All ETF Daily News Articles

The Stock Market Weighs on Crude Oil and Opens A Floodgate

NYSE:USO September 14, 2020 9:19am

Silver: Bulls REMAIN in Control

It's been a frustrating month for investors in the silver (SLV) market as we saw the commodity plunge 20% just as all of the metals bugs were busy hiking their year-end forecasts to $50.00/oz silver.

While many of these price targets could be achievable long-term for the metal, the last time you want to see these targets is after a parabolic rally, as it typically suggests that everyone is now wildly bullish on the metal. This was confirmed by the fact that silver went onto a sentiment sell signal in early August, and it remains on a sell signal as of Wednesday's close.

Fortunately, the good news is that the silver to gold ratio remains on a bullish stance, and silver looks to be consolidating above its recent multi-year breakout, a completely normal reaction after a parabolic rally. Let's take a closer look below:

A picture containing water, person Description automatically generated

(Source: Daily Sentiment Index Data, Author's Chart)

One of the reasons I've been neutral to bearish on SLV since early August has been sentiment, as sentiment ultimately rules in the short-term when it comes to markets.

As we entered the month of August, we had several days with bullish sentiment sitting above 95% bulls, and we had the long-term moving average for bullish sentiment entering the danger zone (red box) above. While we remain in this danger zone as of Wednesday's close, we are trending in the right direction, with silver sentiment dropping to 60% bulls last week.

While this does not suggest a low is in, it is a step in the right direction. Preferably I would like to see silver sentiment fall beneath 40% for a day or two to suggest that speculators are capitulating and giving up their positions, but this is a step in the right direction for the time being.

A screenshot of a computer Description automatically generated

(Source: TC2000.com)

However, while sentiment continues to be a minor headwind here for silver, the monthly chart is the most bullish it's looked since early 2011 with a massive multi-year breakout occurring in July. Generally, the stronger a breakout is, the more weight it holds, and the fact that silver exploded out of its base suggests a high probability that this is a real move.

The other piece of good news is that this correction has been very normal to date, with no retracement anywhere near the breakout level of $22.00/oz~ thus far. Based on the current correction, the most likely path looks to be a new base built between $23.00/oz - $29.00/oz, and a possible breakout later this year.

However, if the metal does break down, I would expect the breakout area near $22.00/oz to provide support. Therefore, regardless of how this correction shakes out, I remain bullish long-term as long as $22.00/oz is defended.

A screenshot of a computer Description automatically generated

(Source: TC2000.com)

The other indicator that corroborates this view is the SLV to GLD ratio, which is back above its long-term moving average last month and has also broken its downtrend line.

The last time this occurred was late in 2010, and silver promptly doubled over the next year after reclaiming this moving average. If this were to play out similarly, we would see a move to $38.00/oz silver based on silver. This is not a prediction, and it's based on a small sample size, so it should be taken with a grain of salt. However, this is certainly possible within 12 months, with both the monthly chart and the silver/gold ratio on a bullish stance.

So, what's the best course of action here?

While I am not long silver as I am on the fence about how this correction unfolds, I do believe that we saw the worst of the correction with the drop last month to the $24.00/oz level. However, while we have seen the worst from a price standpoint, we may need more of a correction from a time standpoint to shake out more weak hands.

This would allow bullish sentiment to reset and exit the danger zone, and it would provide fuel for another leg higher with some bulls moving to the sidelines. Given that I'm unsure how this correction plays out for silver, I am focusing on silver miners instead and added new positions in Pan American Silver (PAAS) PAAS and Fortuna Silver Mines (FSM) last week.

These two silver miners have some of the strongest earnings growth rates in the sector and should perform well regardless of where silver goes. As long as silver stays above $22.00/oz on a monthly close, I will maintain my bullish long-term view.

