Friday, July 2, 2010

Crude and Gold Brief - July 2, 2010


The Fundmental Analytics - by Pat Ambrus


My mistake for crude this week:

I drew something like this in my past post (minus the extra time frames).

When in reality the channels would have been more appropriately defined on a longer time frame such as this:

The lesson being expanding your time frame is key for getting correct technical analysis. I was initially correct on on the downward momentum, but completely wrong on the 75 support. Which would have meant exiting early, and would have cost missed profits.

The real test of support is seen in the longer time frame, as shown above, at 70. This makes for a much wider range of support/resistance at 70 and 80 respectively, seen back from the previous summer 2009.

Ill re-iterate the long term picture:

Price pressure has broken to the downside. The test of 70 Support is "KEY" to see whether or not we will see prices in free fall.

Putting this in a relational context:


To me this graph tells me that the EUR is not a good proxy for the overall dollar in this current environment. The purple line being the EUR trend. To the left of the vertical line we see EUR weakness (dollar strength) with strong CL and to the right we are starting to see EUR strength (dollar weakness) with CL weakness. The traditional dollar/CL correlation maybe biased with economic differences when using a dollar index to compare to CL (depending on the construct and weighting of a dollar basket). Simply put, we are not seeing the typical correlation between the dollar and CL.

However in the same given time period we are seeing very high positive correlations between the SPX and Crude:

(purple line is the SPX)

As I have analyzed the SPX Here; of which I continue to be bearish on.

If my correlation analysis is correct, which I will assume is, I am also bearish on CL. This means 1000ish SPX support coincides with 70 CL support. Both these levels should be watched closely.


I am bearish on CL for next week.

PS: My call on gold has been correct to date so far...


Alexander Lê
Managing Partner
Analyze Capital LLC

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