The Euro Zone Wags The Gold and Silver Dog

If Greece defaults and the European situation begins to spin out of control where will money flow? It would not make sense for market participants to buy Euro’s during a default regardless of whether the default it structured or not. In fact, it is more likely that European central banks and businesses would be looking to either hedge their Euro exposure or convert their cash positions to another currency all together.

Some market pundits would argue that gold and silver would likely benefit and I would not necessarily argue with that logic. However, the physical gold and silver markets are not that large and depending on the breadth of the situation, vast sums of money would be looking for a home. The two most logical places for hot money to target in search of safety would be the U.S. Dollar and U.S. Treasury’s.

The U.S. Dollar and U.S. Treasury obligations are both large, liquid markets that could facilitate the kind of demand that would be fostered by an economic event taking place in the Eurozone. My contention is that the U.S. Dollar would rally sharply along with U.S. Treasury’s and risk assets would likely selloff as the flight to safety would be in full swing.

To illustrate the point that the U.S. Dollar will likely rally on a European crisis, the chart below illustrates the price performance of the Euro compared to the U.S. Dollar Index. The chart speaks for itself:



Clearly the chart above supports my thesis that if the Euro begins to falter, the U.S. Dollar Index will rally sharply. In the long run I am not bullish on the U.S. Dollar, however in the case of a major event coming out of the Eurozone the Dollar will be one of the prettiest assets, among the ugly fiat currencies.

The first leg of the rally in the U.S. Dollar occurred back in late August. I alerted members and we took a call ratio spread on UUP that produced an 81% return based on risk. I am starting to see a similar type of situation setting up that could be an early indication that the U.S. Dollar is setting up to rally sharply higher in the weeks ahead. The daily chart of the U.S. Dollar Index is shown below:



As can be seen from the chart above, the U.S. Dollar Index has tested the key support level where the rally that began in late August transpired. When an underlying asset has a huge breakout it is quite common to see price come back and test the key breakout level in following weeks or months. We are seeing that situation play out during intraday trade on Friday.

We are coming into one of the most important weeks of the year. Several cycle analysts are mentioning the importance of the October 26^th – 28^th time frame as a possible turning point. I am not a cycle expert, but what I do know is that we should know more about Europe’s situation during that time frame. It would not shock me to see the U.S. Dollar come under pressure and risk assets rally into the October 26th – 28^th time frame. However, as long as the U.S. Dollar Index can hold above the key breakout area the bulls will not be in complete control.

If I am right about the U.S. Dollar rallying higher, the impact the rally would have on gold and silver could be extreme. While I think gold would show relative strength during that type of economic scenario, I think both metals would be under pressure if the U.S. Dollar started to surge. In fact, if the Dollar really took off to the upside I think both gold and silver could potentially selloff sharply.

As I am keenly aware, anytime I write something negative about gold and silver my inbox fills up with hate mail. However, if my expectations play out there will be some short term pain in the metals, but the selloff may offer the last buying opportunity before gold goes into its final parabolic stage of this bull market. The weekly chart of gold below illustrates the key support levels that may get tested should the Dollar rally.

For quite some time silver has been showing relative weakness to gold. It is important to consider that should the U.S. Dollar rally, silver will likely underperform gold considerably. The weekly chart of silver is illustrated below with key support areas that may get tested should the Dollar rally:



Clearly there is a significant amount of uncertainty surrounding the future of the Eurozone and the Euro currency. While I do not know for sure when the situation in Europe will come to a head, I think the U.S. Dollar will be a great proxy for traders and investors to monitor regarding the ongoing European debacle.

If the Dollar breaks down below the key support level discussed above, gold and silver will likely start the next leg of the precious metals bull market. However, as long as the U.S. Dollar can hold that key level it is quite possible for gold and silver to probe below recent lows.

Both gold and silver have been rallying for quite some time, but the recent pullback is the most severe drawdown so far. It should not be that difficult to surmise that gold and silver may have more downside ahead of them as a function of working off the long term overbought conditions which occurred during the recent precious metals bull market.

Make no mistake, if the Dollar does rally in coming months risk assets will be under significant selling pressure. While the price action will be painful, those prepared and flush with cash will have an amazing buying opportunity in gold, silver, and the mining complex. Right now, risk remains excruciatingly high as the European bureaucrats wag the market’s dog.

Subscribers of OTS have pocketed more than 150% return in the past two months. If you’d like to stay ahead of the market using My Low Risk Option Strategies and Trades check out OTS at Options Trading Signals.com and take advantage of our free occasional trade ideas or a 66% coupon to sign up for daily market analysis, videos and Option Trades each week.

JW Jones

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Crude Oil Closes The Week in Overbought Mode

Crude oil closed higher on Friday and above the May-July downtrend line crossing near 87.33. The mid range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are overbought and are turning neutral to bearish signaling that a short term top might be in or is near. Closes below the 20 day moving average crossing at 83.57 are needed to confirm that a short term top has been posted. If December extends the rally off this month's low, the 38% retracement level of the May-October decline crossing at 90.65 is the next upside target.

