Crude Oil Celebrates the New Year with a Massive Breakout During First Week of 2010

We have long stated that when crude oil broke $80 by at least 1 percent on a weekly close, a new major uptrend would very likely be underway. Crude oil easily accomplished that during the first week of 2010, surging to close near $83. As long as crude oil does not see a weekly close back below what should now have become support at $80 to $78, the importance of this breakout is hard to overstate. Why? - Because the price of nearly everything is heavily dependent on the cost of energy - especially crude oil. People often don't perceive this connection as there are varying lag-times (often several months to a few years) between a significant rise in oil prices and a rise in the cost of bread, industrial metals, plastics, plane tickets, and the majority of other products and services you can think of. So when the inevitable rise in the cost of living comes, it is easy for the governments and central banks of the world to say that no one could have foreseen the price increases, and if anyone is to blame it is the evil speculators who drove up the cost of copper, steel, wheat, corn, rice, etc. (as it could not possibly have anything to do with central banks increasing the money supply many times faster than any increase in the amount of goods and services produced)..

Increasing the odds that the major bull market in oil that began in 1998 has resumed is the fact that the 10 week average (green) has crossed the 43 (blue) and 65 (red) week moving averages to the upside. From 1999 to 2008, that always indicated a resumption of the secular uptrend.

Gold Probably Already Bottomed - Test of $1200 - $1227 Now Likely

When gold reached our short-term target of about $1200, we closed our gold and silver futures trading positions. Thereafter, we looked to reenter our long gold and GDXJ junior gold miner trading positions whenever gold traded close to its 10 week (50 day) moving average, and we did when gold entered our target range of $1115 to $1080.

We keep our long term investment position in gold at all times, but the odds absolutely did not favor maintaining our long trading position with gold stretched about as far above its 10 week moving average as it normally ever gets. However, at this point, odds again favor holding a long trading position as the short-term correction in gold most likely already has hit bottom.

Our expectation is for gold to move much higher over the coming months and years. Only a weekly close below $1080 would make us favor a deeper correction toward $1033.90 - $978. The long-term view of gold is that it broke out of a 19 month long base when it had a weekly close at $1048. Gold is thus expected to have major support between the two red lines at $1033.90 and $978. It would take a weekly close below $970 - which we do not consider likely - to indicate a failed breakout and possible end to the major bull market in force since the 1999/2001 lows.

We expect gold to trade well above $1400 by sometime during the spring of 2010.

For the complete version of our weekly analysis including many additional and significantly larger charts (as well as potential setups in commodities, currencies, stocks and ETFs) please click here

Previously, he was a financial advisor with Morgan Stanley Dean Witter, but left ten years ago because he wanted the freedom to do completely independent research and focus on perfecting his own trading style and investment skills.

He first entered the financial markets in 1995, trading currencies for his own and his family's accounts. Later, he expanded into equity, commodity, futures, and bond investment and trading, and has extensively studied the history of financial markets going back to their origin centuries ago (covering multiple extraordinary mania periods and subsequent busts).

Please visit the About Normann Financial page for important information about risk management and position sizing. We provide analysis in good faith and to the best of our ability, but all information on the Normann Financial website is provided solely for educational purposes and does not constitute investment advice. Learning to operate successfully in the financial markets is not easy - it takes a substantial amount of time, effort, and discipline. Your trading and investment decisions are exclusively your own responsibility. Proper risk management is crucial.


	LIVE Gold Prices $ \| E-Mail Subscriptions \| Update GoldSeek \| GoldSeek Radio