Disclosure: I am long PAAS, FSM

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Want More Great Investing Ideas? 7 Best ETFs for the NEXT Bull Market Will Stocks Fall into Historical September Slump? 9 "BUY THE DIP" Growth Stocks for 2020
The iShares Silver Trust (SLV) was trading at $25.19 per share on Thursday afternoon, up $0.01 (+0.04%). Year-to-date, SLV has gained 51.02%, versus a 6.35% rise in the benchmark S&P 500 index during the same period. SLV currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 34 ETFs in the Precious Metals ETFs category.

About the Author: Taylor Dart

taylor-dartTaylor has over a decade of investing experience, with a special focus on the precious metals sector. In addition to working with ETFDailyNews, he is a prominent writer on Seeking Alpha. Learn more about Taylor’s background, along with links to his most recent articles. More...
NYSE:SLV September 10, 2020 1:51pm

With Winter Approaching, is Now the Time to Buy Natural Gas?

NYSE:UNG September 10, 2020 12:19pm

Natural Gas- A Pullback as Expected- Then A Bullish Reversal

NYSE:UNG September 9, 2020 9:49am

Crude Oil Down Over 10% In Past Week

  • WTI falls through the bottom end of its trading range

  • Brent rolls from October to November futures

  • Bullish and bearish factors continue to grip the oil market- Inventories and production point higher

Trading crude oil and looking for another significant move to the up or downside had been like watching paint dry since June. The decline to an all-time low in NYMEX WTI futures and the lowest price of this century in Brent futures gave way to a recovery that took the price of the energy commodity to over the $40 per barrel level. Nearby NYMEX futures first reached $40 in early June. Since then, the market had gone into a volatility coma, but the price settled below the level at the end of last week.

Weekly historical volatility on the WTI futures was around 20% to 25% level at the start of 2020. In May, it rose to over 172%. At the end of last week, the metric was back at 25%.

Bullish and bearish factors are pulling the price of the energy commodity in opposite directions as of September 4. Demand remains a critical concern, but production declines have gone a long way to balance the petroleum market's fundamental equation. While the trend remains higher, crude oil tends to take the stairs higher and an elevator shaft to the downside over time.

The slide in the US stock market last week was a warning sign for the petroleum market. The United States Oil Fund (USO) tracks the NYMEX WTI futures price, while the United States Brent Oil Fund (BNO) follows Brent futures on the Intercontinental Exchange.

WTI falls through the bottom end of its trading range

Crude oil took an elevator shaft to the downside earlier this year before recovering to over $40 per barrel. The bullish trend was in question at the end of last week.

The ascent of the energy commodity had been a slow crawl to the upside, but the decline below $40 on the back of weakness in the US stock market ked to a test of technical support at $39, the double-bottom low, which failed to hold.  

Source: CQG

As the daily chart of NYMEX October crude oil futures highlights, the price settled at the $39.77 per barrel level at the end of last week. On Tuesday, September 8, the price was trading around the $36.30 level. The total number of open long and short positions has been flatlining at around the two million contract level over the past two months. The correction from the August 26 high of $43.78 caused price momentum and relative strength indicators to fall below neutral readings to oversold conditions.

Since June 30, the price range had been from $39.00 to $43.78 per barrel. The $39 low on July 10 and July 30 created a double-bottom formation on the daily chart, which was critical support. The narrow trading range pushed daily historical volatility to 30% at the end of last week. The metric reached a high of over 153.5% in March. On September 8, it was over 47%.

The midpoint over the past two months is at $41.39 per barrel. The price moved below the lows in a short-term technical breakdown in the energy commodity.

Brent rolls from October to November futures

On the final day of August, Brent futures on the Intercontinental Exchange rolled from October to November. Brent is the pricing mechanism for approximately two-thirds of the world's crude oil, including the petroleum from the Middle East. The region is home to over half the world's crude oil reserves.

