Trade the Six Major Currencies with a Complimentary Trial

Hello Fast Break readers! It's been a while since I've shown you some of my work, and I'm happy to be doing it again. Below please find latest my bi-weekly newsletter, issued last Thursday, in which I take a longer-term view of key futures markets. I think you'll find my work straight-forward and beneficial. If you have any questions or comments for me, look me up at www.TradingEducation.com. Jim Wyckoff

Crude Oil: Market action in the Nymex crude oil pit the past two weeks saw prices drop around $14.00 a barrel, after flirting with the major psychological resistance level of $100.00 and nearly reaching that level. Futures trading Thursday saw the January crude oil contract drop below $86.00 a barrel and the see a strong short-covering bounce.

Still, serious near-term technical damage has been inflicted on the daily charts for crude oil to suggest that at least a near-term market top is in place. January crude oil prices have recently fallen below solid technical support levels of $94.00, $92.00 and $90.00. January crude prices notched a fresh six-week low on Thursday. Indeed, chatter in the crude oil pit in New York is now that prices will drop below $80.00 a barrel before any fresh attempt is made on the century mark.

Importantly, there was a major market "shock," albeit brief, that hit the crude oil futures market last week. Crude oil futures prices spiked higher by more than $4.00 a barrel late Wednesday/early Thursday, Nov. 28-29, on reports of an explosion on a major pipeline that feeds crude oil from Canada to the U.S. Pipeline owner Enbridge Inc. briefly shut down its four-pipeline system that supplies the U.S. with approximately 20% of its oil imports. However, three of the four pipelines had restarted by that Thursday, returning the 1.8 million-barrel-a-day system back to 75% of capacity, reports said.

While crude oil futures indeed rallied sharply on that major pipeline fire, the $100.00 price level was never seriously challenged. When 20% of U.S. imported oil is taken off line and crude oil futures cannot mount a serious challenge on the $100.00 market, that is a very solid clue that too much risk premium had already been factored into the price of a barrel of crude. Smart traders realized that fact last week and the markets responded by continuing to sell off.

A corrective bounce recently in the value of the U.S. dollar versus the other major currencies is also credited with pressuring the crude oil futures market to the downside. In recent weeks, speculative buying interest in crude oil from outside the U.S. has been keen due to the declining value of the U.S. dollar making purchases of dollar-denominated crude oil futures cheaper for investors holding non-U.S. currency.

At present, the path of least resistance in the crude oil futures market remains sideways to down. It will take multiple closes in nearby crude oil futures prices back above technical resistance at $95.00 a barrel to re-ignite notions that $100.00-a-barrel crude oil is imminent.

See on the weekly continuation chart for nearby crude oil futures that prices have recently penetrated on the downside and negated an uptrend line. See, too, at the bottom of the chart that the Moving Average Convergence Divergence (MACD) indicator is poised to produce a bearish line crossover signal, whereby the blue MACD line crosses below the red "trigger" line.

If you cannot view the Weekly Crude Oil chart, go here.

Gold: The precious yellow metal has backed off recently, from highs scored in November. The rebound in the U.S. dollar and decline in crude oil prices are mainly responsible for gold backing off. Gold will continue to be strongly influenced by the dollar and crude. My bias is that the dollar is close to putting in a major bottom, if it has not already done so. It's also my bias that crude oil has put in at least a near-term market top, if not a major market top. Thus, I can't be too excited about the upside prospects for gold in the coming weeks.

See on the weekly continuation chart for nearby gold futures that one uptrend line has recently been penetrated on the downside. Also, recent price action on the weekly chart has formed a potentially bearish descending triangle pattern.

However, no serious longer-term technical damage has yet been produced in the gold futures market.

If you cannot view the Weekly Gold chart, go here.

Silver: Generally, silver is going to be a follower of its big brother, gold. See on the weekly continuation chart for nearby silver futures that recent price action has penetrated on the downside and negated a longer-term uptrend line. See, too, that the past rallies in silver have petered out around, or just above, longer-term technical resistance at the $15.00 level. A drop in nearby silver futures prices below solid longer-term chart support at the $13.25 level would be significantly longer-term bearish to suggest a major market top is in place.

But at present, no serious longer-term technical damage has yet been produced in the silver futures market.

If you cannot view the Weekly Silver chart, go here.

Copper: Veteran traders know that the red industrial metal, copper, can be a leading indicator for the health of the U.S. stock market and the U.S. economy. See on the weekly continuation chart for nearby copper futures that prices are in a longer-term downtrend after posting a bearish triple-top reversal pattern on the weekly chart. Serious longer-term technical damage has been inflicted in the copper market. A drop below strong technical support at the recent low, as shown on the chart, would produce more serious longer-term chart damage.

If you cannot view the Weekly Copper chart, go here.

U.S. Dollar Index: The daily chart for the U.S. dollar index futures shows an impressive recent recovery from the contract and all-time low. And a weekly high close in the U.S. dollar index futures on Friday would be more near-term bullish technical news.

See on the weekly continuation chart for nearby U.S. dollar index futures that bulls still have some more work to do to begin to suggest, from a longer-term technical basis, that a major market low is in place. However, do note that just this week the dollar index has poked above a downtrend line.

My bias is that there is not much left on the downside in the U.S. dollar index. However, a push to a fresh low in the index would be seriously bearish and open the door to another solid leg down in prices in the coming weeks, or longer.

If you cannot view the Weekly U.S. Dollar Index chart, go here. 

Canada Dollar: The "Loonie" has been hammered lower recently. Serious near-term chart damage has been inflicted to suggest a market top is in place. See, too, on the weekly continuation chart for nearby Canada dollar futures that a classic bearish V-Top reversal pattern has formed. My bias is that there is still more room on the downside for the Loonie. Corrective bounces in this market are likely going to be selling opportunities in the near term.

If you cannot view the Weekly Canadian Dollar chart, go here.

U.S. T-Bonds: On Thursday the bond market saw a profit-taking pullback but no serious chart damage occurred. See on the weekly continuation chart for nearby U.S. Treasury Bond futures that prices have backed well down from last week's high, but a steep uptrend remains in place. It would take a drop in nearby T-Bond prices back below strong longer-term technical support at the 115 area to produce some significant longer-term technical damage to then suggest a market top is in place. My bias is still that dips in the T-Bonds are buying opportunities.

If you cannot view the Weekly U.S. T-Bonds chart, go here.

S&P 500 Index: The U.S. stock indexes have made an impressive recovery this week and the bulls do have some fresh upside technical momentum on their side. However, an examination of the weekly continuation chart for nearby S&P 500 futures shows that prices are still in a choppy mode at higher price levels. The posture of the weekly chart cannot be considered outright bearish, but neither is it in a bullish posture. In fact, I would say the weekly S&P 500 chart slightly favors the bears. See that the past two times prices have hit a fresh for-the-move high, they've sold off very sharply. I would be surprised if this stock index did hit a fresh high anytime soon, but if it did, recent history would suggest a strong sell off shortly thereafter. 

If you cannot view the Weekly S&P 500 chart, go here.

If you would like to see more of my commentary on these markets, please visit www.TradingEducation.com. A new addition to the www.TradingEducation.com site is complimentary news, quotes, charts and trading secrets by successful traders in the industry. As always, there is no charge for any of the content.

Jim Wyckoff, Senior Editor at www.TradingEducation.com, has been involved with the stock, financial and futures markets for more than 20 years. Wyckoff became a financial journalist with Futures World News as a reporter on the futures trading floors in Chicago and New York.