The crude oil market continues to mirror the action in the equity markets. The highs seen on Wednesday in the December contract at $89.69 a barrel remains to be taken out if this market is going to move higher. With mixed Trade Triangles and a Chart Analysis Score of +55, there is no clear cut direction for this market at the moment.

Crude oil is very overbought on the Williams % R indicator. We would not rule out a pullback to the $80 a barrel level, which would represent a 61.8% Fibonacci retracement. Our long term Trade Triangle continues to be negative and we expect it will once again dictate the tone of this market. Intermediate term traders should be on the sidelines and long term traders should continue to be short the crude oil market.


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Crude Oil Rises On Hopes of Euro Zone Deal

Crude oil futures rose Friday amid high hopes going into a weekend summit of European leaders working to resolve the sovereign debt crisis, following equities and the euro higher.

Prices jumped as trading opened in New York and were up as much as 3% in midmorning trade before settling back. Light, sweet crude for December delivery ended the day up $1.33, or 1.6%, to $87.40 a barrel on the New York Mercantile Exchange. Brent crude on the ICE Futures Europe exchange settled 20 cents lower, or 0.2%, to $109.56 a barrel.

Traders and analysts said the market rose on the belief that European leaders will finally put forth a comprehensive settlement to the European credit crunch that has plagued markets on and off for the last year and a half. Government and finance officials were to hold a series of meetings in Brussels this weekend; French President Nicolas Sarkozy and German Chancellor Angela Merkel issued a joint statement saying they would put forth a plan by Wednesday......Read the entire Rigzone article.


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EIA: Libya Resumes Natural Gas Exports to Italy

On October 13, 2011, Libya resumed natural gas exports to Italy via the 340-mile, Greenstream Pipeline (Greenstream), which is jointly owned by the Eni S.p.A. and the National Oil Company of Libya. Natural gas  delivery imports to Sicily, Italy, at the Gela receipt point, are now about 150 million cubic feet per day (MMcf/d).

Source: U.S. Energy Information Administration, based on Bentek Energy, LLC.

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Since February, unrest in Libya resulted in curtailed natural gas exports to Italy. Prior to the February curtailment, Libya supplied Italy with about 900 MMcf/d of natural gas, or 11% of Italy's average daily gas demand in 2010. Italy offset much of the reduced natural gas imports from Libya with increased imports of natural gas from Russia.



After natural gas flows resumed following the disruption, natural gas flowed from the onshore Wafa field about 300 miles southwest of Tripoli to Italy. Natural gas production at Wafa remained open during the crisis  and supplied natural gas to Libyan power plants. Most of Greenstream's natural gas usually comes from the offshore Bahr Essalam field (see map); only those volumes from Wafa in excess of domestic consumption are  available for export via Greenstream.

Crude Oil, Natural Gas and Gold Market Commentary For Friday Oct. 21st

Crude oil opened higher this morning but remains below the May-July downtrend line crossing near 87.23. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near.

If December extends this month's rally, the 38% retracement level of the May-October decline crossing at 90.65 is the next upside target. Closes below the 20 day moving average crossing at 83.52 are needed to confirm that a short term top has been posted.

First resistance is the 38% retracement level of the May-October decline crossing at 90.65 Second resistance is the 50% retracement level of the May-October decline crossing at 95.39

First support is the 10 day moving average crossing at 86.26
Second support is the 20 day moving average crossing at 83.52

Crude oil pivot point for Friday morning is 85.80

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Natural gas was lower overnight as it extends this week's trading range. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term.

Closes above Monday's high crossing at 3.777 are needed to confirm that a short term low has been posted. If November renews this year's decline, monthly support crossing at 3.225 is the next downside target.

First resistance is the 25% retracement level of the June-October decline crossing at 3.859 Second resistance is the reaction high crossing at 3.926

First support is last Thursday's low crossing at 3.446
Second support is monthly support crossing at 3.225

Natural gas pivot point for Fridays trading is 3.642

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Gold started the day sharply higher due to short covering overnight as it consolidates some of this week's decline.

Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If December extends this week's decline, September's low crossing at 1535.00 is the next downside target. Closes above Monday's high crossing at 1696.80 are needed to confirm that a short term low has been posted.

First resistance is Monday's high crossing at 1696.80
Second resistance is the 50% retracement level of September's decline crossing at 1729.40

First support is September's low crossing at 1535.00
Second support is the 38% retracement level of the 2008-2011 rally crossing at 1476.20
Gold pivot point for Friday morning is 1621.40

It's a good time to learn "How To Trade Market Sentiment"

SP500 Poised For A Sharp Pullback Near Term says Dr. Copper

Back on October 3^rd I wrote a public article forecasting a major market bottom at around 1088 on the SP 500 index.  I surmised we were about to complete a 5 wave move to the downside that commenced with the Bin Laden highs of 1370 in early May of this year.  The following day we bottomed at 1074 intraday and closed over my 1088 pivot and continued higher as we all know.  That brings us to the recent highs of 1233 intraday this week, a strong 159 point rally off the 1074 lows in just a few weeks.

