Spread Betting on Crude Oil
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Commodities Analysis from Michael Hewson, Market Analyst, CMC Markets
29 September 2010
CRB Commodity Index Trading Report
After six months of highs around 281, the cap on the CRB Commodity Index that had remained stubbornly in place since March finally gave way last week after the softer economic data out of the US.
This weak data increased the likelihood that the Federal Reserve is about to turn the liquidity taps back on and prompted a weakening of the US Dollar across asset classes.
The recent bullish crossing of the 50 day moving average above the 200 day moving average, a golden cross, looks to have turned sentiment positive as far as commodities are concerned.
As long as the index is able to consolidate above the 281 level, it should now look to re-test the 2010 highs around 293.75.
Gold spread trading markets have surged above $1,300, silver has made fresh all time highs and copper is looking at re-testing its April highs around $3.6480.
Recent rises in soft commodity prices have also helped push the CRB higher. The cumulative rises in corn and soybeans, along with rises in aluminium, gold and copper prices, are dragging the index upwards.
Continued robustness in these prices should more than offset any drag on the index caused by the lack of recent upside in oil prices which have remained fairly static.
These components collectively make up 30% of the CRB index, comprising 6% each, which more than offsets crude oil’s 23% weighting.
The crude oil spread betting price has continued to struggle to make any meaningful gains above the $80 mark where there appears to be some trend line resistance from the May highs around $87.
However, for now it appears to be trading in a broad consolidation with solid support around the $71 area and fairly good interest to sell between this month’s highs of $78 and the $80 area.
With concerns about economic recovery in the US still weighing on sentiment, oil is likely to continue to struggle to make progress above these recent highs, regardless of the level of additional stimulus.
On the other hand, soft commodities spread betting markets, like corn, wheat, coffee and sugar, will in all likelihood continue to be underpinned by supply and demand concerns.
Spread betting, CFDs and FX are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.
Article provided / approved by CMC Markets UK plc / CMC Spreadbet plc which are authorised and regulated in the UK by the Financial Services Authority, registration numbers; 173730 and 170627 respectively.
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Spread betting, CFDs and FX are leveraged products and carry a high level of risk to your capital. It is possible to lose more than your initial investment. These products may not be suitable for all investors, therefore ensure you understand the risks involved and seek independent advice if necessary.
Article provided / approved by CMC Markets UK plc / CMC Spreadbet plc which are authorised and regulated in the UK by the Financial Services Authority, registration numbers; 173730 and 170627 respectively.
Apple, the Apple logo, and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc.
'Spread Betting on Crude Oil' edited by DB, updated 29-Sep-10
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