The Crude Oil Trader: August 2010

Tuesday, August 31, 2010

Where is Crude Oil and Gold Headed on Wednesday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil & gold are likely headed tomorrow.

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Bears Maintain Near Term Technical Advantage as Traders Wait For Friday's U.S. Jobs Report

The U.S. stock indexes closed firmer today and saw some short covering to end the month. Bears still have the overall near term technical advantage. Traders are awaiting Friday's key U.S. jobs report. Trading could be quieter up until Friday morning. Remember that the months of September and October have been historically unkind to the stock market bulls. Friday's jobs report and the stock market's reaction to it could set the tone for trading in the stock indexes during the month of September.

Crude oil closed down $2.95 at $71.75 a barrel today. Prices closed near the session low today as bears have regained fresh downside technical momentum. A less than rosy economic assessment from the Fed in its FOMC minutes helped to sink crude today. Crude oil bears have the overall near term technical advantage.

Natural gas closed down 0.2 cents at $3.81 today. Prices closed near mid-range today. The bears still have the solid overall near term technical advantage. A 2 1/2 month old downtrend is still in place on the daily bar chart. The next upside price objective for the bulls is closing prices above solid technical resistance at $4.20.

The U.S. dollar index closed up 3 points at 83.59 today. Prices closed nearer the session high today. Bulls and bears are still on a level near term technical playing field. Bulls' next upside price objective is to close prices above solid technical resistance at 85.00.

Gold futures closed up $11.80 at $1,251.00 today. Prices closed near the session high, hit a fresh two month high, scored a bullish "outside day" up on the daily bar chart and posted a significantly bullish monthly high close today. Bulls gained fresh upside technical momentum today and are now poised to challenge the all time high of $1,270.60, scored in June. A weaker U.S. dollar and some fresh safe haven buying interest also helped to support the gold market today.

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Bloomberg Analysis: Crude Oil Price May Fall to $63 If Cap at "Pivot High" Holds

Crude oil may decline as low as $63 a barrel in New York if prices remain capped by a “pivot high” at $76.47, according to technical analysis by Barclays Capital. Oil futures for October settlement traded around $74 a barrel on the New York Mercantile Exchange today, having lost about 6 percent in August during their first monthly slide since June. Barclays predicts the losses may extend as far as $63 to $65 a barrel if crude stays below the level that confirmed the most recent downward trend, known as a “pivot high.”

On Aug. 19, following a two week fall in which oil dropped 9 percent, crude rose as high as $76.47. That level, higher than the previous and following days’ closing prices, constitutes a pivot high. In the following week, crude slumped to a three month low of $70.76, confirming that the downward slope had not been broken. “Absent a close above $76.47, I think you’ll maintain the downtrend,” Barclays analyst MacNeil Curry said in a telephone interview from New York today.

Prices will first be drawn to $70.35 a barrel, the lowest point reached by the October contract during its slide in May, according to Curry. After that, it is “fairly likely” the commodity will plunge another $6 to $7 as sagging equity indexes drag other markets lower, he said. “The inter-market is not very constructive right now,” Curry said. “Equity markets remain vulnerable to further downside.”

Reporter Grant Smith can be reached at gsmith52@bloomberg.net

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Schlumberger Finalizes $11 Billion Dollar Merger with Smith International

Schlumberger has closed its merger with Smith International. As previously announced, each Smith stockholder will receive 0.6966 shares of Schlumberger common stock in exchange for each Smith share, with cash paid in lieu of any fractional shares of Schlumberger common stock. Schlumberger has issued approximately 176 million shares pursuant to the merger, representing a transaction value of approximately $11 billion. As a result, former Smith stockholders own approximately 12.9% of Schlumberger's outstanding shares of common stock.

The merger widens Schlumberger's lead as the world's largest oilfield services company based on revenue and market capitalization. Smith's drilling technologies, other products and expertise complement a variety of Schlumberger technology offerings, while the geographical footprint of Schlumberger will enable the merged companies to extend joint offerings worldwide.

Andrew Gould, Chairman and Chief Executive Officer of Schlumberger, commented, "I am extremely pleased to welcome Smith employees, customers and shareholders to Schlumberger. We are ready to begin the process of realizing the synergies made possible by this merger and our focus in the near term is on the execution of plans that have been laid out these past few months while continuing to deliver safety and quality in our field operations. Beyond the near term, the merger will allow us to address new markets and develop new technologies, and employees from both companies will have key roles to play in unlocking the value brought by the combination."