 

Source: Barchart

The chart shows that Brent futures have traded in a range from $40.35 to $46.59 since late June. The trend in the Brent futures was higher, with a midpoint at $43.47. However, at below $40 on September 8, Brent futures fell through the bottom end of the band over the past two months. Brent and WTI futures crawled higher, as fundamentals were supportive of the price. The correction in the stock market caused a return of the elevator ride lower at the start of this week.

Bullish and bearish factors continue to grip the oil market- Inventories and production point higher

Crude oil never away on the upside after reaching the $40 per barrel level. The memory of the price carnage on the downside that led to the April low of a negative price for WTI and the lowest price of this century for Brent continues to weigh on the price action.

Fears that demand could evaporate because of a resurgence of COVID-19 during the winter months is the primary bearish factor hanging over the market. The recent weakness in the stock market weighed on the price of the energy commodity. Meanwhile, the winter months tend to be a bearish seasonal period for the energy commodity.

On the bullish side of the oil market, production and inventories have been highly supportive over the past weeks. OPEC, Russia, and other producers continue to maintain a 7.7 million barrel per day cut, after tapering the level from 9.7 mbpd in August. US output has dropped, with the Energy Information Administration reporting 9.7 mbpd for the week ending on August 28.

The level of US production declined 26% from record high level in March 2020. In the latest report, the EIA said production fell by 1.1 mbpd. The decline was because of hurricane Laura's impact on petroleum production in the states on the Gulf of Mexico.

At the same time, the American Petroleum Institute and Energy Information Administration reported the sixth straight week of falling inventories for the week ending on August 28.

Source: API

Since the week ending July 24, crude oil stocks have dropped by 34.965 million barrels. Gasoline inventories moved 9.128 million barrels lower, and distillate stocks rose by only 0.933 million barrels.

Source: EIA

Over the same period, the EIA reported a decline of 38.2 million barrels of crude oil. Gasoline inventories moved 11.781 million barrels lower, and distillate stocks dropped by 0.300 million barrels.

The inventory data in the US continues to support the price of crude oil futures though they fell below the $40 per barrel at the end of last week on the NYMEX October futures contract. The November Brent futures at under $40 have some support from the decline in OPEC, Russian, and other producers' output.

Crude oil's bullish trend turned lower over the recent sessions. The memories of the decline that took prices to lows in April and concerns over demand continue to prevent the price from moving appreciably higher. Crude oil was heading for a test of the mid-June $35.25 per barrel level on October NYMEX futures, the mid-June low. A move below there could open the floodgates on the downside.

The settlement at the lowest price since June 26 on the October WTI futures contract was a warning sign for the energy commodity last week. On Tuesday, it followed through on the downside, rekindling fears that another period of price carnage could be on the horizon.

Want More Great Investing Ideas? 7 Best ETFs for the NEXT Bull Market Will Stocks Fall into Historical September Slump? 9 “BUY THE DIP” Growth Stocks for 2020
The United States Oil Fund (USO) was trading at $26.73 per share on Tuesday afternoon, down $1.78 (-6.24%). Year-to-date, USO has declined -73.92%, versus a 5.29% rise in the benchmark S&P 500 index during the same period. USO currently has an ETF Daily News SMART Grade of D (Sell), and is ranked #69 of 112 ETFs in the Commodity ETFs category.

About the Author: Andrew Hecht

andrew-hechtAndy spent nearly 35 years on Wall Street and is a sought-after commodity and futures trader, an options expert and analyst. In addition to working with StockNews, he is a top ranked author on Seeking Alpha. Learn more about Andy’s background, along with links to his most recent articles. More...
NYSE:USO September 8, 2020 2:49pm

Silver: Time for Patience

It's been a volatile couple of weeks for investors in silver (SLV) following the metal's 13% decline in mid-August, which put a dent in its upside momentum. The significant reversal at the $30.00/oz level has pushed the momentum in favor of the bears for the time being, and often corrections after parabolic rallies like this take at least eight to sixteen weeks to complete.

