Some analysts say the huge rally in this commodity has finally cooled off.» Read More
U.S. drivers could see a further decline in gas prices at the pump, courtesy of world oil markets.
Crude oil on Monday hit its lowest level for the year. The tumble in black gold is leading to lower gas prices that may provide modest pocketbook relief just as the summer driving season arrives.
Halting economic growth in both the U.S. and China – the world's top two energy consumers – has sparked a deep sell-off that has driven Brent crude to a nine month low near $100 a barrel, with U.S. crude hitting its lowest since late December below $89. Analysts are concerned that sluggish global growth will undermine demand for oil.
Over the last three trading sessions alone, crude oil has lost over $5 per barrel, or approximately 6 percent of its value. So what's behind this move, and where is the bottom for Texas tea?
(Read More: Brent Crude Oil Tumbles Below $101)
Driving this move are the simple fundamentals of supply and demand. Last week, the Energy Information Administration once again downgraded its forecast for crude use around the world in 2013—and that was the third downgrade in the last few months. China also imported oil at a slower rate, which could be a sign that its economy is slowing. Meanwhile, Europe continues to struggle, and demand for Brent crude has also declined.
So while U.S. production has been strong, demand for gasoline and other crude products has been weak. The bottom line is that barrels of crude oil are starting to pile up, and that can only mean a drop in price.
However, I would be remiss if I did not mention the geo-political front, with North Korea causing the world the most stress at this point. I do not foresee a disruption in the supply of crude, or for that matter, in the production, Even if the North launches a missile, it will most likely fall into the ocean. But I did say "most likely." If the scenario is worse than this, then you could see a spike in prices, at least in the short-term.
So where is the bottom in crude? The next support area I see is at $88 to $87.50. Under that, there is strong support at $85.50 to $85.
Crude could soon correct because its drop has been so fast—but after that, a test of these areas seems probable.
Gold bugs have gotten zapped.
After trading below $1,500 for the first time since July 2011, gold entered into a free-fall on Sunday night and into Monday morning, as investors sold out of their holdings. A major psychological level, especially for bulls—$1,480—was a line in the sand.
(Read More: Gold Slumps to 2-Year Low Below $1,400)
After opening at $1,478.2 and trading to a high of $1,493, the metal skidded more than $100 to reach $1,385. The downtrend began last week after $1,526 was taken out, but disappointing GDP data out of China showing a slowing economy was a major catalyst Sunday night.
Two things put investors on edge last week. The first was the idea that a nation (Cyprus) will need to sell gold reserves to help finance a bailout, and the fear that this will become the norm. The second was that Goldman Sachs lowered its forecast amid moderating inflation in the U.S.
Traders must remember that this market is moving at a very fast pace. Sunday night, gold hit an initial low of $1,422, and that's where the market will find resistance. Above there, $1437.50 will be the next level of resistance.
(Read More: Gartman on Gold: We've Never Seen Anything Like It)
The bottom line is that gold is in an intermediate downtrend. However, it has reached a technically oversold level, which is why I am expecting a corrective bounce in the next few sessions. Since we have fallen over $200 in three sessions, we could bounce back to the $1,475 area.
If you want to play the long side of gold, consider the May $1,475 strike calls, which cost $1,050 each. This will give you 10 days of long exposure. And remember, as with any counter-trend trade, capitalize quickly. You might even consider getting short in the $1,475 area if that price is reached.
Unless JPMorgan Chase reports "blowout earnings" on Friday, CEO Jamie Dimon could be pushed out as chairman, especially following his failure of controls over mortgage foreclosures and the London Whale trading debacle, banking analyst Dick Bove said.
To Bove, the timing of this earnings report is critical, since JPMorgan will host its annual meeting on May 21.
"He can go in saying, 'Look at how much money we're making' and as a result of that, any thought of him being pushed out of the chairman's position will be eliminated," said Bove, an analyst with Rafferty Capital. "If JPMorgan does not have blowout earnings, then I think he goes into that meeting (with) a level of uncertainty about whether he holds onto the chairmanship position."
Last month, JPMorgan's board of directors said it "strongly endorses" keeping Dimon as both its chairman and CEO. The comment, contained in the opening pages of the company's proxy filing, is a more vigorous affirmation of the same view the panel took last year when it opposed an unsuccessful shareholder proposal to split the roles. (Read More: Jamie Dimon Warns of More Actions by Regulators)
It's earnings season.
And JPMorgan Chase will be among the first big U.S. banks to report earnings. The financial institution is scheduled to deliver its results before Friday's opening bell.
That said, we want to hear from you - do you think financials will lead the market higher this year?
Vote now in our "Futures Now" poll!
