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CRUDE OIL – ACTION ALERT –
Crude Oil closed at $86.68 +1.81 or 2.13%.
A strong open to the new week for capital markets after an extended holiday weekend would encourage a strong performance from crude oil. The third consecutive advance for this benchmark commodity has established remarkable momentum at fresh 17-month highs. Having surpassed the $84-level swing high last Thursday, there has been a notable interest among the speculative crowd to participate in this next leg of a larger bull trend. Looking at the delayed open interest on the benchmark NYMEX active futures contract, net positions rose 1.35 million contracts through Thursday – the highest level since March 18th (back when the gauge rose to a recent historical high). Today’s strength is no doubt sourced from the overall rebound in risk appetite. With most US market’s closed this past Friday for the US non-farm payrolls report, investors in the different asset classes had to play catch up. With only currency and bond traders online to trade the actual release, the initial response was one that encouraged interest rate forecasts, which subsequently boosted the dollar. However, the detrimental effect a higher currency would have on oil was overshadowed by the tentative gains in growth-related assets that would naturally develop alongside improved confidence in economic health. That being said, there was a notable limit to optimism in the Dow Jones Industrial Average. This is perhaps partly a side effect of a significant portion of the market still out for the holiday. If European shares help cycle the market even higher tomorrow, crude traders may soon see the $89.50 level that represents the mid-point of the 2008 to 2009 tumble that brought the commodity from record high to five-year low with the fallout from the worst financial crisis in generations.
Intraday chart @ 12:15am 04/06/10 Pacific time
Daily Close 04/05/10
Chart via Don Vialoux