Markets I contend move based on human behavioral patterns, mostly because the crowd reacts to good or bad news in different ways depending on the collective psychology of the masses.  There are times when seemingly bad news is ignored and the markets keep going higher, and there are times when very good news is also ignored and the markets go lower. This is why I largely ignore the day to day economic headlines and talking heads on CNBC, as they are not much help in forecasting markets at all.

Using my methods, I was able to forecast the top in Gold from 1862-1907 while everyone was screaming to buy.  I was able to forecast the April 2010 top in the SP 500 well in advance, the bottom last summer, and recent pivot tops at 1231 and 1220 amongst others.  All of this is done using crowd behavioral theory and a bit of my own recipes.  

That brings us forward to this recent rally from 1074 to 1233, which as it turns out is not all that random.

The rally to 1233 will have taken place within a 13 Fibonacci trading day window which ends today.  In addition, the rally is leading into the end of Options Expiration week which tends to mark pivot highs and pivot lows nearly every single month.  Also, at 1233 we have a 61% Fibonacci retracement level of the 1010 lows of July 2010 and the 1370 highs of May 2011.  1233 was my “Bear line in the sand” I gave out a few months ago to my subscribers as a likely bull back breaker.  

In essence, the market is having trouble breaking the glass ceiling at 1233 for a reason; it’s a psychological barrier for investors now.

Near term, I expect the market to have another sharp correction to work off the near 160 point SP 500 rally that has taken hold in just over two weeks and again on 13 Fibonacci trading days as of today.  In addition to that, we should follow copper as it tends to be an extremely good indicator for the SP 500 index long and short term.

Right now, Copper has dropped 8% this week while the SP 500 levitates on a magic carpet ride within a 30 point range.  Copper looks like it has begun a 5^th wave down, which will likely take it to the $2.70’s per pound from $3.46 last week on its recent bounce from $2.99.  Below I offer a few charts showing the projected copper pattern and also one showing the SP 500 relating to Copper.

In any event, we are due for what I call a “B wave” correction of sentiment in the SP 500 and market indices, which should take the SP 500 to the 1149-1167 ranges minimally, and perhaps set up another entry for a C wave to the upside.  Caution is warranted near term is my point.  If you’d like to receive these types of regular updates during the week covering Gold, Silver, and SP 500 and more, check us out for a coupon or free weekly update at Market Trend Forecast.Com

David Banister

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Oil N' Gold: Crude Oil Daily Technical Outlook For Thursday Oct. 20th

Crude oil's break of 85.55 minor support argues that whole rebound from 74.95 has completed at 89.51, on bearish divergence condition in 4 hours MACD. Intraday bias is back to the downside and break of 83.17 support should confirm this bearish case and target a test on 74.95 low. On the upside, in case of another rise, we'd continue to expect upside to be limited by 90.52 resistance (38.2% retracement of 114.83 to 74.95 at 90.18) and bring resumption of whole decline from 114.83. However, note that decisive break of 90.52 will argue that crude oil has completed a double bottom reversal pattern (75.71, 74.95) and would bring stronger rise through 100.62 resistance.

In the bigger picture, medium term rebound from 33.2 is treated as the second leg of consolidation pattern from 147.24 and should have finished at 114.83 already. Current decline should target next key cluster support at 64.23 (61.8% retracement of 33.2 to 114.83 at 64.38) next. Sustained break will pave the way to retest 33.2 low. On the other hand, note that the fall from 114.83 is note clearly displaying an impulsive structure yet. Break of 90.52 will argue that price actions from 114.83 could merely be forming a sideway consolidation pattern and rise from 33.2 might still extend beyond 114.83 before completion.

Check out Oil N' Gold.Com for the Nymex Crude Oil Continuous Contract 4 Hour, Daily and Monthly Charts

Crude Oil Analysis & How To Trade Oil Report

How to trade oil is not an easy thing to do in today’s headline driven market. Even the best oil analysis which may have been correct will still be wrong at times. This is due to the fact that oil has many factors which play into its price. Things likes like extreme weather conditions, geopolitical events, currency fluctuations, economic conditions and supply and demand.

During any time of the day oil traders and their oil analysis stand a good chance of having one of these factors directly affect the price of crude oil messing up their charts.

But, I am a firm believer that these factors (news events) generally fall in line with the overall larger trend of oil. So understanding how to spot trends in oil is a vital part of the equation.

Another important aspect of trading crude oil along with stocks and commodities is for you to understanding how to trade price and volume at an intraday time frame. If you don’t understand candle sticks, chart patterns and volume will get your head handed to you more times than not.

Let’s take a look at some charts which cover everything you need to know in great detail…...

