Crude Oil May Fall on ISM and ADP Data, Gold Still Looking for Direction

Commodities - Energy

Crude Oil Vulnerable Ahead of ISM, ADP Reports

WTI Crude Oil (NY Close): $102.70 // +2.11 // +2.10%

Crude oil prices followed the S&P 500 higher as expected yesterday, taking out resistance at the 38.2% Fibonacci retracement of the 5/2-5/6 decline ($102.35). Futures tracking the US benchmark stock index rapidly erased overnight gains in the opening hours of the European session as traders reoriented themselves on the upcoming set of economic releases out of the world's top economy. A preliminary US employment gauge from ADP as well as the May's ISM Manufacturing reading are on tap, with weakness expected on both fronts and threatening risk appetite and the WTI contract by extension . The 38.2% Fib has been recast as near-term support, with a break back below this boundary exposing the psychologically significant $100/barrel level. Weekly API crude inventory numbers are also due to cross the wires.

Commodities - Metals

Gold Continues to Look for Direction

Spot Gold (NY Close): $1535.80 // -1.35 // -0.09%

Prices continue to flirt with the 61.8% Fibonacci retracement of the drop from the May 2 high at $1533.12 as gold struggles to define the catalyst that will drive price action in the days ahead. As we discussed yesterday , the metal appears to be torn between the risk and safe-haven sides of the sentiment dichotomy, opting to trade with stocks when the issue at hand is the imminent end of QE2 but reversing the relationship when more "traditional" risk aversion (this week, the reemergence of Euro Zone debt fears) takes center stage.

On balance, short-term correlation studies suggest the QE2-centric story is ready to retake the spotlight as the inverse link between gold and the S&P 500 futures contract carved out over the past eight days is unwound. With that in mind, there seems insufficient evidence to draw firm conclusions for the time being, with much likely to depend on how the market reacts to another batch of dour US economic data. The 61.8% Fib remains as near-term support, with a daily close below that exposing the 50% level at $1519.55.

Spot Silver (NY Close): $ 38 . 63 // + 0 . 36 // + 0 . 95 %

Positioning is little changed from yesterday, with prices still wedged between $36.44 and $38.99, the 23.6% and 38.2% Fibonacci retracements of the 4/25-5/6 decline, respectively. The correlation between gold and silver is on the mend as the former metal moves closer in line with risk appetite again, hinting both may find themselves under pressure as S&P 500 index futures dip into negative territory ahead of the opening bell. Alternatively, a break above immediate resistance exposes the $40.00 figure, followed by the 50% Fib at $41.05.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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