Crude oil is flat after shedding $0.88, or 1.14% on Wednesday. The primary catalyst for the move was the DOE inventory report, which was decidedly bearish. Gasoline and distillate inventories are now sitting at or near record seasonal levels. In the event refiners start cutting back utilization rates, and they have to if they are to get the current oversupply under control, crude oil demand will take a near-term hit.
Equity markets sold off steeply late in the afternoon on Wednesday after Fed Chairman Bernanke presented a cautious outlook of the economy to Congress in the semiannual report. While stock markets have not been making new lows in recent weeks, they are bouncing along the bottom, indicating that global economic slowdown concerns have not gone away.
Gold lost 0.6% on Wednesday, as the metal continues to seesaw lower. Gold ETF holdings fell again, but not by nearly as much as was the case on Tuesday. Interestingly, gold price action in recent sessions has correlated with risk appetite, and the direction of U.S. equity markets in particular. Whether this new pattern continues remains to be seen.
Technical Outlook: Bullish follow-through has proved elusive after prices have put in a Piercing Line bullish candlestick formation above support at a rising trend line established from the swing bottom in early February. A bounce sees initial resistance at the $1200 figure, followed by a horizontal barrier at $1215.47. Alternatively, a break lower sees initial support at $1170.