This is because it takes a while for speculators to lose interest in an asset class and sell out of disgust after they've just witnessed a powerful advance.

The good news is that while this correction might be frustrating for the bulls, especially those looking for $50.00/oz by year-end, the long-term picture will remain bullish as long as the $23.50/oz level is defended on a weekly close. Let's take a closer look at the weight of evidence below:

A picture containing outdoor, water, person Description automatically generated

(Source: Daily Sentiment Index Data, Author's Chart)

If we begin with bullish sentiment for silver, it's been a wild year, as we saw sentiment drop to just 4% bulls in early March before sentiment rose to a new multi-year high at 97% bulls three weeks ago. These massive shifts in sentiment in a short period (lows to highs) often mark tops for a commodity, hence why there was elevated risk in the metal a few weeks ago when speculators were elbowing each other to get into the trade.

While short-term sentiment has cooled off a little with the violent drop on August 11th, the long-term moving average for bullish sentiment remains in the cautious zone at 82% bulls. This suggests that while bounces are possible and we are making progress on unwinding this crowded trade, it will likely be very difficult for silver to make new highs before October.

A screenshot of a cell phone Description automatically generated

(Source: TC2000.com)

As I noted a few weeks ago, silver was printing several caution signals in a row (orange bars) with the metal more than 30% above its acceleration bands heading into mid-August. While this rally continued a little longer than I expected with five consecutive caution signals, the gains from these types of advances are typically ephemeral, and this is precisely what we saw.

Not only was this whole advance retraced entirely, but it only took one day for this to occur. Fortunately, we are no longer on caution bars despite trading at similar levels as the overbought readings have subsided. However, we still remain extended on a short-term basis, more than 25% above the metal's long-term moving average.

A picture containing clock Description automatically generated

(Source: TC2000.com)

Finally, if we look at key support and resistance levels above, we can see strong support at $21.50/oz near the multi-year breakout area and strong resistance at $27.80/oz.

While the metal has made a few attempts to get above this resistance level at $27.80/oz, a clean weekly close above this level will be required to remove this resistance and increase the probability that the correction is over. Therefore, while we've seen the worst of the correction with the dip to $23.50/oz from a price standpoint, the correction has not satisfied the time element, so I see no reason to rush into the miners or silver near $28.00/oz.

So, what's the best course of action?

Given that silver has registered a massive monthly breakout above $21.50/oz, the bulls will remain in complete control of the bigger picture as long as they defend $23.50/oz. However, I prefer to buy and silver when we see excessive fear in the market, or at a bare minimum, indecision.

After a 120% rally in 100 days off of the March lows, it's going to take some more choppy price action to put make the bulls begin to doubt this rally.

Currently, I am keeping a close eye on Pan American Silver (PAAS) and Silvercrest Metals (SILV) to add to my position, and I would get very interested in adding to silver if it came down near $24.00/oz to create a double bottom. At this juncture, I see no reason to aggressively add to metals or miners as there is minimal evidence that this correction is complete just yet.  Therefore, patience is required here, in my opinion, as the lowest-risk entry points have still not arrived yet.

Disclosure: I am long PAAS, SILV

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing.

Want More Great Investing Ideas? 7 Best ETFs for the NEXT Bull Market Beware Stocks in September? 9 "BUY THE DIP" Growth Stocks for 2020
The iShares Silver Trust (SLV) was trading at $25.00 per share on Thursday afternoon, down $0.55 (-2.15%). Year-to-date, SLV has gained 49.88%, versus a 8.84% rise in the benchmark S&P 500 index during the same period. SLV currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 34 ETFs in the Precious Metals ETFs category.

