.902 is viewed as a correction in the larger down trend. It is too earlier to determine that the whole correction is completed at 2.759. But, in case of another rise, any Northside should be limited by 8.2% Fibo retracement of 4.983 to 1.902 at 3.079, and bring on a resumption of the down-trend resumption, and to a new low below 1.902 IMO.

The Long Term Picture: the whole down-trend from 13.694, the 2008 high is still in progress, so is that from 15.78, the Y 2005 high, and there is not sign of at reversal. Another fall could be seen to the Y 1999 low of 1.62 on resumption IMO. Stay tuned...

Nymex Natural Gas Continuous Contract Daily Chart

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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.