John Yearwood, former Chief Executive Officer of Smith, said, "This is an exciting time for all the former Smith International employees as we aggressively expand our service offerings through the rapid implementation of the identified growth strategies while continuing to focus on our customers' everyday needs. The quality of the integration planning process has been outstanding and everyone is looking forward to exceeding expectations."

Many oil traders when they think about the impact of hurricanes on the oil market most often focus on the threat to supply. Yet the truth is more often than not hurricanes are more of a threat to demand then they are to supply. That is definitely the case when it comes to Hurricane Earl, not to mention tropical storm Fiona, Hurricane Danielle and a storm to be named later. Earl in particular could do major demand destruction as its path is perilously close to the East Coast.

Earl currently is a category 4 hurricane and is expected to graze the tip of North Carolina on Friday at 2 am just as vacationers are planning to arrive for the big three day Labor Day holiday weekend. I am sure many looking at the weather maps may be canceling their plans already as many will not want to chance the storm. In fact cancelation may become more prevalent as storm warnings all up and down the East coast may cause vacationers and beach lovers to stay closer to home! Hurricane Earl could just destroy a lot of holiday weekend travel plans and the gasoline demand that was expected. The oil and gas market was expecting.....Read the entire article.

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Crude Oil Technical Outlook For Tuesday Morning August 31st

Crude oil was lower overnight as it consolidates some of last Friday's rally. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term.

Closes above the 20 day moving average crossing at 76.49 are needed to confirm that a short term low has been posted. If October renews this month's decline, May's low crossing at 70.35 is the next downside target.

First resistance is Monday's high crossing at 75.58
Second resistance is the 20 day moving average crossing at 76.49

Crude oil pivot point for Tuesday morning is 74.76

First support is last Wednesday's low crossing at 70.76
Second support is May's low crossing at 70.35

Where Does The King of Natural Gas Price Forecasts Say Prices Are Headed

From Peter Schaefer at "Oil and Gas Investment"......

First Energy analyst Martin King, whom I believe has called the natural gas market in North America better than anybody over the last two years, gave up on the likelihood of higher natural gas prices for the next 18 months in a report today, Aug 30.

“Let us reiterate: placing money in the natural gas investment space, aside from special one time circumstances, is likely to be dead on arrival” he wrote this morning. He lowered his forecast for prices in the US for 2010 by 40 cents per million BTU, and in 2011 by a full dollar per million BTU (Mmbtu).

Back in February 2009, he was one of the very few calling for a spring rally in gas prices, but there was one. Throughout July and August 2009 he counselled investors that a big seasonal run was coming in natural gas prices and gas stocks, and he was right. Today King was even more negative on Canadian natural gas prices than US prices: “Impacts for Canadian gas pricing are even more negative as we have also chosen to modestly widen the price spread between Nymex and Aeco prices over the same forecast horizon.”

NYMEX is the New York merchantile exchange, and one of the major hubs where natural gas prices are quoted. AECO is the the Alberta based Canadian standard natural gas price quote. In the US, the reason for the lower price forecast is simple: natural gas producers are still drilling, despite low prices.

In Canada, King’s reasoning for even lower prices than the US include one that I have been speaking about for months: increased pipeline capacity in the US that makes domestic gas very portable, and has opened up new markets (the Northeast US and California) for previously stranded Rocky Mountain gas in the US, the mainstream Canadian media have not reported on this, and the amount of Canadian gas that is being displaced by this, at all.

Increasing gas supply coming out of Western Canada, as the Montney, Horn River and gas saturated oil plays increase production. First Energy forecast an actual increase in Western Canadian gas production in 2011, which would be the first time since 2006. King also spoke to a new pipeline taking Canadian gas down into the US at a time when the US market is having a hard time digesting all its own new home grown supply.

In an entertaining 7 page report, he used the analogy of the supply side being a big dragon, and the only sword that could slay it is sustained low prices for 18-24 months“....we are now wielding a price sword to slay this supply dragon with the view that prices low enough for long enough, will tilt the balance of the market firmly to a structurally undersupplied situation.”

