Crude Oil

Anyone who thinks crude oil -- and by extension, bullion -- is topping here should take a good look at the April contract's weekly chart. There is no gainsaying the authority of the bullish impulse leg that I've highlighted (not that I had to; it's clear enough), and the futures could pull back all the way into the $90s without diminishing its presumptive power one bit.   Most immediately, traders should play to a 107.95 rally target (5-min, A=105.50 on March 5 at 5 a.m. EST); B=107.42, and C=106.03).  The futures are struggling more than I might have expected, but camouflageurs can still look for trading opportunities on any ABCconsolidation above the 106.99 midpoint pivot. Would you like to learn how we use the ‘camouflage’ trading technique to significantly reduce entry risk? Click here for details.

After spiking above $110, the price of a barrel of crude oil receded sharply on Friday, suggesting that the winds of war had abated, if perhaps only temporarily. Oils ups and downs seemed to track Obama’s rhetoric concerning Iran over the weekend. It began with the President saying, in an interview with Atlantic Monthly magazine released late in the week, that he would never allow Iran to develop a nuclear weapon and that it was no bluff to say that the U.S. was prepared to use force to prevent this. But by Sunday, the President had somewhat changed his tune. In a speech before AIPAC, the pro-Israel lobby group, he said there was still time to give negotiations and sanctions time to work. This line landed with a thud at the AIPAC conference, although Obama drew cheers for insisting, in the same speech, that “I do not have a policy of containment; I have a policy to prevent Iran from obtaining a nuclear weapon.” He further noted, to much applause, that “I will not hesitate to use force when it is necessary to defend the United States and its interests.” We had suggested here a while back that readers tune out the speeches and headlines in order to gauge the odds of war with Iran. If a pre-emptive strike against the country’s nuclear facilities is coming, we reasoned, it seems certain to be reflected by a rise in the price of oil, much as occurred in the months leading up to the U.S invasion of Iraq in March of 2003. Unfortunately, our current forecast for NYMEX April Crude suggests a run-up to at least $120.18 over the near term -- about 12% above Sunday night’s levels near $107. Although Iran’s threats to shut down the Strait of Hormuz have presumably

Much as April Gold has all but locked up a push to at least 1820, April crude has presumably turned a rally target at $120 magnetic. Both vehicles popped through Hidden Pivot midpoints so decisively last week that it is difficult for  me to imagine their failure to reach their respective 'D' targets, presumably later this week or early next. The considerable downside for the world is not just that energy prices are once again about to be goosed into the stratosphere by speculative forces, but that the speculative action itself implies a greatly heightened risk of military conflict between Israel, Iran and conceivably the U.S.  Camouflage entry opportunities will be hard to find following  last week's breakout, but the best place to look will probably be the 3- or 5-minute chart (where, it must be noted, no legitimate 'external' peaks to leverage exist at the moment).

Can a sharp rise in the price of crude oil warn of imminent war in the Middle East? We could find out soon, since NYMEX futures look ready to explode. Under the circumstances, we considered April Crude’s chart in detail in order to establish technical criteria for creating a ‘war alert’ on the charts. We also looked closely at Comex Gold, since it has been moving in tandem with oil.

Crude oil prices are at an extremely crucial threshold, since a move touching 107, basis the NYMEX April futures, would imply a very powerful breakout is at hand. Since this could signal a heightened threat of war in the Middle East, we'll be keeping a very close watch in the days ahead.

Because securities markets sometimes do crazy things for stretches of days, weeks or even months, Rick’s Picks seldom attempts to reconcile seemingly contradictory forecasts for trading vehicles that are related, such as crude oil and gold (more on these two in a moment).  Nor do we seek to explain the ups and downs of stocks, bonds and commodities by connecting their frequently nutty behavior to events in the even nuttier world.  That futile task we leave to The New York Times, The Wall Street Journal and their ilk, since they are in the business of selling news as something that matters greatly, particularly to investors. It is with the foregoing in mind that we came to contemplate a seeming fork in the road for crude oil and gold. On the charts, the former looks like it’s about to blast off, while the latter seems bent on screwing the pooch for the remainder of 2011. We said as much in the headline that topped yesterday’s commentary:  Doomed Rally in Stocks Could Cap Gold’s Surge. Doomed may have been too strong a word – we did write a column for a Hearst paper for a few years, remember – but bulls could hardly have been encouraged by the egg the broad averages laid yesterday after having rallied nearly 300 points the day before. A few denizens of the Rick’s Picks forum (click here for a free seven-day pass that will also give you access to our detailed daily forecasts and trading recommendations) thought that stocks were simply taking a rest, but we saw them as relapsing into the quagmire of global problems. The most bullish story out there at the moment – bullish, that is, for everything but the U.S. dollar and Treasury paper – is that Helicopter Ben is about to

On Thursday morning, with the stock market collapsing, we conducted another of our live impromptu webinar sessions for Rick's Picks subscribers. As stocks were plummeting, we looked for trade entries and potential swing lows in a number of vehicles, including Gold, Crude Oil and the E-Mini S&Ps. Check out this video if you want to see Hidden Pivot Analysis at work, turning the panic, fear and confusion of most everyone else into valuable information that was easy to use.

If anyone needed convincing that the stock market has become invincible, yesterday was the day.  Japan was shaken badly by another big earthquake, crude oil quotes were bounding above $110, Portugal was threatening to topple Europe's financial house of cards, and the U.S. government was hours from shutting down. How did Wall Street take the news?  Like a pro, actually. The stage-managed panic was over almost before it began. Stocks dove on word from Japan -- but not in a way that showed even the slightest sign of fear.  Rather, the market swooned in the fashion to which we've grown accustomed, violently shaking down widows, pensioners and a few other nervous nellies, but few "players."  A precipitous, 100-point loss in the Dow was recouped in minutes, and when the dust had settled it were as though the day's headlines were no more alarming than the kind of routine stuff that fills the "Daily Roundup" box on an inside page.  Now, I'm no Irving Fisher, and I don't mean to suggest that stocks have reached a permanently high plateau.  Far more likely is that they will give back in a week everything gained since 2009.  In the meantime, however, it is clear that it will take far more to bring this market down than the latest evidence that the world is indeed going to hell in a handbasket.

Many markets impulsed down yesterday or intensified downward impulses that were already in progress.  Others enjoyed "flight-to-quality" rallies which didn't stick.  Most markets have bounced back into yesterday's range (crude oil excepted), so it's looking like an "inside day."  A good day to keep an eye on key prior highs or lows for clues as to where things are headed.  Also a good day for us to continue to send our best wishes to Rick for a quick and full recovery.  (Posted by Doug McLagan)