About the Author: Taylor Dart

taylor-dartTaylor has over a decade of investing experience, with a special focus on the precious metals sector. In addition to working with ETFDailyNews, he is a prominent writer on Seeking Alpha. Learn more about Taylor’s background, along with links to his most recent articles. More...
NYSE:SLV September 3, 2020 1:01pm

Natural Gas: Important Levels to Watch

NYSE:UNG September 3, 2020 11:47am

Gold: Bulls Remain In Control

It's been an eventful couple of weeks for the yellow metal (GLD) as gold's rally was derailed by a 7% daily drop in mid-August, and a drop to nearly $1,850/oz the following day. However, while this has certainly put a little doubt in some market participants' minds, it's worth noting that zero technical damage has been done to date.

This is because gold continues to trade above its key monthly moving averages, and the metal remains above its all-time high breakout made in late July.

While bullish sentiment continues to be a minor headwind to future rallies, I see no reason to give up on the metal here, and I ultimately expect that we'll see another set of new all-time highs before year-end.

A screenshot of a computer Description automatically generated

(Source: TC2000.com)

The gold price's recent correction has put what looks like a severe dent in the Gold vs. S&P-500 (SPY) ratio, with the ratio making a lower low and a lower high since April.

However, while we certainly have seen a slight departure from the strong uptrend we saw in Q1, it's worth noting that this ratio remains above its key moving averages despite being up against one of the strongest rallies in history in the S&P-500.

Currently, the S&P-500 is up over 60% in less than 115 trading days. The fact that the Gold vs. SPX ratio has held its ground regardless of this near parabolic advance is incredible.

A screenshot of a computer Description automatically generated

(Source: TC2000.com)

As we can see, if we take a bigger picture view, this ratio finally turned in early 2020 and reclaimed a multi-year resistance level (white line) dating back to 2011.

This was a significant change in character for the bulls and suggested that it was time to begin adding some gold exposure and miner exposure to one's portfolio.

However, even though this pullback has pushed the ratio down from 0.65 to 0.56 since April, the ratio remains above the short-term momentum line (green line) and the long-term moving average.

Notably, the long-term moving average is turning and finally assuming a positive slope. Therefore, while this correction in the ratio could go on a little longer, I see no reason to lose faith in this ratio's ability to maintain its bullish posture. Based on this, an allocation to gold and miners continues to make sense.

A picture containing clock Description automatically generated

(Source: TC2000.com)

If we zoom into the 4-hour chart below, we are clearly wading through a short-term correction, but the correction structure has been very normal. Other than the one-day plunge on August 11th that brought with it a significant increase in volatility, gold has been carving out a bullish continuation pattern since.

While there's no reason to believe that gold is going to head higher in a straight line from here, this pattern suggests that further consolidation would not be surprising, but the worst-case low for this correction is likely to be $1,800/oz.

Therefore, any re-test of the August 11th low or undercut of this low would be an area to look to add some exposure incrementally.

A picture containing screenshot, clock Description automatically generated

(Source: TC2000.com)

If we zoom out to a big picture view, gold couldn't look more bullish, as it's just emerged from a nearly 10-year breakout to new all-time highs.

Currently, there are no asset classes with a breakout of this magnitude to new all-time highs, suggesting that for investors looking to get in on the ground floor of a new bull market, gold is the most suitable place to be parking some of one's money.

As long as the bulls can continue to defend the $1,890/oz level on a quarterly closing basis (September close), this breakout will remain valid.

While some investors might be getting nervous that we've seen the top in gold or that much lower prices are ahead, I don't see any reason to be worried here.

While it's possible that the metal could consolidate in the $1,795/oz to $1,2045/oz range for the next month or two to reset bullish sentiment, ultimately, I expect the metal to make new all-time highs before year-end.

Therefore, buying the metal today near $2,000/oz might not be wise; any sharp pullbacks should provide low-risk buying opportunities.

For now, I have no plans to add to my position in gold, but I remain long several miners, and long gold from $1,450/oz last year. As long as gold continues to stay above $1,750/oz, I plan to stick with my position.