Goldman Sachs slashed its gold price forecasts on Wednesday morning, and recommended that people close out the long gold positions Goldman previously recommended and start shorting bullion. While the call did seem to hurt gold in Wednesday's session, many traders kept asking the same question: Why would anyone listen to what Goldman says about commodities?
"Their calls have been suspect at best, so I'm not giving this one much merit," said Jeff Kilburg of KKM Financial. "Traders out here in Chicago are not lending much credibility to their calls, because they've been so inaccurate lately."
The latest minutes from the Federal Open Market Committee meeting suggests that a few Fed policymakers expect to soon slow the pace of asset purchases, prompting one professional trader to warn that an abrupt end to the bond-buying program would be a "disaster."
(Poll: Will the Fed End QE This Year?)
"I could think of probably two ways it ends good and about 10 it ends bad, but the way it is now, it looks like we are one day closer to either being curtailed back or ending," Anthony Grisanti, founder of GRZ Energy, said on CNBC's "Futures Now."
Minutes from the most recent Fed meeting suggested that some policymakers expected to slow the asset purchases by midyear and end them later this year, while several others expected to taper the rate a bit later and halt the program by year's end.
(Read More: Some Fed Members Fear Monetary Policy Effects)
The price of gold popped through resistance on Tuesday to reach the next major level that all traders are now watching: $1,590.4.
This was the level that broke the camel's back a week ago and gold continued to trade another $50 lower. Once it reached a high of $1,590.1 on Tuesday, the precious metal quickly backed off and consolidated just above the $1,583.8 level into the close.
(Read More: Gold or Stocks? It Doesn't Matter!)
On Wednesday, gold reached a high of $1,588.5, but the market has little mojo, as it currently easing toward $1,570.
Meanwhile, Goldman Sachs has once again lowered their 2013 gold forecast to $1,545 from $1,610 and to $1,350 in 2014 from $1,490, as they note that although euro-area fears are heightened and U.S. data has been disappointing, gold prices are unchanged over the last month. In February, Goldman reduced their 2013 forecast from $1,810. Nonetheless, we all know and have seen Goldman reduce or raise forecasts in order to find themselves a better entry or exit point, so this should all be taken with a grain of salt.
(Read More: Goldman Sachs Says It's Time to Short Gold)
Due to an accidental early release to Congress and to trade organizations yesterday, the FOMC minutes were released at 9 a.m. today, surprising the market. Traders must remember that these minutes are from the meeting that took place on March 19 and 20 – which, importantly, was prior to the last Friday's disappointing jobs report. Major focus is always placed on dissension among the ranks, but we want to place the focus on the top economists who see a downtick in the economy as a result of sequestration. Although there are Fed governors who see the endless easing coming to a halt at the end of the year, this is not realistic, and the top economists believe that if anything is changed at all, the $85 billion worth of bonds purchasing will just be curtailed slightly.
(Poll: Will the Fed End QE This Year?)
If we continue to see an uptick in U.S. economic data, this will continue to provide a green light for equities, thus taking away the luster of gold. However, if we see a downtick in economic data caused by sequestration, then this is will provide a catalyst for investors and traders alike to step back into gold.
Support will now come in at $1,570, and furthermore $1,566.1 — so a close below here will confirm Tuesday's failure into Wednesday morning, likely initiating a bearish leg lower. A close back above $1,578.9 on Wednesday will neutralize the negative activity. A close above $1,583.8 will provide positive momentum, confirming Tuesday's price action. And only a close back above major resistance at $1,590.4 will be bullish.
Read on for 10 Things You Need to Know to Trade Futures
On Wednesday, the Federal Reserve released the minutes of its latest Federal Open Markets Committee Meeting several hours earlier than planned.
The minutes were inadvertently released to about 100 Congressional staffers and trade lobbyists shortly after 2pm ET Tuesday, according to a Federal Reserve spokesperson.
Minutes from the most recent Fed meeting suggest that members have grown increasingly concerned that things could get messy if it continues its asset-purchasing and money-printing policies too far into the future.
The Dow Jones Industrial Average has hit new highs and the S&P 500 index has set records, while U.S. Treasurys continue to push higher. Each asset class competes for investors' monies, so typically stocks rally or bonds rally, but not both together.
Since stocks and bonds typically trade inversely, professional trader Jim Iuorio said Treasurys have advanced on fears the prolonged stock market rally could soon come to an end.
To pro trader Anthony Grisanti, it's foreign investment that's driving bond prices higher.
"My theory is it's the money that's coming in from overseas, with all the liquidity that's happening there. That money has to go somewhere," said Grisanti, founder of GRZ Energy. "If it ain't going into equities, it's going to go into bonds and I think it's coming from them."
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