A technical look from GS. Pay particular attention to the last paragraph.
WTI, Brent, S&P all made bullish engulfing candles: lower lows, higher highs, higher closes. Aluminium made a new low and rejected it, at the same time holding within its trading channel, the upside of which is at $2060. Copper not quite so bullish yesterday (despite Xstrata's KIDD site 7-10 week shut in news, a disruption the market might be underestimating) but it shrugged off the 3% down move in the Shanghai Comp overnight and has since traded new 2009 highs of $6518 with a near term target there initially $6600 and then $7200 (one of our favourite trades is to be long Dec9Dec13 copper spreads, also on the move, settled $425, last $470). Looks like most contracts now look to retest their previous highs and would expect to see a surge of buying should they take them out. EURUSD had another strong move up after looking relatively the strongest performer all day in the Trilogic Trade (USD, Equities, Commods). Even the sick man of the currencies (GBP) managed to reject the new low print at 1.6154 and close higher on the day.
On crude specifically, Brent held the important neckline on a closing basis and now needs to take out the previous high of $76.25 in COV9 to move higher - still targeting $84.50 level if it can take out major resistance at $78.72, the 38% retracement level from the down move from 2008 highs. Highs so far today $73.30, previous 2009 high $76.
WTI had a look at the 38R level at $69.43 and the recent uptrend support at $69.75 but was unable to breach either. Major resistance lies at $76.28 (the 38% retracement of the down move from 2008 highs) but a break through there suggests a move to $84.50 initially. Highs so far today $73.35, previous 2009 high $75.
A word on Natural Gas the commodity I have had more calls from people dying to buy it basis oil/gas ratios and outright cheapness. It is cheap for a reason. Storage sits last at 3.258tcf. That compares to this time last year at 2.757 and last year's peak of 3.488tcf (which it hit mid Nov….). The picture doesn’t look like it should get better any time soon, it probably gets worse with too much gas particularly in the West Coast, and Canada full and trickling imports to the US. It's going to take a Hurricane to bring this thing back to life as far as I can tell and technicals look awful in a downward trend spiral. Dec 9 at $5 looks a screaming sale and $4 puts cost about 19c. If you must own it for all the value or oil/gas ratio/substitution arguments buy Summer 10 around $5.50. New injection season, new higher production costs and new Hurricane season optionality.