How to Trade Oil Daily Chart Analysis:

Below you can see clearly how the overall trend is down for oil. You can also see the repeated bearish patterns and key resistance levels. In my oil analysis I focus on finding and trading the trend. You will not find me trying to pick a major top or bottom with my strategy; rather I focus on low risk high probability continuation patterns within a trend.

Once the trend stops and reverses there will likely be one or two losing trades as the investment shakes things up and sentiment slowly comes around and shifts to support the new trend in oil.

Intraday Crude Oil Analysis:

This is a chart of Oct 19^th using a 5 minute interval. The annotations on the chart explain clearly what I saw and was hoping to see for an oil etf trade setup this week.

How To Trade Oil Conclusion:

In short, I have been waiting for this setup to unfold for a few days now. This report goes to show that if you have the patients to site back, watch and wait you will trade with much less risk. By doing this you reduce risk on your overall position because you can time your entry 1-3 days before oil moves in your favour getting you the best possible price. Also the less time you have to keep your money in a trade the better because of the factors (news events) I told you about earlier. Cash is king! Get my bi-weekly reports and videos by joining my free oil newsletter here at The Gold and Oil Guy.Com

Chris Vermeulen

Williams [WMB] to Split Into Two Before Years End

Williams' [ticker WMB] board of directors has approved a revised plan to separate the company's businesses into two stand alone, publicly traded corporations. The revised plan calls for Williams to fully separate its exploration and production business via a tax free spinoff to Williams shareholders by year end 2011. The new independent exploration and production business will be known as WPX Energy, Inc.

The previously proposed plan was to conduct an initial public offering (IPO) of WPX Energy in 2011, followed by a spinoff of Williams' remaining WPX Energy shares in first quarter 2012.

Following the spinoff, Williams shareholders will own common stock in Williams, a premier owner/operator of North American midstream and natural gas pipeline infrastructure assets; and common stock in WPX Energy, a large scale, independent North American diversified exploration and production company with positions in key North American oil shale and gas basins along with additional holdings in South America. WPX Energy's stock will trade on the New York Stock Exchange under the symbol "WPX."

"The continued instability and weakness in equity markets, especially for new issuances, makes the IPO of WPX Energy appear unattractive in the near term," said Alan Armstrong, president and chief executive officer.

"However, the strong growth in cash flows from our energy infrastructure businesses gives us the flexibility to revise our plans and prepare to separate WPX Energy by the end of this year.....Read the entire Rigzone article.

Phil Flynn: A Sad Day For Freedom And The Free Markets

The CFTC took a dangerous step towards damaging the credibility of our nation's energy markets and may have harmed the economy and the average American. The commission's view that speculators are guilty until proven innocent is just another step in the Dodd-Frank regulatory overreach that is freezing our economy and stagnating job growth. This witch hunt against this elusive ghost called "excessive speculation" culminated in a 3 to 2 party line vote that will help drive trading in oil into a less transparent marketplace and will eventually lead to a less liquid and more volatile market.

You think trading is volatile now, well folks you haven't seen anything yet. In fact forget about volatility. I predict that the implantation of these new regulations will create shortages the next time the market is challenged by the type of economic crisis that we saw in 2008.
The spike up in oil to the all time high in 2008 was the catalyst for this damaging regulation and it was based on the false assumption that "excessive speculation" was driving the price of oil to record highs. Of course we now all know that the prices of oil and all other commodities were a relief valve as the market sought safe haven from the greatest economic crisis of modern times. If money was restricted from entering the futures markets at that time, the global economic crisis would have had much more severe consequences. We would have seen hording of supply and the freezing of commodity movement as the big players would have refused to sell to each other because of the lack of real true price discovery. In other words, the global commodity markets would have frozen more than the banks.

Read the entire article "A Sad Day For Freedom And The Free Markets"


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The SP 500, Apple Earnings and Feeding The A.D.D. Monster

The last hour of trading was intense on Tuesday and then all eyes were focused on Apple’s earnings which were released around 4:30 ET. The initial reaction to the earnings release is negative although as I write this AAPL is bouncing sharply higher in after market trading on strong volume.

To put the final hour’s volatility into perspective, at 3 P.M. Eastern Time the S&P 500 Index was trading at 1,217. A mere 12 minutes later the S&P 500 Index pushed 15 handles higher to trade up to 1,232. Then sellers stepped in and pushed the S&P 500 lower by nearly 12 handles in the following 20 minutes.

The price action was like a roller coaster and I was sitting watching the flickering red and green bars in real time with the anticipation of a child. It was the most excitement I have had in quite some time, but please don’t hold that against me. I don’t know whether reading my previous line makes me laugh or cry, but the truth must be heard I suppose.

Enough self deprecation, I want to get down to business with some charts and what is likely to happen in coming sessions. The sell the news event in AAPL has the potential to really change the price action tomorrow. If prices hold at lower levels, the indices could roll over sharply tomorrow. The S&P 500 E-Mini futures contracts are showing signs of significant weakness after the earnings miss by Apple in aftermarket trading.