Disclosure: I am long GLD, AU, KL, SILV

Disclaimer: Taylor Dart is not a Registered Investment Advisor or Financial Planner. This writing is for informational purposes only. It does not constitute an offer to sell, a solicitation to buy, or a recommendation regarding any securities transaction. The information contained in this writing should not be construed as financial or investment advice on any subject matter. Taylor Dart expressly disclaims all liability in respect to actions taken based on any or all of the information on this writing. Want More Great Investing Ideas? 7 Best ETFs for the NEXT Bull Market Beware Stocks in September? 9 "BUY THE DIP" Growth Stocks for 2020
The SPDR Gold Shares (GLD) was trading at $185.25 per share on Tuesday morning, up $0.42 (+0.23%). Year-to-date, GLD has gained 29.64%, versus a 10.19% rise in the benchmark S&P 500 index during the same period. GLD currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #1 of 34 ETFs in the Precious Metals ETFs category.

About the Author: Taylor Dart

taylor-dartTaylor has over a decade of investing experience, with a special focus on the precious metals sector. In addition to working with ETFDailyNews, he is a prominent writer on Seeking Alpha. Learn more about Taylor’s background, along with links to his most recent articles. More...
NYSE:GLD September 1, 2020 11:10am

OPEC Is Optimistic as Crude Oil Remains Stable and Near the Recent High

NYSE:USO September 1, 2020 9:21am

Natural Gas Is Overbought, But the Price Continues to Rally

NYSE:UNG August 31, 2020 9:25am

Natural Gas Hits 2020 Highs, Will the Rally Continue?

NYSE:UNG August 27, 2020 2:09pm

Silver Bullish Sentiment Remains Elevated Despite Correction

It's been nearly two weeks since the 15% daily rout in the silver market (SLV), with the decline sending most silver miners (SIL) down 25% or more from their August highs.

While this sharp correction has helped to relieve overbought conditions in both the miners and silver, it hasn't done anything to fix sentiment, which remains at the highest levels in nearly a decade.

This suggests that there could be more consolidation ahead for the metal before it tries to make another run at the $30.00/oz area and that there's no need to aggressively position in miners here with silver at $27.00/oz. Let's take a closer look below:

A picture containing outdoor, water, person Description automatically generated

(Source: Daily Sentiment Index, Author's Chart)

As the chart above shows, the long-term moving average that measures bullish sentiment in silver (white line) remains at lofty levels and has barely budged despite a 20% correction in the metal. This is generally not a good sign.

The more reliable bottoms show up when market participants throw in the towel and puke up their positions, not when they are frustrated to have gone through a drawdown but remain predominantly bullish. Based on the current reading of 84% in silver, I would argue that there's limited fear in the trade, and the crowded trade has not yet been unwound.

While this doesn't mean that we need to see lower prices below the $23.50/oz low to fix this reading, it does suggest that we'll need to correct through time or price. Therefore, while some investors might be hoping for a new high in silver within the next couple of weeks, I think it's unlikely.

A screenshot of a video game Description automatically generated

(Source: TC2000.com)

If we look at the weekly chart above, we remain nestled against resistance at $27.80/oz, with no strong support until the $21.50/oz level. Therefore, while we have seen a sharp correction from the highs, the reward to risk isn't great at current levels with support much lower.

If the bulls could manage to get through the $27.80/oz on a weekly close, I would be more open-minded that this could be a short-term consolidation and that we could see new highs by as early as October.

However, as long as we are $27.80/oz on a weekly closing basis, a re-test of $23.50/oz low is entirely possible.

A screenshot of a video game Description automatically generated

(Source: TC2000.com)

Zooming in further to a daily chart, we can see that silver remains quite extended above its 200-day moving average (yellow line), and it's rare to see sustained upside when the metal is more than 50% above its moving.

Therefore, this corroborates the view that we're unlikely to see new highs in the next couple of weeks in silver. The good news for the bulls is that trading sideways in a range between $23.50/oz - $30.00/oz would be a bullish development, as we often see a multi-week base built following a major breakout.

