The Overall Fundamentals

Financial markets have been directed by sentiment over the sovereign debt crisis in the EuroZone.

Headline Noise regarding what will be delivered after the EU summit, the Key meeting on October 26th, were mixed and confusing.

No matter what plans will be announced after the meeting, it remains a difficult path to solve the problems facing the EuroZone because they require a whole structural reform in the fiscal system IMO.

There are several issues that European leaders will address during the meeting. The most pressing is the Greek issue. The scenario indicates that the Country will likely be able to repay its debts.

Policymakers have been discussing about increasing the haircut on Greek government debt to 50-60% from 21% agreed previously. Other issues include bank re-capitalization and expansion of the new EFSF program.

Gold and Silver

Gold fell for the first time in 3 weeks. The near-term outlook of the precious Yellow metal is biased to the Southside as recent movement of Gold price has been in line with equities and other metals.

After rising to a record high of 1923.7 in early September, Gold has seen a sharp correction driven by Long liquidations and CME’s increases in margin requirement.

It is likely that Gold is demonstrating what Silver experienced in Q-3 of Y 2011. The precious White metal fell after CME’s margin hikes. Prices stayed in consolidative mode after the sell-off. Gold is showing me similar action.

In the medium to long-term, I am Bullish Gold and believe it will strike new record highs as long as Global economic outlook remains uncertain and central bankers are committed to maintain a low interest rate environment.

Crude Oil

Crude Oil prices saw choppy trade last week. The WTI-Brent spread narrowed, another important phenomenon observed in recent weeks is the rise in Brent time spreads despite falling Crude Oil prices.

The steep backward augurs a tight physical market. It is rare for time-spreads to rise while Crude Oil prices fall. The last time I saw a steep backwardation was 20 yrs ago, during the Gulf War period.

There are things in common for the situation now and 20 yrs ago. During the Gulf War, Crude Oil supplies from Kuwait and Iraq were disrupted and Saudi Arabia had to increase exports to substitute the loss in production from the 2 countries.

This year, the civil war in Libya resulted in Oil supply disruption and Saudi Arabia again ramped up production. But, the quality of Crude Oil between the producing countries are different, it is difficult to fully substitute the lost supplies.

Global economic outlook has weakened in recent months. In particular, US’ economy has been deteriorating so much that has triggered the US Fed to embark “Operation Twist” at the latest meeting. 20 ys ago, US’ economy was in recessionary territory from Q-3 of Y 1990 thru Q-1 of Y 1991.

Crude Oil fundamentals, aka, the demand-supply balance, is not as bad as most think. Prompt physical market remains tight as supply is limited, while demand has been firm despite the economic turmoil. During the Gulf War period, Crude Oil inventory fell sharply in 2-H of Y 1990.

Baker Hughes reported that the number of Nat Gas rigs dropped -9 units in 927 in the week ended October 21. Oil rigs slipped -1 unit to 1079 and miscellaneous rigs were flat at 7 units, sending the total number of rigs to 2013 units. Directionally oriented combined Oil, Gas, and Miscellaneous rigs dipped -9 units to 241 while horizontal rigs fell -11 units to 1142 and vertical rose +10 units to 630 during the week.

The Overall Technicals

Comex Gold (GC)

Gold’s break of 1627.6, the minor support, suggests that the choppy recovery from 1535 may be finished at 1696.8.

Intra-day bias is back on the Southside for a test of 1535 low first. A clear break there confirms the resumption of the decline from 1923.7 and should target 1500, the psych mark, next.

On the Upside: while another recovery cannot be ruled out in here, I beleive that with 1705.4 Double Top Neckline intact, the outlook remains Bearish and the decline from 1923.7 is expected to resume sooner or later.

The Big Picture: this development indicates that Gold made a medium term top at 1923.7, ahead of long term projection level of 161.8% projection of 253 to 1033.9 from 681 at 1945.6 and 2000 psych level. While the fall from 1923.7 is deep, Gold is holding inside long term rising channel from 681 and above 55 wks EMA at 1513.3. So, I am not too Bearish Gold yet. Strong support is anticipated at 1478.3/1577.4 support Zone to contained any downside initially, and bring on a rebound.

Note: a sustained break of 1478.3 will suggest that the long term up-trend has reversed.

Comex Silver (SI)

Silver’s sideway pattern from 33.58 is still unfolding. Intra-day bias remains Neutral and more consolidative trading could be seen.

On the Upside: a break above 33.58 extends the rebound from 26.15 and should target 38.76/44.275 resistance Zone.

On the Downside: a clear break of 28.435 will turn outlook Bearish and will likely extend the fall from 49.82 for another low below 26.15.

The Big Picture: I am treating price action from 49.82 as correction to the up-trend from Y 2008 low of 8.4. Silver drew Strong support from 26.30 and 100% projection at 26.27 despite a brief break. There is still the prospect of another high above 50, thepsych mark . But, a clear break of 26.30 will tell me that Silver is correcting the up-trend from Y 2001 low of 4.01. In that case, a deeper decline will be seen through 21.44 resistance turned support.

Nymex Crude Oil (CL)

Crude Oil’s break of 85.55, the minor support, augurs that the rebound from 74.95 completed at 89.51, on Bearish divergence condition in 4 hrs MACD.

Intra day bias is back to the Southside and break of 83.17, Key support, should confirm this Bearish situation and target a test on 74.95 low.

