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Crude Oil Looks for Clues as Gold tests the Lows of its range ahead of a busy week for day traders around the Globe

Rumors are flying this morning about the value of commodities, giving traders plenty of opportunity to trade this week. Not much more than talking heads over the weekend talking about the lack of supply on crude oil, possible releases of more reserves by the IEA, and Gold is looking quite vulnerable at the lows with traders watching the US Dollar Index.

We begin our day looking at the news this morning…

Personal income in April posted a 0.4 percent gain equaling the pace in March. Importantly, the key wages & salaries component increased 0.4 percent, following a boost of 0.3 percent in March. Spending looked healthy at face value but inflation was the underlying factor for the most part. Personal consumption expenditures expanded at a 0.4 percent pace in April after increasing 0.5 percent the month before. The headline PCE price index posted a 0.3 percent gain, down marginally from 0.4 percent in March but still strong. However, the core rate firmed to 0.2 percent from 0.1 percent in March. Looking ahead, the private wages & salaries component of personal income should be moderately strong as private aggregate weekly earnings gained 0.4 percent in May. Personal spending-at least the goods portion-will likely be negative as unit new motor vehicle sales fell 10.4 percent in May while retail sales excluding autos rose only 0.3 percent. PCE inflation should ease at the headline level as the CPI slowed to 0.2 percent from 0.4 percent in April. Core PCE likely will firm as the core CPI rose 0.3 percent in May, compared to 0.2 percent the month before.

Personal Income
Personal Expenses

Very interesting trends we can see in personal income and expenses as referenced in the charts posted above.  You can easily see the personal income has been declining on the year, but has jumped a little recently (assumed to be from lower commodity prices with the rising US Dollar).

On the flip side look at the personal expenses that have mirrored that of the income.  You can see expenses have dropped monthly, however, look at the strong bullish trend in expenses over the year.  This chart really shows what the consumer is going through and a great ‘finger on the pulse’ of what traders will be watching this week with this news data.

Remember, as day traders we like to know this information to help us make educated decisions, but we also put a lot of emphasis on the reaction to this news, so we will be watching closely for clues on the tape and the speed after the news is released.

Once we get through our 830am news we have the 930am US Market Open, and then nothing through to 1130am for the European Close, and we will look for the Golden Lunch afterwards.

Looking at the charts this morning..
US Dollar Index 89Range SchoolOfTrade.com

US Dollar Index 13Range SchoolOfTrade.com

You can see the US Dollar Index is trading just off the highs of its price wedge, looking at some major support around 76.000.  You can see we are trading in a slight downtrend on the Dollar this morning, and we will use that info to make day trading decisions today.
Gold Futures SchoolOFTrade.com

The Gold Futures are trading at the lows of the major price wedge, and we can see a sideways range around the lower trend line of the wedge.  With a narrow wedge on the dollar and this location on gold we are assuming we will be seeing sloppy price action until we make new highs or new lows.  We’ve seen this before, and we need to beware the fake-out breakouts on Gold, we will discuss more in the trade room today.

Crude Oil Futures SchoolOfTrade.com

And crude oil futures are trading in a very narrow price wedge as well, inside of a sideways range and in the middle of this strong bearish price channel.  We will be using this ‘inside day’ to our advantage today in our day trading.

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    Click Here to Leave a Comment Below

    Joseph James - June 27, 2011 Reply

    We review crude oil futures and we see the following:
    – Inside day
    – BMT / OPEN is above us
    – Price Wedge Bearish
    – Price Channel Bearish
    – Sideways Ranges (big round numbers)
    – Triple bottom at the lows
    The biggest clues we get are the ‘inside day’ and the price wedge.
    My plan of attack trading crude oil:
    If price rises:
    – The high % trade is to sell at resistance (bearish channel, bearish wedge, triple-bottom)
    – I will always sell at resistance first, then look to buy pullbacks with new higher highs.
    – I don’t buy the highs, I buy pullbacks off new higher highs
    – Im selling resistance levels as 90.56, 91.00, 91.30, 91.47, etc all the way up.
    – Im avoiding the OPEN 90.71, the P.OPEN 91.16, and the BMT at 91.23
    – Also want to avoid the middle of the ranges around 90.40 down to 90.20 (at least for the time now)
    – Avoid the big round numbers, 89.00, 90.00, 91.00, etc.
    If price falls:
    – I’m buying the lows and buying at support as price falls (inside day, price channel, price wedge)
    – I’m buying first, then selling once support breaks and becomes resistance, I then sell with a retracement off new lower lows.
    – I don’t sell the lows
    – Avoid the big round numbers 89., 90., 91.
    – Buying support at the lows of the price wedge around 89.90
    – Buying support as the LOD 89.61 and then looking to buy at minor support at the extensions of the price channel.
    – We also located major support on the daily chart 89.70, 88.00, 85.50 and 83.85

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