Some other potentially game changing news items came out of Europe where Reuters reported earlier today that the Eurozone will likely pass legislation that will ban naked CDS ownership on sovereign debt instruments. Additionally, Treasury Secretary Timothy Geithner stated this morning that a forthcoming FHA announcement involving a new housing refinance plan was going to be made public in coming days. The statement regarding the new FHA plan helped the banks and homebuilders show relative strength during intraday trading and likely were behind much of the intraday rally.

I would point out that the S&P 500 Index (SPX) broke out slightly above the August 31 highs before rolling over. The reason that is critical is because the S&P 500 E-Mini futures did not achieve a breakout, but tested to the penny the August 31^st highs. I am going to be totally focused on tomorrow’s close as I believe it will leave behind clues about the future price action in the S&P 500 leading up to option expiration where volatility is generally exacerbated. The daily chart of the S&P 500 Index is shown below:



If Wednesday’s close is below the recent highs near 1,230 we could see this correction intensify. The price action on Tuesday helped stop out the bears and if we see a significant reversal tomorrow the intraday rally today will have been nothing more than a bull trap. The price action Tuesday & Wednesday could lead to the perfect storm for market participants where bears were stopped out and bulls are trapped on the potential reversal.

Another interesting pattern worth discussing is the head and shoulders pattern seen on the SPY hourly chart. The strong rally to the upside may have indeed negated the pattern, but if prices don’t follow through to the upside in the near term and the neckline of this pattern is broken to the downside we could see serious downside follow through. The hourly chart of the Spider SPY Trading ETF is shown below:

Ultimately there are two probably scenarios which have different implications going forward. The short-term bullish scenario would likely see prices breakout over recent highs and push higher toward the key resistance area around the 1,260 price level. The 1,260 price level corresponds with the neckline that was broken back in August that led to heavy selling pressure.

Bullish Scenario
If we do breakout to the upside, the longer term ramification may wind up being quite bearish as most indicators would be screaming that price action was massively overbought at those levels and a sharp selloff could transpire into year end. The daily chart of the S&P 500 Index illustrates the bullish scenario below:




Bearish Scenario
The short term bearish scenario would likely involve a break below Monday’s lows that would work down to around the 1,140 level or possibly even lower. If a breakdown took place, a higher low could possibly be carved out on the daily chart which could lead to a multi month rally that would likely see the neckline mentioned above tested around the holiday season. The daily chart of the S&P 500 below shows the bearish scenario:



There are a variety of reasons why either scenario could unfold. Most of the analysis that I look at argues that the bearish scenario is more probable. However, based on what happened in the final hour of trading on Tuesday and the surprise earnings miss from Apple anything could happen.

I will likely wait for a confirmed breakout either to the upside above recent highs or to the downside below the neckline of the head and shoulders pattern illustrated above before accepting any risk. I am of the opinion that risk is exceptionally high in the near term. I am not going to try to be a hero, instead I am just going to wait patiently for a high probability setup to unfold.

Until a convincing breakout in either direction is confirmed, I am going to sit on the sidelines. I am quite content just watching the short-term price action without taking on any new risk. For those that want to be heroes or feel they have to trade, I would trade small and use relatively tight stops to define risk. Risk is excessively high!

Subscribers of OTS have pocketed more than 150% return in the past two months. If you’d like to stay ahead of the market using My Low Risk Option Strategies and Trades check out OTS at Options Trading Signals.Com and take advantage of our free occasional trade ideas or a 66% coupon to sign up for daily market analysis, videos and Option Trades each week.

JW Jones

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Crude Oil Continues to Mirror Action in the Equity Markets

Is the market a buy or short sale? That’s the question that is going through many trader’s minds this week. Should I buy this market, or should I go short this market? At the moment, this market is being driven by perception and sentiment. Eventually that will change and the market will become driven by the direction of the major trend.

Our major trend indicators remain negative on the equity markets. We are also looking at the S&P 500 at the top of the Donchian trading channel. I believe that was the reason for yesterday’s sharp move down.

In order for this market to really get going on the upside it needs to clear the highs of 1230 on the S&P 500 in a convincing fashion.

There is so much confusion in the marketplace right now.....Interest rates, mortgage foreclosures, contagion in Europe and the occupation of Wall Street. The markets always have numerous conflicting thoughts, but eventually the market figures it out and goes the way it wants to go. Our job here at MarketClub is to recognize those changes and alert you to what we are witnessing.

Let's look at todays action in crude oil......

The crude oil market continues to mirror the action in the equity markets. The highs seen yesterday in the December contract at $88.40 a barrel remains to be taken out if this market is going to move higher. With mixed Trade Triangles and a Chart Analysis Score of +70, there is no clear cut direction for this market at the moment. Crude oil is very overbought on the Wiliams % R indicator.

