At The Crossroads: OIL and COPPER

Have you looked at the daily charts for OIL and Copper lately? Both are at a crossroads that may prove ultimately bullish for the Precious Metals. Quite possibly the oldest and simplest of trading signals is now present in both of these important commodities. And both OIL and Copper have often lead the Precious Metals hire [and lower] over the entirety of their secular bull market to date. I'm talking about the 50/200 day Moving Average Crossover. "Investors" swear by this technical trading signal when deciding to go long or short a market.

Let's read some background on this popular trading signal and then we'll look at the charts I've posted to "get the picture". For some background we'll use a

T e c h n i c a l A n a l y s i s T u t o r i a l by Alan Farley I found at TradingDay.com. To read the entire tutorial:

http://www.tradingday.com/c/tatuto/movingaveragecrossovers.html

Moving Average Crossover
Moving averages emit vital market data, but all of them exhibit one common limitation: They lag current events. By the time a 20-bar average curves upward to confirm a trend, the move is already underway and may even be over. While faster incarnations (such as exponential averages) will speed up signals, all of them ring the trading bell way too late.

Multiple moving averages overcome many flaws of the single variety. They're especially powerful when used in conjunction with price patterns. For example, pick out a long-term and a short-term average. Then watch price action when the averages turn toward each other and cross over. This event may trigger a good trading signal, especially when it converges with a key support or resistance level.

Crossovers mark important shifts in momentum and support/resistance regardless of holding period. Many traders can therefore just stick with the major averages and find out most of what they need to know. The most popular settings draw charts with a 20-day for the short-term trend, a 50-day for the intermediate trend and a 200-day for the big picture.

Long-term crossovers carry more weight than short-term events. The Golden Cross represents a major shift from the bears to the bulls. It triggers when the 50-day average breaks above the 200-day average. Conversely, the Death Cross restores bear power when the 50-day falls back beneath the 200-day. The 200-day average becomes major resistance after the 50-day average drops below it, and major support after breaking above it. When price gets trapped between the 50-day and 200-day averages, it can whipsaw repeatedly between their price extremes. This pinball action marks a zone of opportunity for swing trades.

Please click on the charts to enlarge.

OIL
After marking lows around 51 in mid-January, a very bullish trend reversal occurred amidst superior bullish divergence in the RSI and MACD indicated by the red trend lines on the chart above. The ensuing rally off that low has been powerful. After knocking down resistance at 62 / 64 in late March, OIL needed time to rest and consolidate it's impressive gains...and wait for it's 50 day moving average to catch up to it. Today it sits on the launch pad: OIL's 50 day moving average is just 11 cents below it's 200 day moving average at the close on May 3, 2007. "Investors" will be watching OIL closely over the next several days. My posts yesterday with regard to the supply / demand fundamentals of OIL leave me with little doubt as to the ultimate outcome of this impending 50/200 day Moving Average Crossover. The chart at this link will give a bit of historical OIL price data that is quite eye-popping: http://seekingalpha.com/wp-content/seekingalpha/images/oilseasonal.png Oil tends to go only one way between June and August year in and year out -- UP!

COPPER
After marking lows around 240 in early February, a very bullish trend reversal occurred amidst very bullish divergence in the RSI and MACD indicated by the red trend lines on the chart above. Just like OIL, the ensuing rally off that low has been very powerful. Bullish Divergence in the RSI and MACD as they relate to price is one of the most powerful rally predictors in technical analysis in any market. Copper took off like a raped ape out of this bottom, stopping briefly to retest the break of the 50 day moving average and again to test it's break of critical resistance at 300. Copper has been all up since that February low, and quite frankly has gotten way ahead of itself. For the past four weeks copper has been resting and consolidating just below it's next major resistance test at 370. Coincidentally COPPER's 50 day moving average has actually just crossed it's 200 day moving average this week as it test this level of resistance. A move through 370 here in conjunction with a 50/200 day Moving Average Crossover could catapult COPPER to new highs this summer.

In conclusion: It is no secret that OIL and COPPER have been pivitol drivers in the Precious Metals bull market that began in 2001. Both have pulled the Precious Metals higher, and both have pulled them lower. Of all the Precious Metals, SILVER is the most heavily influenced by both OIL and COPPER. Could new highs in OIL and COPPER finally catapult SILVER into the $20's? The future may be now...

