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Paul Ebeling Reports on Crude Oil, Gold and the US Dollar

                            Crude Oil closed over US$81 bbl in 1st Y 2010 Session
Crude Oil started this New Year with a resumption of its rally Monday on upbeat manufacturing data and a weakening USD sent the price to + US$81 bbl.
The US Institute for Supply Management's factory index rose to 55.9 in December from 53.6 in November, reaching the highest level in more than 3 years,a reading above 50 signals expansion.
Crude Oil prices have been rising since last December as Arctic weather in North America revived fuel consumption.

Light, Sweet Crude for February delivery rose US$2.15, or 2.7%, to settle at US$81.51 bbl on the New York Merc.

In London, Brent Crude for February delivery gained US$2.19 to settle at US$80.12 bbl on the ICE Futures Exchange.   

The Overall Technical Outlook:  Nymex Crude Oil (NYSE:CL)

Crude Oil's rally from 68.59 extended further to as high as 81.16 on Monday and at this point, intra-day bias remains on the Northside, looking at the 82.0 resistance next. This development suggests that medium term rise from 33.2 is still in progress and a test of the 82.0 high will augur a move to the next Key resistance level at 90.

On the Downside: A close below 79.12, the minor support, will turn intra-day bias Neutral and bring about a retreat, probably to 4 hours 55 EMA (now at 77.49), but a break of the 73.61 support is needed to indicate that Crude Oil has topped out in here. So, my short term outlook is now changed from Neutral to Bullish.

The Big Picture: the strong rally from 68.59 and sustained trading above 55 days EMA augurs that the medium term rise from the Y 2009 low of 33.2 is still in progress, and headed for another high above 82.0. A break above this 82.0 level will target the next Key cluster resistance level at 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90, a Key level. I will still be alert for a reversal signal as the rise from 33.2, which is treated as correction to whole fall from 147.27, is expected to conclude inside 76.77/90.24 fibo resistance zone.

The Long Term Picture: there is no change in the POV that the fall from 147.27 is part of the correction to the 5 wave sequence from 98 low of 10.65. While the rebound from 33.2 is strong and might continue, there is no solid evidence that suggest fall 147.27 is completed and I have to prefer the case that rebound from 33.2 is a corrective rise only. There looks to be strong resistance between 76.77/90.24 fibo resistance zone, and may well bring a reversal to test 33.2 before completing the whole correction from 147.27. Stay tuned...


                                     Gold advances as USD retreats on Monday

Gold price advanced as the USD retreated Monday. The February contract rose to as high as 1124.6 before closing at 1118.3, up + 2%. The USD set back in the beginning of the year with the dollar index dropping -0.4% to 77.52.

The "Greenback" declined against major currencies including the Euro, the Yen and the GBP. Strong economic data, rather than raising speculations about an earlier Fed rate hike, spurred demand for high yield assets.

Savvy observers agree that this situation may be temporary. The US employment report may surprise to the upside on Friday and again fuels expectations that the Fed will tighten the monetary policies earlier than previously scheduled, supportive for the US Dollar. It's a factor for the speculators, I see no rate tightening for a long time.

Over the past 2 yrs, the inverse correlation between USD and equity market was strong, but the link should weaken this year as investors will be focusing more on country specific factors such as monetary and fiscal policies.  Stay tuned...

The Overall Technical Outlook: Comex Gold (GC)

Gold's break of the minor resistance at 1114.5 augurs that the rise from 1075.2 is resuming and flips the intra-day bias back to the Northside for 1142.9 resistance. A break there will indicate that whole fall from 1227.5 may have completed and will bring stronger rally to retest this resistance.

On the Downside: a break below 1093.5, the minor support, will indicate that consolidations from 1075.2 may have completed and will bring resumption of the decline and to the 1075.2 support and perhaps below.

The Bigger Picture:  the rise from 681 is expected to develop into a set of 5 wave sequence with the the 1st wave completed at 1007.7, the 2nd wave triangle consolidation completed at 931.3, and the rise from 931.3 is treated as the 3rd  wave, and that has possibly completed at 1227.5 after missing 100% projection of 681 to 1007.7 from 931.3 at 1258. If so then a deeper pull back could be seen to  the 1026.9/1072 support zone, or even further to retest 1000, the Key level. Nevertheless, the downside should be contained well above the 931.3 support and bring up-trend resumption to another high above 1227.5.

The Long Term Picture: the rise form 681 is treated as resumption of the long term up-trend from the 1999 low of 253 after interim consolidation from 1033.9 completed in form of an expanding triangle. So, the next long term target is 100% projection of 253 to 1033.9 from 681 at the 1460 level. I am now Bullish long term as long as 931.3 structural support holds. Stay tuned....


                            US Dollar weakens, Stocks and Commodities Rise

The US Dollar came under heavy pressured on Monday as Solid Manufacturing Data boosted Risk Appetite

US Dollar was pressured on soild data as investors' risk appetite got a boost as the New Year started Monday.

Commodity currencies were the biggest winners as China PMI manufacturing rose to 56.1, highest level since April 2004.

Strong growth in the manufacturing sector in China will boost demand for commodities.

Crude Oil rides on the optimism and breaches 80 level today while Gold also rises to as high as 1124.6 so far. Data released from US saw ISM manufacturing index rose more than expected to 55.9 in December.

The GBP was lifted against the USD as PMI manufacturing in UK rose to 54.1, highest level in 25 months.  Sterling somewhat lags behind other majors currencies, and has indeed weakened against commodity currencies and Euro.

Data from Eurozone saw PMI manufacturing revised up to 51.6. Sentix investor confidence, though, missed expectations by rising to -3.7 only. Euro continues to under perform Aussie and Loonie. ----Paul A. Ebeling, Jnr.

Disclosure: long oil long gold no usd position