We are looking for a pullback to the $80 a barrel level, which would represent a 61.8% Fibonacci retracement. Our long term Trade Triangles continue to be negative and we expect they will once again dictate the tone of this market. Long term traders should continue to be short the crude oil market.

December crude oil closed up $1.88 a barrel at $88.50 today. Prices closed nearer the session high today, hit a fresh four week high and scored a bullish “outside day” up on the daily bar chart. Crude bulls still the overall near term technical advantage and gained fresh upside momentum today.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = + 70

Now, let’s go to today's video and look at the 6 major markets we track every day.

Adam Hewison


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Insider Monkey: Wilbur Ross Buys More EXCO Resources, Ticker XCO

Wilbur Ross’s Invesco Private Capital (WL Ross & Co) filed Form 4 on October 17th for its insider purchase in Exco Resources Inc. (XCO). Invesco Private Capital is XCO’s insider and largest stakeholder, and the firm reported 26.78 million shares, or 12.5% activist stake in XCO in its last 13D on August 31th. According to the Form 4 disclosure, Wilbur Ross bought 7,900 shares at $9.99 on October 13th. Although this is just a small purchase he made recently, Wilbur Ross has filed totally 4 insider purchases in XCO since September. XCO is now trading at $11.62, still near its 2 year low.

In the second quarter, twenty nine hedge funds in our tracking list had XCO in their portfolios. Howard Marks’ Oaktree Capital Management had 34.78 million shares, giving a 16.23% stake. Wilbur Ross’s Invesco Private Capital (WL Ross & Co) had 2.10 million shares, or 9.8% stake at that time, after a decrease of 95%. Anand Parekh’s Alyeska Investment Group had 9 million shares, corresponding to a 4.2% stake.

Wilbur Ross is known for restructuring failed companies. He specializes in leveraged buyouts and distressed businesses. He was listed as one of the world’s billionaires with a net personal wealth of $1.9 billion in 2011. His Invesco Private Capital (WL Ross & Co) has a portfolio value of $1.24 billion, with most of the capital invested in Financial, Basic Materials, and other sectors.

EXCO Resources, Inc. is an independent oil and natural gas company. According to Yahoo! Finance, the company “engages in the exploration, exploitation, development, and production of onshore North American oil and natural gas properties with a focus on shale resource plays”. The company had proved reserves of approximately 1.5 trillion cubic feet equivalent, and operated 7,276 wells as of December 31, 2010. The company was founded in 1955 and is headquartered in Dallas, Texas.


Posted courtesy of Insider Monkey. Visit our favorite website for tracking the actions of hedge fund managers around the world at Insider Monkey.Com

EIA: Summer 2011 Electricity Prices Were Mostly Down Compared to Summer 2010

Source: U.S. Energy Information Administration, based on data from SNL Energy.

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Except for Texas, California, and the Southwest, average on-peak, wholesale electricity prices at trading points across much of the country declined during the summer (May 15 to September 15) of 2011 when compared to the summer of 2010. Wholesale power prices generally mirrored changes in wholesale natural gas prices. One stark exception was in the system operated by the Electric Reliability Council of Texas (ERCOT) where extreme, sustained, widespread heat as well as insufficient capacity resulted in wholesale prices over 100% higher compared to the summer of 2010.

Electric system demand typically increases in the summer months as a result of residential air-conditioning demand. This increased demand usually drives up wholesale electricity prices compared to the spring and fall.

Some key drivers of price changes this summer included:

Weather: Mild temperatures throughout the Northeast and Central United States drove significant declines in average power prices in New England, New York, and the Midwest. The sustained heat wave in Texas resulted in record-breaking load levels. The map below shows the percentage change in cooling degree-days between the summer of 2010 and the summer of 2011, by state. Texas had a 13% increase in cooling degree-days, while Oklahoma and New Mexico had 15% and 13% increases, respectively. August 2011 was the warmest August recorded by the National Oceanic and Atmospheric Administration for New Mexico, Oklahoma, Colorado, Arizona and Louisiana.

Source: U.S. Energy Information Administration, based on data from the National Oceanic and Atmospheric Administration.

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Natural Gas Prices: Because natural gas is the marginal fuel for electricity generation in many regions of the country, natural gas prices can have a significant impact on the wholesale price of electricity. Overall, wholesale natural gas prices this summer were little changed compared to prices in the summer of 2010; wholesale natural gas prices at the Henry Hub in Louisiana fell about 1% to $4.30 per million British thermal units. There were some regional changes, however. In the Northeast, wholesale natural gas prices were down between 2% and 15%, reflecting both lower regional demands and growing natural gas production from the Marcellus shale play. Natural gas prices were about 4-7% higher than last summer in the Southwest and California markets and supported modestly higher wholesale power prices in those markets.

Hydroelectric Output: Power prices in the Pacific Northwest were driven down by the availability of inexpensive hydroelectric generation and mild temperatures in the early part of the summer. The average on-peak wholesale electricity price at Mid-Columbia zone (along the Washington/Oregon border) decreased 6% as hydroelectric output increased above five-year highs.