Silver Resistance: 13.39 / 13.44 / 13.55

Silver Support: 13.30 / 13.20 / 13.10

__________________________________All prices SPOT

Gold Resistance: 681 / 686 / 691

Gold Support: 676 / 672 / 670

Under Cover Of The Night

Under cover of the night, while we here slept, and the rest of the world was on vacation, dem Rat Bastids do their dirty work. Like the cowards we call "terrorists", they take cheap shots at us...afraid to face us, afraid to challenge us mano y mano. Right back into the Rat Traps they came. 13.03 Silver, 666 Gold. As the sun rose here on the Comex, like the little cockroaches that they are, dem Rat Bastids scurried for cover as the brave jumped all over this Precious gift from the vermin. Nothing brings out the buyers like a good Sale.

To today's headlines:


U.S. Factory Orders Rise Sharply
http://biz.yahoo.com/ap/070502/economy.html?.v=9
WASHINGTON (AP) -- Orders to U.S. factories surged in March by the largest amount in a year, an encouraging sign that the recent slowdown in manufacturing may be ending.

The improving data has prompted some economists to say that the worst of the manufacturing slump may be ending.

"The underlying data appear to corroborate other indicators ... that the manufacturing sector may have stabilized," Michelle Girard, an economist with RBS Greenwich Capital said.

For March, the increase was led by a 38.1 percent surge in demand for commercial aircraft.

Folks, have you ever noticed that almost every "surge" in factory orders reported usually contains these four words somewhere in the report: demand for commercial aircraft.

However, demand for household appliances and furniture both fell, indicating continued troubles in the housing industry.

If the American consumer is "responsible" for 70% of our economy, I fail to see how a few airplane orders is going to rescue the US Dollar. Do you know anybody that has ordered an airplane? This bird has wax wings, and it too will soon crash and burn. I'd call today's US Dollar and stock market reaction to this report "Livin' On A Prayer".

Crude Oil Falls After U.S. Refiners Bolster Gasoline Output
http://www.bloomberg.com/apps/news?pid=20601087&sid=abxpaCTGExjs&refer=home

I am absolutely convinced that Bloomberg in dem Rat bastids number one source of spreading disinformation.

May 2 (Bloomberg) -- Crude oil fell below $64 a barrel in New York after an Energy Department report showed that refiners increased gasoline output.
Refineries operated at 88.3 percent of capacity in the week ended April 27, up 0.5 percentage point from the week before. Gasoline supplies fell for a 12th week.

Gasoline inventories have plunged 15 percent to 193.1 million barrels in 12 weeks, the longest series of consecutive weekly declines since at least 1990, according to the department. The decline left gasoline supplies 7.9 percent below the five- year average for the week, the department said.

The national average price of gasoline WILL be well, imo, well past $3 a gallon by Memorial Day.

Soaring Gas Prices Already Near Highs, And It's Not The Top
http://www.investors.com/editorial/IBDArticles.asp?artsec=5&issue=20070502
With driving season fast approaching, energy experts are warning that gas prices have yet to find their peak. When they do, they will stubbornly hold that painful level throughout the summer. Supply will remain tight just as millions hit the road.

That assumes no big hurricanes or other major supply disruptions.

U.S. gasoline stockpiles, at 193.1 million barrels, have never been this low at this time of year. Stocks have plunged from an excess of the five-year average to 13 million barrels below it. They've fallen 34.1 million barrels in the past 12 weeks, according to DOE data.
There's no sign yet that prices have climbed high enough to cut usage. There is just a tad under 21 days of supply in U.S. inventory, said Eric Wittenauer, an energy futures analyst at A.G. Edwards. There should be at least 23.

US gasoline use hits record despite high pump cost
11 Apr 2007 21:32:36 GMT
http://www.alertnet.org/thenews/newsdesk/N11255671.htm
WASHINGTON, April 11 (Reuters) - Rising gasoline prices have not discouraged Americans from driving, as weekly U.S. motor fuel demand reached a new record high for April, the government said...

The national price for regular unleaded gasoline soared 9.5 cents over the last week to $2.80 a gallon, up 12 cents from a year ago. It was the 10th straight weekly increase.
At the same time, gasoline consumption last week averaged 9.472 million barrels a day, a record for April, according to the federal Energy Information Administration.

Oh, I love the truth. It's out there if you want to look for it. Bloomberg isn't interested in it. So, gee whiz, refineries have increased production a WHOPPING 1/2%, and crude inventories have risen because refinery capacity is running at ONLY 88.3%. LOL, crude inventories are far from a surplus...gasoline inventories even further. Only a surplus in crude would be a legitimate excuse to sell oil.

Noise! It's all just blah-blah, yada-yada...NOISE. Ignore it. Oil will rise further shortly, it has repeatedly the past six weeks. You can bet the Chinese are buying on every dip. The Russians are buying Gold on every dip.

