Commentary: A day of profit taking across financial markets led to crude oil sinking $0.61, or 0.74%, to settle at $81.94. Oil prices were down as much as $2.03 at one point, so prices did finish well off the lows. There was no particular catalyst for Wednesday’s moves; oil fluctuated with equity markets which in turn fluctuated on profit taking considerations. Traders are feeling antsy ahead of the much-anticipated Fed policy decision expected next week. In the bigger picture, however, these are bull markets, thus the dip like we had in the early part of the session was met with buying at the end of the day. We aren’t buyers at these levels, but if prices could somehow put together a more meaningful correction, we would be looking to get in. The government inventory report was a mixed bag with a big increase in crude inventories offsetting a sharp decline in gasoline and distillate inventories. We saw crude inventories jumped by 5 million barrels, while gasoline inventories fell by 4.4 million barrels and distillate inventories fell by 1.6 million barrels. The total petroleum surplus rose modestly indicating that supplies remain ample for now. These elevated inventories are preventing crude prices from spiraling higher like we are seeing in many other commodities. Oil’s time will come, but just not yet. Technical Outlook: Prices are wedged between the top of a downward-sloping channel set from October’s swing high ($82.86) and a rising trend line established from mid-September ($81.29). A turn lower through trend line support will see the bears targeting $79.21, the 38.2% Fibonacci retracement of the 8/25-10/7 advance. Alternatively, a move above the channel top exposes the $84 figure. Commentary: A second day of gains in the U.S. Dollar caused gold to sink $15.10, or 1.13%, as the metal reestablished its inverse correlation with the greenback after breaking free of the correlation yesterday. The USD rose 0.57% on the day as measured by the trade-weighted Dollar Index. Yesterday the currency rose 0.78%, thus we see the buck trying to put together some form an uptrend here. In fact, the dollar has risen in five of the last seven days. In this context, it is not surprising to see gold back down to recent lows near $1320. As the Fed’s much-anticipated second round of quantitative easing draws near, expect dollar and gold volatility to increase. We continue to favor the downside on gold in particular, but a lot of near-term price action hinges on the size and scope of the Fed’s new program, thus we would be extremely cautious of taking any positions over the next several days. Technical Outlook: Prices remain locked below the top of a falling channel set from this month’s swing high ($1334.08), with a break higher exposing horizontal resistance at $1361.25. Near-term support lines up ata rising trend line in place from late July ($1322.26), with a break below that targeting the 38.2% Fibonacci retracement of the 7/28-10/14 advance at $1295.63. Silver – $23.66 // $0.07 // 0.30% Commentary: Silver gave up all of yesterday’s gains and then some, shedding $0.28, or 1.2%, to settle at $23.59. The amount of investment capital flowing into silver is remarkable. It’s likely that this theme has yet to play out. So if we get the correction in the precious metals complex that we are looking for, that may be a good time to take long positions for a trade. The gold/silver ratio stands at 56.1, near the lowest levels since August 2008. (The gold/silver ratio measures the relative performance of gold and silver. A higher number indicates gold outperformance, while a lower number indicates silver outperformance). Technical Outlook: Prices are wedged between the 50% Fibonacci retracement of the 10/14-10/22 decline at $23.87 and a rising trend line set from late August ($23.50). A break higher exposes the 61.8% Fib at $24.12. Alternatively, a move below the trend line targets $23.63, the 23.6% retracement level.

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