Commodities - Energy Crude Oil Digests Recent Gains Near 25-Month Highs Crude Oil ( WTI ) - $86.92 // $0.07 // 0.08% Commentary: Crude oil is close to unchanged as prices consolidate following five straight days of gains last week. After rising 6.7% last week, prices hit a new 25-month high in overnight trade, but so far crude has been unable to decisively break the May highs near $87.15, which is the top of a 13-month range. The U.S. nonfarm payrolls numbers we got last week were unequivocally bullish, and just add to an already bullish picture for the global economy. It is probable that crude oil continues higher in the coming weeks to levels over $90 as demand continues to increase. This coming week's economic calendar looks to be extremely light, which is in sharp contrast to last week's excitement amid the Fed, ECB, BOE, and BOJ policy decisions and the U.S. jobs report. This probably means that the bias of markets will likely remain to the upside given all the positive developments of last week. On the other hand, equities and commodities are extremely overbought and ripe for profit taking. The most likely outcome is that markets end this week fairly flat as recent gains are digested. Technical Outlook: Prices have put in a bearish Shooting Star candlestick formation below resistance at $87.15, the major swing top set in May that - until last week - served as the 2010 yearly high. Negative RSI divergence continues to point toward a pullback, with a reversal lower initially targeting resistance-turned-support at $84.43, the 10/07 wick high. Commodities - Metals Gold Tries to Hold on Despite Dollar Strength Gold - $1388.10 // $5.55 // 0.40% Commentary: Gold is down just slightly as the metal is hit with the same profit taking considerations that are affecting crude. Recall that gold rocketed to new all-time highs just under $1400 last week in large part due a sinking U.S. Dollar. But the most interesting action was on Friday when gold continued to hold gains and even finished a bit higher despite a notable 0.88% recovery in the dollar. Perhaps gold traders are considering the one day move in the dollar as just a corrective bound in a strong downtrend. But if the dollar's recovery turns out to have legs, we'll likely see gold begin to move lower, for as we have been pointing out in our Gold - Forex Correlations report , the strong inverse relationship between gold and the dollar very much remains intact: \"Over the past week, we saw the trade-weighted dollar index decline four of five days, while gold advanced three of five days. Incidentally, after the Federal Reserve policy decision on Wednesday, it looked as if the gold-dollar correlation was about to break down. And it did for a brief moment as a swath of gold traders \"sold on the news\"-gold was down $32 at one point while the dollar also sold off. But that breakdown proved to be ephemeral as gold sharply rebounded by the end of the session to finish lower by only $9. The next day on Thursday, the dollar continued to sell off to new lows for the year, while gold surged a stunning $44 to hit a new record high.\" Read more in the latest Gold-Forex Correlations report. Technical Outlook: Gold prices have put in a bearish Doji candlestick below resistance at the psychologically significant $1400 figure, hinting a pullback may be forthcoming. Initial support lines up in the $1364.77-$1381.00 region. Silver - $26.69 // $0.05 // 0.20% Commentary: Silver is flat after rallying $2, or 8% last week. Prices are hitting at new 30-year highs and show no signs of slowing down. Prices continue to benefit from a long-awaited contraction in the ratio between gold and silver prices. Indeed, even with the recent outperformance of silver relative to gold, the ratio between the two metals is only at the lowest since 2008. The gold/silver stands at 52, the lowest level since August 2008. (The ratio measures the relative performance of gold and silver. A higher ratio indicates gold outperformance, while a lower ratio indicates silver outperformance). Technical Outlook: Prices have taken out support at the top of a rising channel set from late August to pause ahead of the $27.00 figure, a psychological boundary reinforced by the 200% Fibonacci extension of the 10/14-10/22 downswing. Negative RSI divergence hints that (at least) a corrective pullback may be next. The first layer of significant support lines up at the $25.00 figure.

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