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Commodities Crash: Buy Levels Revealed

The markets are down again today. The selling is not massive but it is the third drop in a row. The SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $121.79, -1.32 (-1.07%). The big driver to the downside today is clearly commodities. Almost every single commodity is dumping sharply. Everything from oil to gold and silver. While these drops are massive, smart investors and traders are starting to look for the buy level.

Oil is coming off a massive run-up recently. The United States Oil Fund LP (ETF) (NYSEARCA:USO) is trading at $36.93, -1.68 (-4.35%). This is a massive drop as spot crude is down well over $4.00 per barrel. Support levels on the USO are tricky because the commodity is still overbought. The first level that looks attractive on the USO is the 50 moving average at $36.35. This level will be a short term oil bounce level but is not a long term buy. The term used to trade this level would be swing trade. The following major support on the USO is $34.50. This would be the longer term hold level.

Gold is plummeting. The SPDR Gold Trust (ETF) (NYSEARCA:GLD) is trading at $153.32, -5.13 (-3.24%). As central banks dump gold and raise cash, pressure on the commodity is strong. In addition, the Dollar of late has surged dramatically higher. This also puts major pressure on the precious metal. The first support level on the GLD is $149.50. After a small bounce, expect the GLD to head to $144.00. This should be a longer term bottom.

Silver, like gold is under major pressure. iShares Silver Trust (ETF) (NYSEARCA:SLV) is trading at $28.09, -1.73 (-5.80%). SLV hit some minor support today at $27.40. This may give it a day or two bounce. However, more downside is likely before all the selling concludes in mid 2012. The next major support on the SLV is $26.10 with the longer term buy level at $24.25.

Gareth Soloway

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