As the U.S. Existing Home Sales release this morning showed sales climbing to a two-year high, we note that most major markets (S&P 500, U.S. bonds, gold) are still very quiet as the market digests Bernanke’s QE pledge and also gets prepared for the homestretch of the U.S. presidential election. We anticipate low volatility for the U.S. stock and bond markets going into the election. We notice that precious metals (gold, silver) are staying strong, and consolidating near multi-month highs. We would not at all be surprised to see these metals markets consolidate into the presidential election as well.
However, one market stands out today as the big mover – Crude Oil futures. DEC 12 Crude oil futures are the biggest loser in the commodities complex today. We include a chart to share with you some key trendlines and price levels. In a previous report we issued, we commented that we thought crude oil would touch $100, which it recently did. Now, we note that crude oil has broken a key multi-month supportive trendline and is now approaching the next major chart support at $88. This is an important price level in our view. If Crude oil can’t stay above the $94 area, we look for $88 to be hit.
To us, it feels and looks like most markets are consolidating and are waiting to see how some major issues develop before making their next move – Europe, U.S. economic data, and the U.S. election. We believe the S&P 500 remains in bull mode and that crude oil might hit its key downside target of $88 shortly as traders prepare for a possible political release of oil reserves by the US.