Gold, Crude Oil and Natural Gas Trading Numbers For Tuesday Morning

Crude oil opened lower Tuesday morning as it consolidates below the May-July downtrend line crossing near 87.11. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

Multiple closes above the aforementioned downtrend line would confirm a trend change while opening the door for a possible test of the 38% retracement level of the May-October decline crossing at 90.65. Closes below the 20 day moving average crossing at 82.61 are needed to confirm that a short term top has been posted.

First resistance is the aforementioned downtrend line crossing near 88.40.
Second resistance is the 38% retracement level of the May-October decline crossing at 90.65.

First support is the 20 day moving average crossing at 82.61.
Second support is this month's low crossing at 74.95.

Crude oil pivot point for Tuesday mornings trading is 86.81.

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December gold opened lower as it consolidates some of the rally off September's low. Stochastics and the RSI are overbought but remain neutral to bullish hinting that a short term low might be in or is near. Closes above last

Wednesday's high crossing at 1693.90 are needed to confirm that a short term low has been posted. If December renews the decline off September's, the 38% retracement level of the 2008-2011 rally crossing at 1476.20 is the next downside target.

First resistance is Monday's high crossing at 1696.80. Second resistance is the 50% retracement level of September's decline crossing at 1729.40.
First support is September's low crossing at 1535.00.
Second support is the 38% retracement level of the 2008-2011 rally crossing at 1476.20.

Golds pivot point for Tuesdays trading is 1679.60.

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Natural gas was lower overnight as it consolidates around the 20 day moving average crossing at 3.671. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term.

Multiple closes above the 20 day moving average crossing at 3.671 are needed to confirm that a short term low has been posted. If November renews this year's decline, monthly support crossing at 3.225 is the next downside target.

First resistance is the 25% retracement level of the June-October decline crossing at 3.859.
Second resistance is the reaction high crossing at 3.926.

First support is last Thursday's low crossing at 3.446.
Second support is monthly support crossing at 3.225.

Natural gas pivot point for Tuesday morning is 3.702.


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Adam Hewison: Was Last Week’s Market Rally a Head Fake?

Last week, the equity markets rallied along with many other markets. We felt at the time this was a counter trend rally and with Monday’s action we have probably put in an interim top. We also expressed the feeling that professional traders would be selling against the recent highs around 1220 to 1230 basis the S&P 500 index.

The rally was pretty unusual in the fact that it was on very light volume and it took off to the upside very quickly without any kind of market consolidation.

This is going to be a big week! Are we going to continue going up? Or are we going to see the longer term downtrend kick in? A downside reversal could be quite dramatic. This also holds true for the crude oil market, which has been mirroring the US equity markets.

The problems in Europe remain and we see little reason to celebrate any victories on that front. Greece will eventually default, and it remains to be seen if Ireland, Spain and Italy will dodge a bullet.

Every week it seems we go from “the world is coming to an end” to euphoria. Eventually the markets will sort out this conundrum. Our view longer term remains with our Trade Triangle technology which remains negative on the equity markets indicating long term weakness.

Now, let’s go to the 6 major markets we track every day. Click here for unlimited access to this and other trading videos FREE!


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BP Shares Surge After Anadarko Settlement

BP shares opened sharply higher Monday after the U.K. oil company reached a $4 billion out of court settlement with Anadarko related to a deadly explosion and oil spill at a U.S. offshore drilling platform.

Anadarko followed Japan's Mitsui & Co. and Weatherford International in agreeing to pay BP to settle claims over the Deepwater Horizon platform disaster, which killed 11 and led to the largest accidental marine oil spill in U.S. history. Drilling contractor Transocean's Deepwater Horizon rig had been leased by BP, while Anadarko and Mitsui also held stakes in the Macondo prospect.

Anadarko also agreed to drop its gross negligence claims against BP and transfer to BP the 25% interest it still holds in the Macondo well, which caused the devastating oil spill.

Like the Mitsui deal, BP's pact with Anadarko shelters the Houston based company from claims brought by private businesses and property owners seeking compensatory damages. But it doesn't protect Anadarko from punitive damages or penalties that might come from the U.S. government. Civil liability trials on the matter are scheduled to begin in February.....Read the entire Rigzone article.



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Phil Flynn: Seven Days

It's now 7 days to fiscal sanity, or is it the alternative? It is do or die with an October 23rd deadline. A deal to save Europe which has to be done in seven days and France and Germany have to do the heavy lifting.

The G20 told the EU that they have one week to come up with a "comprehensive plan" that includes the details on how much of a haircut Greek bondholders will have to take and a plan to recapitalize all of the debt ridden European banks. It seems that all are agreed and Europe will be saved yet again.

Yet not so fast. Perhaps that 7 day deadline is not as hard and fast as the markets at first believed. Dow Jones said that German Finance Minister Schauble said the upcoming EU summit will not present an ultimate solution for the crisis. What?