Given the 5-year breakout for silver above the $21.50/oz level, I would view any corrections that remain above this breakout area to be noise. However, while we're in the upper end of this range near $27.00/oz, the reward to risk remains balanced at best.

So, what's the best course of action here?

Given that sentiment remains elevated for silver and we continue to remain extended technically, I believe the best move is patience to wait for new setups to develop.

If this truly is a successful breakout for silver, we should see the $23.50/oz level defended on a weekly closing basis, and pullbacks below $24.00/oz should be low-risk buying opportunities.

Therefore, I am in no rush to add new exposure, but if the metal pulls back and sentiment also cools off, this would tell us we're getting closer to preparing for what's likely to be another leg higher in Q4.

In summary, I see this as a buy the dip market, but the low-risk trade is beginning to add exposure below $24.00/oz, not near $27.00/oz, while the bulls remain convinced that new highs are imminent.

Disclosure: I am long PAAS, SILV, GLGDF

Want More Great Investing Ideas? The Best of StockNews 2 Step Process to Sell @ Market Top in September 9 "BUY THE DIP" Growth Stocks for 2020
The iShares Silver Trust (SLV) was trading at $24.69 per share on Tuesday morning, up $0.09 (+0.37%). Year-to-date, SLV has gained 48.02%, versus a 7.61% rise in the benchmark S&P 500 index during the same period. SLV currently has an ETF Daily News SMART Grade of A (Strong Buy), and is ranked #3 of 34 ETFs in the Precious Metals ETFs category.

About the Author: Taylor Dart

taylor-dartTaylor has over a decade of investing experience, with a special focus on the precious metals sector. In addition to working with ETFDailyNews, he is a prominent writer on Seeking Alpha. Learn more about Taylor’s background, along with links to his most recent articles. More...
NYSE:SLV August 25, 2020 11:02am

Natural Gas Rises to Overbought Territory

NYSE:UNG August 25, 2020 9:32am

Crude Oil Crawling Higher

  • An elevator ride lower and then climbing the staircase to the upside- September futures roll to October

  • Inventory and production data remain bullish

  • Balancing the equation to allow for a continuation of the bullish crawl

Over the past weeks, some of the leading industrial commodities have been sending a signal to the crude oil market.

The price of lumber rose to a new all-time high at $830.90 on August 21. Before the most recent rally, wood futures peaked at $659 per 1,000 board feet in May 2018.

Last week, copper futures on COMEX probed above $3 per pound for the first time since June 2018. The demand for wood and copper that lifted the price is a function of some supply disruptions and the US dollar's falling value against other currencies.

The dollar is the pricing mechanism for most commodities, and a weakening greenback often has a bullish impact on raw material prices.

Copper and lumber are industrial commodities, and so is crude oil.

The energy commodity hit a low, along with lumber and copper, in March when the global pandemic caused risk-off conditions in markets across all asset classes.

Since then, the prices of WTI and Brent crude oil futures that trade on the NYMEX and ICE have been crawling higher.

The price action in the base metal and wood markets could be a sign that crude oil is heading for the $50 per barrel level sooner rather than later. The United States Oil Fund (USO) and the United States Brent Oil Fund (BNO) track the prices of the two benchmark petroleum futures markets higher and lower.

An elevator ride lower and then climbing the staircase to the upside- September futures roll to October

The price of nearby NYMEX crude oil traded to a high of $65.65 per barrel in early January. In late April, it was $105.97 lower at the negative $40.32 level.

The wide contango or forward premium caused the September contract to fall to $21.99, and October futures reached a bottom at $23.25. Over the past week, September futures on NYMEX rolled to October.

Source: CQG

The new active month October contract shows that the peak on August 5 was at $43.68 per barrel, and the price was trading at just below that level. After taking an elevator shaft to the downside earlier this year, the price has made higher lows and higher highs.

