Commentary: Crude oil will attempt to regain its footing after getting slammed almost $3 to end last week. There were two notable culprits for the latest decline: renewed European sovereign debt concerns, specifically with regard to Ireland, as well as speculation about more interest rate hikes from China. Neither of these risks are enough to staunch the self-sustaining global economic recovery we are in the midst of. Rather, they are merely excuses for traders to lock in the enormous gains that have been made in crude and other assets over the past few weeks. Were the selling to continue into this new week, we would be looking to accumulate. Ideally, we would be seeking entries under $80, but with inventories now rapidly declining, it may be difficult for prices to get so low. Traders will want to watch the situation in China for guidance. Apparently diesel demand has been exploding in the world’s second largest oil consumer as electricity production is cut to fulfill a 5-year plan that ends next month. Technical Outlook: Prices have followed up a bearish Shooting Star candlestick formation with a sharp decline to challenge support at a rising trend line set from mid-September, with a break below this juncture exposing horizontal support at $83.27. Near-term resistance lines up at the $86.00 figure. Looking toward the new week, while profit taking in gold cannot be ruled out, to get a sustained move lower, there will need to be some sign that the easy monetary conditions in the U.S. and Eurozone economies are coming to an end. With QE2 made official just two weeks ago, there is little to suggest that that will happen anytime soon. Technical Outlook: Prices followed the formation of a well-defined Bearish Engulfing candlestick pattern with a break below horizontal support at $1387.35. The bears now target a rising trend line set from late July, now at $1351.48. The $1387.35 level has been recast as near-term resistance. Silver - $26.02 // $0.06 // 0.22% Commentary: Silver fell almost 6% last Friday for the same reasons that gold fell. Given the parabolic nature of silver’s advance, it is not surprising to see it fall so precipitously. There is still a lot of room to fall further if traders continue to liquidate. The gold/silver ratio surged to 52.4 from levels near 50, as silver fell much harder than gold on Friday. (The gold/silver ratio measures the relative performance of the two precious metals. A higher ratio indicates gold outperformance while a lower ratio indicates silver outperformance). Technical Outlook: As with gold, prices have moved sharply lower to meet support at $26.10, 50% Fibonacci retracement of the 10/22-11/09 upswing. Continued selling from here exposes the 61.8% level at $25.33. Near-term resistance lines up at $26.87, the 38.2% Fib.

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