Technical alert: commodity markets in focus
By Stanislav Bernukhov
20 October 2023
This week, the primary focus of financial markets was the geopolitical crisis in the Middle East. As a result, gold crossed the 200-day moving average and reached the 1950 mark, recording the most significant gain in two weeks. The sell-off in bond markets escalated, driving the yields of 30-year bonds above the 5% watermark. Consequently, the US dollar found support, though the momentum is waning.
Weak earnings from US stocks pushed the Nasdaq index lower, consequently placing the S&P 500 under pressure. The rising yields for Treasury bonds could amplify negative sentiment in the financial sector, putting financial stocks on traders' radar.
In this review, we will concentrate on gold and crude oil as the two most crucial assets. According to data from the Commodity Futures Trading Commission, the net position of commercial traders in gold has reached a new peak, indicating demand in the gold market from major market participants. Another bullish factor is, undoubtedly, the flight-to-safety approach amid the escalation in the Middle East. Crude oil is also experiencing a bullish phase, but commercial traders are reducing their positions, suggesting that crude oil might peak in the intermediate-term perspective, though it remains in an uptrend in the short term.
Gold closed above the 200-day moving average and gained substantial momentum. The next significant level would be the psychological threshold of $2000, which could be reached shortly. It is sensible to join the trend either during a pullback or a consolidation period, as illustrated in the chart below.
Crude oil prices are influenced by geopolitical tensions. However, from a supply and demand standpoint, maintaining the current price levels might prove challenging, as such prices could heighten recession concerns. According to the Commitment of Traders report, commercial traders have reduced their buying to levels below the previous year's low. Consequently, there's potential for USOIL to reach another peak at around $90, as depicted in the chart. Technically, this price represents the upper Bollinger Bands on the daily chart.
This is not investment advice. Past performance is not an indication of future results. Your capital is at risk, please trade responsibly.
Stanislav Bernukhov is a professional and trained trading trainer with 15 years of experience in this field. He specializes in multiple trading methods, including price action, Market auction theory, and unconventional graphical analysis.
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