If Gold prices are going down, why would one of the biggest short positions in the industry be closing out it's shorts at such a quick clip the past quarter?

Barrick Gold hedge position eliminated; produces 2 million ounces of gold
http://www.mineweb.net/mineweb/view/mineweb/en/page674?oid=20389&sn=Detail

Ignore the noise. Focus on the fundamentals. "Good things come to those who wait."


Silver Resistance: 13.20 / 13.30 / 13.39

Silver Support: 13.10 / 13.03 / 12.92
__________________________________All prices SPOT

Gold Resistance: 672 / 675 / 677

Gold Support: 670 / 666 / 660

IGNORE THE NOISE!

This entire day can be summed up by illiquid markets in metals and currency trading due to Worker’s Day celebrated everywhere outside of North America combined with a slightly strange major up tick in the ISM while all the drivers of the US economy headed into the rat trap. -Jim Sinclair Tuesday, May 01, 2007, 5:20:00 PM EST

"...headed into the rat trap..." You've got that right.

It would be easy to spew forth with a string of expletives to express one's frustration with the Precious Metals Markets the past 10 days. Go Ahead, let a couple F-bombs drop. Ahhhh, feel better? Been down this road countless times already folks, ...IGNORE THE NOISE! Focus on the fundamentals. Nothing in the fundamentals has change the FACT that Precious Metals, OIL, and most all commodities WILL BE heading higher, and the US Dollar WILL BE heading lower. Nothing that was "news" today or yesterday or the past 10 yesterdays changes anything.

April ISM manufacturing index rises to 54.7 from 50.9 in March

Whoop-de-freaking-do! Buried within that ISM report was this little reported truth:

However concerns at the US Federal Reserve about inflationary pressure are unlikely to have eased with the prices element up 7.5 pct as manufacturers reported widespread increases in commodity prices.

GM, Ford, Toyota, Honda Post April Sales Declines

May 1 (Bloomberg) -- General Motors Corp., Ford Motor Co., Toyota Motor Corp. and Honda Motor Co. posted U.S. sales declines in April as waning consumer confidence and rising gasoline prices curbed demand for new vehicles.

Oh, that sounds positive. Put it upside this next one and obviously the worst is behind us...LOL, Yeah, right:

U.S. Economy: Manufacturing Rises, Home Sales to Drop

The manufacturing report showed a jump in orders and employment, signaling that the slowdown won't get much worse. At the same time, any rebound is likely to be muted as long as housing remains in recession, economists said.
``You are getting some confirmation'' that ``things are improving,'' said Robert Mellman, an economist at JPMorgan Chase & Co. in New York. ``Housing may not be getting better, but it's going to be less of a drag in the second quarter.''

"...less of a drag..."? Less of a drag my ass. The housing blowup is going to drag this economy down for months to come. If anything, housing IS going to be even MORE of a drag in the second quarter. JP Morgan...the Oracle of Lies.

I don't know that there is a single adjective that can describe this form of reasoning:

N.Y. Oil Drops Most in a Week on Signs U.S. Supplies Increased

May 1 (Bloomberg) -- Crude oil fell the most in a week in New York on speculation a U.S. government report tomorrow will show inventories rose as some refineries shut units for repairs.

Signs? SIGNS? What freaking signs? Let's see now...refineries were shut, so we couldn't refine the crude, so that means we will have more of it. Brilliant! And what will happen once they begin to refine the oil again? LOL!

"We're in big trouble," said Phil Flynn, an analyst at Alaron Trading Corp. in Chicago. He noted that inventories stand at 194.2 million barrels -- or slightly above the levels reported in the days after Hurricane Katrina struck the Gulf Coast in 2005 -- and he predicted that that the average prices this summer will surpass the 2005 record of $3.06 a gallon.

New York gasoline futures hit an 11-month high on Monday after refinery shutdowns. On Tuesday, the contract RBc1 was up 0.23% at $2.2645 a gallon.
U.S. gasoline stocks are expected to have fallen last week for the 12th week in a row, a preliminary Reuters poll of analysts showed.

Yeah, I guess we better sell Oil. There's just to damn much of it sitting around. I'll go on the record right here and now: OIL WILL BE AT $80 A BARREL BY THE 4th OF JULY.

Gold Supply Falls Short of Demand Reports Kevin DeMeritt of Lear Financial

The discovery rate of major gold deposits has declined in each of the last eight years while the demand for gold by investors and industry has increased. http://www.prweb.com/releases/2007/05/prweb522503.htm

FUNDAMENTALS BABY! Stay focused.

