Primed for the new year - UPDATED 1/6/09

Gold saw a little spike that has a lot of people wondering "is this the run to $2000 that everyone is clamoring about"? While I expect gold to reach those levels eventually I believe it is premature right now. The $40 move in Gold was due to increased tension between Pakistan and India following the Mumbia attacks. Pakistan has canceled military leave for it's soldiers and has began moving them to the border with India. Not a good sign but the connection to Gold is tenuous at best.

What we see in the Gold chart is telling. There are 3 bad omens arguing against further appreciation.

1) Not only did it fail to exceed the 12/17 high but it reacted obediently to it's overhead descending trend line AND the 200 day moving average (red line).

2) The RSI and MACD oscillators are at levels that have proved insurmountable in recent history.

3) There is a lot of "overhead supply" Gold must contend with here.

So a long entry here would carry lot's of risk with the odds against you. What is more likely is that gold will retrace to support levels in the $780-800 range before making a new attempt higher.

GOLD

TRADE UPDATE 1/6/09: Getting ready for a Gold trade http://screencast.com/t/xaPo29F3BY

TRADE UPDATE 1/2/09: The Gold chart still warrants caution. See updated chart http://screencast.com/t/NBBzZ3L8TF

Crude on the other hand should be watched closely. It has made an awesome descent from its July high of $148. Commodity traders, hedge funds and investment banks have faced catastrophic deleveraging causing margin calls, panic and implosions. The trend has turned parabolic as waves of redemption calls from frightened fund stakeholders force funds to relinquish positions. The Maddoff scandal only heightened their fears.

As mentioned before deleveraging cares not for value but for survival. In the process markets almost always over correct. I believe that is what we've seen here, but the old adage "never catch a falling knife" applies. The chart offers no constructive price patterns but a bullish retracement is certainly due.

CRUDE OIL

TRADE UPDATE 1/6/09: 30% Gain - taking profits. See updated chart http://screencast.com/t/I9TS6x7FMl

TRADE UPDATE 1/2/09: 25% gain and growing! See updated chart http://screencast.com/t/VQja00kaT

With the foregoing in mind Oil drillers are showing positive divergence from the crude price. These are likely to respond nicely to a crude bounce with limited downside should we not see it.

CLR is one such stock currently showing a 4 week cup with handle. This is certainly not the only play in this segment. WTI is almost as a good with other drillers also showing resilience. Notice the difference between the crude chart above and CLR's chart below. CLR has refused to drop even as crude probes new lows. This is one to have on a watch list waiting for a green light from crude oil.

CLR

TRADE UPDATE 1/6/09: 20% Gain. This trade still looks strong.

The link to the updated chart shows 3 areas of price interest. We are at one of them now, however I am reluctant to take profits here as I suspect it can meet the next targets in the weeks/months ahead. This one requires the "Art of the Trade". Some may wish to scale back their position here letting the rest of their profits run. I will simply watch it for a few more days. I suspect crude oil may take a breather from its run of late. This is likely to cause a retracement in CLR. Both I consider buying opportunities. Trailing Stops are also an effective alternative here. A 2.5 pt trailing stop would make sense here. See the chart link for the next target levels: http://screencast.com/t/AfJ1yP2sJhT

TRADE UPDATE 1/02/09: Breakout from Cup w/ Handle base. See chart w/ targets http://screencast.com/t/nusqWMFlCds