On the Upside: in case of another rise, I expect upside to be limited by 90.52, the Key resistance; 38.2% retracement of 114.83 to 74.95 at 90.18, and bring resumption of whole decline from 114.83.

Note: a clear break of 90.52 augurs that Crude Oil has completed a Double Bottom reversal pattern; 75.71- 74.95 and should bring on a stronger rise through 100.62, the Key resistance.

The Big Picture: the medium term rebound from 33.2 is treated as the 2nd leg of consolidation pattern from 147.24 and should have finished at 114.83. This decline should target the next Key cluster support at 64.23; 61.8% retracement of 33.2 to 114.83 at 64.38 next. A clear break shows the way to retest the 33.2 low.

Note: the fall from 114.83 is not showing a impulsive structure yet. A clear break of 90.52 argues that price actions from 114.83 could be forming a sideway consolidation pattern and rise from 33.2 might still extend beyond 114.83 before completion.

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.

Find out more about HCM Managed Funds

For More Information Contact

Linda Johnson,
Business Development Director – Private Client Group,
Heffernan Capital Management
Sales@Heffcap.com

Bangkok

Suite 53 Athenee Tower
63 Wireless Road,
Lumpini, Pathumwan,
Bangkok 10330 THAILAND
Tel: +66 8 0700 7900
Fax: +6682 2079301
Email : info@heffcap.com

New York

347 5th Avenue, Suite 1402-508 NY, NY 10016
Tel: +1 212-252-2129
Fax: +1 212-898-1209
Email : info@heffcap.com

Singapore

3 Raffles Place #07-01
Bharat Building Singapore 048617
Tel: +65 6329 6408
Fax: +65 6329 9699
Email : info@heffcap.com

Get the Updates Daily

Enter your email address:
Delivered by FeedBurner

Brokerage, Investment Management, Investment Banking, Emerging Markets Specialists

Managed Trading Account with Integrity and Stability

Eliminate concerns about Stock Market Downturn, Real Estate Downturn, Bernie Madoff’s, Current Events and Diversify at the Same Time;

THE BEST OVERALL MANAGED ACCOUNT SOLUTION, FIND OUT WHY, CONTACT US TODAY

Now is the time to get professional portfolio management services with HCM. Reap the benefits of proper international diversification and positioning in the global market place, with a high degree of customer service.

Our Managed Account Program accommodates those investors who wish to allocate a portion of their risk capital to managed hedge funds.

Find out why we are at the top, select the right investment for inclusion in your portfolio, to receive information and/or get started Click Here

Lower the Exposure of Your Portfolio to the Risks of the Global Marketplace.

Did you know? Major banks around the globe are weighing heavier on relatively shorter term trading speculation than the traditional lending-borrowing business.

Profits can be made on a falling market (by selling short) just as easily as buying a rising market, in addition, derivatives and CFD trading allows profits to be compounded monthly. Let us put the world’s most liquid, but least understood market, in your financial arsenal.

Global Portfolio and World Events

Do you have your portfolio directly linked to the economy?

• Equities
• Interest Rates
• Real-Estate

Which investment benefits are You lacking?

• Recession Proof
• Inflation
• Full Transparency and Audit Trail

Select the right investment for inclusion in your portfolio,to receive information and or get started Click Here

Managed Trading Account

You have a choice. There is No need to own “Companies” .There is No need to own illiquid Company stock, funds or Real Estate”. Do you have your portfolio directly linked to the economy? Or Worse just the Stock Market or Real Estate? Get a Liquid, Transparent/Separately Managed Liquid,Alternative Investment Account in Your Name , where money management, along with capital preservation and liquidity are most important.

Features:

• Professionally supervised by traders
• Risk/Money management (very important to us)
• Trades only occur with the most liquid spot markets
• High degree of liquidity
• Excellent Risk-to-Reward ratio
• Profits possible regardless of direction of the market
• Portfolio diversification: currencies, commodities, stocks, bonds, mutual funds, ADRs

Benefits:

• No one can withdraw funds other than the client
• The clients deposit direct to custodian
• The trader can only trade
• The investor’s funds remain in the client’s OWN NAME.
• The investor’s funds are held by an independent institution .
• Clients have direct access to their account, 24 hours a day

Our Goals For You:

• Capital Preservation
• Income Generation
• Security
• Quality Service
• Planning for the Future

Select the right investments for inclusion in your portfolio, to receive information and or get started Click Here

Your use of any of the Websites or any of the Services (defined below) constitutes your agreement to be bound by and comply with the Website Terms and Conditions and your consent to the collection, use and disclosure of personal information as described in the Privacy Policy. If you do not so agree and consent, you are not authorized to visit or use our Websites or the Services.

Be extremely careful, investing in securities carries a high degree of risk; you may likely lose some or all of the investment. You must also accept that opinions on stock markets change minute to minute, opinions expressed my change at any time without warning. Opinions maybe influenced by ad sales and other financial consideration. This site does not offer any assistance in making financial decisions.

Read the Terms of Service

Posted by Shayne Heffernan on Oct 22nd, 2011and filed underEnergy, Gold, Latest News, Limelight, Metals, Paul Ebeling, Research, Silver, USA.You can follow any responses to this entry through theRSS 2.0Responses are currently closed, but you can trackback from your own site.