Many commodities are retreating this morning as the U.S. equity markets continue their gravity defying rally. Many analysts have been calling for a consolidation or pullback, but we sense the equity markets are in trend mode, and see no reason to call a top. We believe the next key target for the S&P 500 is 1530, and if the market gets up there, we will reassess our views. The MAR13 E-mini S&P 500 is up again today, trading up 1.5 points or +.1%.
The Nikkei is actually the biggest gainer of the major world equity markets, trading up 190 points, or 1.7%, as the yen’s weakness resurfaces today after a dead-cat bounce on Friday.
The main energy markets which have been very strong recently are retracing some gains this morning, with heating oil down just $0.57 and RBOB gasoline down a bit more, trading down $1.76. Heating oil may still have a lot of room to run, especially considering the length of the big Northeastern storm is unknown. Crude oil futures (MAR13) are up slightly today, trading up $0.51 at $96.24. We see the only reason for crude to rally beyond $100 is if some geo-political tensions with oil producing countries outside the U.S. re-enter the reality.
We focus more on precious metals today, specifically silver. MAR13 silver futures are trading down $0.39, or -1.24%. We included a chart to show that the top of the recent range in silver is $35.50. Since hitting that level last fall, silver has steadily been in a downtrend, and we expect this to continue until silver hits our target of $27.50. With the money coming into the equities market, propelling the S&P 500 to 1500 and beyond, we don’t see the gold and silver markets being very bullish this year.
Silver is still holding above a key uptrend line dating back to last summer, but if silver can break below this line, we will look for $27.50 to be hit, and then silver may head lower from there.
Click to enlarge.