The bottom line is that oil is living and dying with the twists and turns in this European nightmare. If Europe fails to come up with a viable plan then the word sinks back into crisis mode and the demand for oil will plummet.

Iranian revelations are also disturbing. Fears that perhaps this could escalate to some type of military conflict could keep some upward pressure on the Brent WTI spread.



You can get a free trial of Phils daily trade levels. Just email him at pflynn@pfgbest.com.

Gold, Crude Oil and Natural Gas Numbers For Monday Morning Trading

Crude oil was higher overnight and is challenging the May-July downtrend line crossing near 88.40. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

Multiple closes above the aforementioned downtrend line would confirm a trend change while opening the door for a possible test of the 38% retracement level of the May-October decline crossing at 90.65. Closes below the 20 day moving average crossing at 82.90 are needed to confirm that a short term top has been posted.

First resistance is the aforementioned downtrend line crossing near 88.40
Second resistance is the 38% retracement level of the May-October decline crossing at 90.65

First support is the 20 day moving average crossing at 82.90
Second support is this month's low crossing at 74.95

Crude oil pivot point for Monday morning is 86.00

Make sure to check out our Free Weekly Index & Commodity Forecast

Natural gas was higher overnight as it extends last Friday's rally above the 20 day moving average crossing at 3.685. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term.

Multiple closes above the 20 day moving average crossing at 3.685 are needed to confirm that a short term low has been posted. If November renews this year's decline, monthly support crossing at 3.225 is the next downside target.

First resistance is the 25% retracement level of the June-October decline crossing at 3.859 Second resistance is the reaction high crossing at 3.926

First support is last Thursday's low crossing at 3.446
Second support is monthly support crossing at 3.225
Natural gas pivot point for Monday morning is 3.653

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Gold was slightly higher overnight as it extends the rally off September's low. Stochastics and the RSI remain bullish hinting that a short term low might be in or is near. Closes above last Wednesday's high crossing at 1693.90 are needed to confirm that a short term low has been posted.

If December renews the decline off September's, the 38% retracement level of the 2008-2011 rally crossing at 1476.20 is the next downside target.

First resistance is the overnight high crossing at 1696.80
Second resistance is the 50% retracement level of September's decline crossing at 1729.40

First support is September's low crossing at 1535.00
Second support is the 38% retracement level of the 2008-2011 rally crossing at 1476.20
Gold pivot point for Monday morning is 1677.00

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How Gold & Stocks are About to Repeat the 2010 Bottom

In May of 2010, immediately following the flash crash many investors started to become bearish (nervous) regarding their position in gold and equities. Once the general public became aware that the stock market could fall 10% in a matter of minutes, investors became very cautious. Suddenly protecting their capital and current positions was at the forefront of their investment process.

A couple days later the market recovered most of its value, but it became clear that investors were going to sell their long positions if the market showed signs of weakness. It was this fear which pulled the market back down to the May lows and beyond over the next couple months which caused investors to panic and sell the majority of their positions. It is this strong wave of panic selling that triggers gold and stock prices to form intermediate bottoms. Emotional retail traders always seem to buy near the top and sell at the bottom which leads to further pain.

Now, fast forward to today........

This past August we saw another selloff similar to the “Flash Crash” in May of 2010. I warned followers that gold was on the edge of topping and that stocks would take some time for form a base and bottom. Over the past couple months gold, silver, and stocks have been trying to bottom but have yet to do so.

Just a couple weeks ago we saw gold, silver, and equities make new multi month lows. This has created a very negative outlook among investors which I highlighted in red on the chart below. Since the panic selling low was formed just recently we have seen money pile back into gold and stocks (more so stocks).

This strong bounce or rally which ever you would like to call it may be the beginning stages of a major bull leg higher which could last several months. Before that could happen, I am anticipating a market pullback which is highlighted with red arrows on the chart below.

Chart of SP500, Gold and Dollar Index Looking Back 18 Months

Reasons for gold and stocks to pullback:

• Stocks are overbought and generally retracements of 50% or 61% are common following large rallies.
• The dollar index looks ready to bounce which typically means lower gold and stock prices.
• Gold continues to hold a bearish chart pattern pointing to lower prices still.

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A few weeks ago I warned my followers that stocks and gold are forming a bottom and that we should be on the lookout for further confirmation signs. I also mentioned that I was not trying to pick a bottom, rather that I was looking to go long once the odds were more in my favor.

This is a potentially very large opportunity unfolding and there will be several different ways to play this. However, right now I continue to wait for more confirming indicators and for more time to pass before getting subscribers and my own money involved.

From August until now (October 17) the SP500 is down -6.3% and gold is down -8.1%. Subscribers of my newsletter have pocketed over 35% in total gains using my simple low risk ETF trading alerts.

I can email you my bi-weekly reports and videos by joining my free newsletter here at The Gold and Oil Guy.com

Chris Vermeulen