Price momentum and relative strength indicators were above neutral readings at the end of last week.

The total number of open long and short positions in the NYMEX crude oil market has been stable at the two-million-contract level.

Daily historical volatility at 17.5% declined from a high of almost 155% in March. The daily price ranges have narrowed dramatically over the past months as crude oil has been on a staircase to the upside.

Inventory and production data remain bullish

Last week, the inventory data from the API and EIA remained upbeat with the fourth consecutive week of declines in crude oil inventories.

The API reported a decline of 4.264 million barrels for the week ending on August 14. While gasoline stocks rose by 4.991 million barrels, distillates fell by 964,000 barrels. The EIA said that crude oil inventories fell by 1.60 million barrels with a decline of 3.3 million barrels in gasoline stocks.

Distillate only rose by 200,000 barrels. The inventory data was a sign of demand for the energy commodity. Meanwhile, at 10.7 million barrels per day, US production was 18.3% below the peak output level in March.

When it comes to OPEC, Russia, and other leading world producers, the group tapered its production cut from 9.7 million barrels per day in July to 7.7 mbpd in August.

At the most recent meeting, the group concentrated on compliance with the production quotas and did not change the level for the coming month. OPEC and Russia continued to express concern about demand, saying, "the pace of recovery appeared to be slower than anticipated."

Balancing the equation to allow for a continuation of the bullish crawl

Inventory and production data have balanced the fundamental equation for crude oil with the price above the $40 per barrel level. The fundamental and technical position of the crude oil market continues to support the slow and steady crawl to the upside.

Meanwhile, a falling dollar, interest rates at historic lows, and government and central bank stimulus combine to create a potent bullish cocktail for commodity prices. Copper rose to its highest price in over two years last week.

Lumber reached an all-time peak and traded at over $830 per 1,000 board feet over recent sessions. In May 2018, the price of wood reached a record high at $659. Before that, the record level was at $493.50 in 1993. Gold recently moved to a new all-time peak.

The price of crude oil continues to edge slowly higher. The price action in many other commodities could be telling us that higher oil prices are on the horizon.

Resistance on October futures is at $43.68 and at $54.50 on the continuous contract. Support stands at $39 and $38.72. Risk-reward continues to favor the upside in crude oil. However, any sudden decline in the US stock market could change the current path of least resistance for the energy commodity.

Want More Great Investing Ideas? The Best of StockNews 2 Step Process to Sell @ Market Top in September 9 “BUY THE DIP” Growth Stocks for 2020
The U.S. Oil Fund LP (USO) rose $0.18 (+0.60%) in premarket trading Monday. Year-to-date, USO has declined -70.34%, versus a 7.44% rise in the benchmark S&P 500 index during the same period. USO currently has an ETF Daily News SMART Grade of D (Sell), and is ranked #73 of 111 ETFs in the Commodity ETFs category.

About the Author: Andrew Hecht

andrew-hechtAndy spent nearly 35 years on Wall Street and is a sought-after commodity and futures trader, an options expert and analyst. In addition to working with StockNews, he is a top ranked author on Seeking Alpha. Learn more about Andy’s background, along with links to his most recent articles. More...
NYSE:USO August 24, 2020 9:47am

Free Investing Ideas Newsletter!

Join over 70,000 investors who get the latest insights and top rated picks from our free investment newsletter.

Most Popular


Sponsored Content


From Our Partners


5 WINNING Stock Chart Patterns

Explore More from ETFDailyNews.com

Free Investment Newsletter

Join over 70,000 investors who get the latest insights and top rated picks from our free investment newsletter.

ETFDailyNews.com respects your privacy.

Best ETFs

We've rated and ranked nearly 2,000 ETFs and ETNs using our proprietary SMART Grade system.

View Top Rated ETFs

Best Categories

We've ranked dozens of ETF categories based on relative performance.

Best ETF Categories