Investment demand boosting precious metals prices: CPM

Gold could rise sharply, to last May's $732/oz, 1980's $850/oz or some other phenomenal number, in this environment," said CPM. "Silver could spike to levels above $15/oz, platinum to $1,350/oz or higher and palladium to something above $410/oz."

CPM expects gold to hold above $675/oz to $680/oz over the short term because it has technical support "at various points" down to its "key support" around $645/oz. "There remains a great deal of buying interest on the part of investors in many parts of the world," it said.

CPM continued: "Silver probably will hold above $13.50/oz; its main technical support is around $12.80/oz. Platinum probably will hold above $1,270/oz. Its major support is around $1,210/oz and $1,225/oz. Palladium is expected to remain above $370/oz; its main support is at $360/oz." http://www.platts.com/Metals/highlights/2007/mp_mw_042707.xml

Investment demand is the single most overlooked "fundamental" characteristic of the Precious Metals. Investment demand is what will ultimately bring dem Rat Bastids to their knees and crush the vermin.

Can the “Axis of Oil” Topple the US Dollar? http://news.goldseek.com/GoldSeek/1178038676.php

Gary Dorsch's piece linked here on goldseek.com is an absolute must read. There is some serious TRUTH unleashed in this piece.

IGNORE THE NOISE in the daily blah blah. Focus on the big picture AND the fundamentals. Precious Metals are on sale this week because most of the other side of the world is on vacation. Take advantage of these buying opportunities.

I have my convictions...I don't consider myself a "permabull" but a realist. And the reality is Precious Metals, Oil, and commodities in general are ALL in secular bull markets. No bull market, no matter how powerful, goes straight up. The US Dollar is in a secular bear market. No bear market, no matter how ugly, goes straight down. It is safer to be long this commodities bull market than out of it...or short.

Silver Resistance: 13.39 / 13.44 / 13.55

Silver Support: 13.27 / 13.20 / 13.10

_______________________________All prices SPOT

Gold Resistance: 675 / 677 / 681

Gold Support: 672 / 670 / 666

Feeling Ripped Off?

Gold closes April 2007 at all-time monthly "closing" high?
http://www.jsmineset.com/cwsimages/Miscfiles/4603_Chart_for_4-30-2007.pdf

China Lifts Bank Reserves In Bid to Cool Growth
BEIJING -- For the seventh time in less than a year, China's central bank raised the share of deposits banks must keep on reserve as the government struggles to soak up capital and keep the country's economy from overheating.
http://setup1.wsj.com/article/SB117783255254786134.html

And China's economy has continued to grow at a double digit pace after each increase. Funny thing about China and it's economy. The geniuses in our illustrious Congress would like to pressure the Chinese into allowing their currency, the juan, to rise. Do they not understand that a rising juan will cause a falling US Dollar? LOL, as if the US Dollar needs any help falling...

For the month of April 2007 Gold was up 2%. For the month of April 2007 the US Dollar was down 1.7%. Why then, as a Precious Metals investor, do I feel like I was ripped off this month?

Oil... Oil refuses to go down. When oil cracks $67, $700 Gold will not be far behind.

Euro gold stayed under €500.

This whole scenario is getting ridiculous. Remain focused, maintain your convictions, be patient. Consolidation is a good thing. Think of it as massing the troops for an overwhelming assault on dem Rat Bastids.


Silver Resistance: 13.45 / 13.55 / 13.67

Silver Support: 13.39 / 13.33 / 13.20
____________________________________All prices SPOT

Gold Resistance: 681 / 686 / 691

Gold Support: 675 / 670 / 666


Must read!

Why The Price Of Silver Is Set To Soar
Precious metals remain the most undervalued of all the asset classes. Precious metals, and particularly silver, remain the most undervalued of all the commodities. Silver is even more undervalued than gold and is undervalued when compared to other strategic commodities such as oil and uranium.
http://www.moneyweek.com/file/28810/why-the-silver-price-is-set-to-soar.html

Recipe For Stagflation

Growth rate down in first quarter; prices up
WASHINGTON — Economic growth slowed to a near crawl at a 1.3% annual rate in the first three months of 2007, the worst performance in four years. The main culprit: the housing slump.
http://www.usatoday.com/money/economy/2007-04-27-gdp_N.htm

Hey, isn't that the recipe for STAGFLATION?

DJ MARKET TALK: Comex Gold, Silver Up After Thursday Sell-Off1358 GMT [Dow Jones] - Comex gold and silver are higher as some traders usedThursday's profit-taking pullback as a buying opportunity, says Paul McLeod,vice president with Commerzbank. Much of the focus is also on the euro, whichhit a record high against the dollar. Overall, trading conditions have beenquiet, he says. "Both metals are still in their upward channels that havepretty much been in place since January," McLeod says. "Even though they soldoff fairly large yesterday, it hasn't really changed the trend established overthe last three months. The size of the correction yesterday has people thinkingit's a good time to be purchasing again."

As noted here and elsewhere on the Internet, Gold has held up remarkably well in the recent tsunami of Central Bank Gold sales. 75+ tonnes of Gold and counting have literally been dumped on the market in a effort to hold it in check below $700 and attempt to persuade the knuckleheads glued to their CNBC feed that "...the Fed has everything under control..." Yeah right. Gold is now the defacto barometer of inflation. Efforts to pull on it's reins and keep it in the barn are futile. The more the Fed, US Treasury, and European Central Banks try to stifle the rise in Gold, the harder they press on the inflation accelerator and the higher the price of Gold will ultimately go.

Bob Chapman, The International Forecaster :

The dishoarding continues, but all the bankers are doing is buying time and losing their most precious asset at ridiculously low prices. This is a terrible price to pay for confidence and illusion. They want us to believe their lie that their fiat currencies have value when they do not have value. Only gold has value. That is why government tries to shut us up. They do not want anyone to know the truth. This you see in their phony war on terrorism. In their pursuit of your liberty by naming you an enemy of the state if you disagree and expose them.http://news.goldseek.com/InternationalForecaster/1177858860.php

Just who has been buying all this Gold being foolishly dumped on the market. The obvious marks are the OPEC countries, most of Asia, wise investors, speculators, and the Russians. My sense though is that a lot of it is being bought via short covering. Producer dehedging is running ahead of forecasts so far for this year, and there is news that Goldman Sachs short position on the Japanese Tocom is at it's lowest level EVER. Perhaps a lot of the "smart" money is finally coming to the realization that the jig is up and that an explosion in Precious Metals prices is imminent. Now I don't mean to suggest that Gold is going to $1000 next month, but I do believe that in the next 6-8 weeks dem Rat Bastids are going to get an ass whuppin like no other yet. Facing extinction come late Spring, the Rodent Vermin will be given one FINAL opportunity to square their books and cover their shorts at losses that will allow them to keep their institutions afloat, but cost most of them their jobs. Sometime in August of 2007 the lid is going to blow off the Precious Metals and the trip to the Moon we have so patiently looked forward to will have lifted off.

I expect Silver to be the biggest beneficiary of Gold's move thru $700. In terms of "percent", silver's gains in the coming Mother Of all Short Squeezes will dwarf the gains of ALL other metals. Continuing to maintain a short position in Silver is a death sentence. Dem Rat Bastids will NEVER survive what is lurking just below the surface in this tiny market. Oh sure, there will be some "survivors". But..., they'll either walk with a limp, sign their name holding the pen in their mouth, or both. Bearing that in mind, let's take a look at The Big Picture of Silver:

Please click on the chart to enlarge.

This week's slump was just another buying opportunity for Silver. Silver held the 20 Day Moving Average as the Bollinger Bands continue to narrow. Narrowing Bollinger Bands usually proceed powerful moves in a market [up OR down]. Using the trend lines in blue, I have projected an intermediate high for the next leg up in Silver using Fibonacci Lines and the June 12, 2006 low of 9.55 as 0%. 14.04 is at 61% of the projected top at 16.80. I could blah-blah some more, but I'll let the picture do most of the talking.

I will throw in a note about the Gold/Silver Ratio here. As I have noted in past posts here, 45 on the Gold/Silver Ratio is HUGE resistance to advances in the Metals. A 16.80 high in Silver would equal $756 at 45 on the Gold/Silver ratio [16.80 X 45 = 756] Nothing goes straight up...if you have not accepted that yet, perhaps you should choose another hobby. There is always downside risk in any bull market. If we are unable to crack 45 on the next intermediate high in Silver be prepared to protect your profits. $750 Gold would be the "obvious" next area of resistance after taking out $700.

The run up in Silver off the June 12, 2006 low has contained 4 mini-legs. And each of these legs to date has been 6-8 weeks in length. 6-8 weeks from this past weeks low would take us to June 8 or 15th. Obviously this takes us thru and past the timing of the usual Spring Dump in metals...I'm just doing the math here. But that crappy GDP number Friday only strengthens my convictions...it's a BULL MARKET stoopid. Expect the unexpected...and expect dem Rat Bastids to cry uncle soon. Be patient.

Silver Resistance: 13.55 / 13.69 / 13.88

Silver Support: 13.39 / 13.30 / 13.20
_____________________________________All prices SPOT

Gold Resistance: 681 / 686 / 691

Gold Support: 675 / 670 / 666