Interestingly, natural gas prices rallied today, crawling back over $3/mmcf in Canada and up 11 cents to $3.74 in the US. Also, this last week of August marked the low price point for natural gas in Canada and the US for all of 2009.

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Crude Oil Heads for First Monthly Slide Since May on Slowing Global Growth

Crude oil fell, headed for its first monthly decline since May, as slower than forecast growth in U.S. personal incomes stoked speculation the pace of economic recovery in the world’s largest crude user may falter. Futures dropped as much as 1.3 percent, extending their decline from the highest level in a week, after the Commerce Department said that incomes rose 0.2 percent, less than the 0.3 percent median estimate of 66 economists surveyed by Bloomberg News. An Energy Department report tomorrow may show crude inventories gained last week.

“The past couple of weeks have been clouded by talk of a double dip recession,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “Until we get some macro news that is more consistent, these markets are going to be a bit choppy.” The October contract fell as much as 94 cents to $73.76 a barrel in electronic trading on the New York Mercantile Exchange, and was at $73.82 at 1:43 p.m. Singapore time. Yesterday, it dropped 0.6 percent to $74.70.

Prices have tumbled 6.3 percent this month and are down 6.8 percent since the start of the year. Oil rose 2.3 percent last week, the biggest increase since the period ended July 23. “The roller coaster ride continues,” said David Taylor, a market analyst at CMC Markets Ltd. in Sydney. “Markets have become hyper-sensitive to economic developments”.....Read the entire article.

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Phil Flynn: Big Bad Ben!

Commodity bears be on notice: Ben is coming to run that big bad deflation out of town. Ben Bernanke has made it clear that the Fed will step up if prices go down. Those words should bring comfort to commodity bulls that have been under assault from an array of weakening economic indicators. That worn out song “for an extended period” may change to "forever and a life time" and the Fed stands at the ready by the printing presses ready to print at a moment’s notice if price fall too far.

It is clear as Mr. Bernanke says that monetary policy continues to play a prominent role in promoting the economic recovery. And if it plays a prominent role in the economic recovery, it is a major factor in promoting the price of oil. Without the Fed's help, oil prices would be collapsing under the weight of near record supply. When the Fed takes steps to fight deflation it directly supports the price of oil. It does it in two ways. One way is because it weakens the dollar.....Read the entire article.

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Crude Oil Falls as Dollar Strengthens, Economic Outlook Remains a Concern

Crude oil fell for the first time in four days as slower than forecast growth in personal incomes heightened concern the economy is struggling to recover. Oil fell from the highest level in more than a week after the Commerce Department reported that incomes increased less than forecast and the savings rate dropped. The dollar strengthened against the euro, curbing the appeal of commodities as an alternative investment.

“You do have a lot of evidence that the economy is just stalling,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “Policy makers are all making a brave face and saying we’ve got plenty of tools available, but I’m starting to think they’re running out of tricks.” Crude for October delivery fell 69 cents, or 0.9 percent, to $74.48 a barrel at 9:20 a.m. on the New York Mercantile Exchange. Earlier, it touched $75.58. Futures have tumbled 5.7 percent this month, the first decline since May.

The dollar gained 0.4 percent against the euro. The U.S. currency traded at $1.2709 per euro, compared with $1.2763 on Aug. 27 in New York. Incomes rose 0.2 percent, according to the Commerce Department, less than the 0.3 percent median estimate of 66 economists surveyed by Bloomberg News.

Reporter Margot Habiby can be contacted at mhabiby@bloomberg.net

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Crude Oil Technical Outlook For Monday Morning

Crude oil was lower overnight as it consolidates some of last Friday's rally but remains above broken resistance marked by the 10 day moving average crossing at 74.09. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term.

Closes above the 20 day moving average crossing at 76.96 are needed to confirm that a short term low has been posted. If October renews this month's decline, May's low crossing at 70.35 is the next downside target.

First resistance is the overnight high crossing at 75.58
Second resistance is the 20 day moving average crossing at 76.96

Crude oil pivot point for Monday morning is 74.27

First support is last Wednesday's low crossing at 70.76
Second support is May's low crossing at 70.35

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Sunday, August 29, 2010

High Volume Resistance Plagues Precious Metals, Crude Oil & SP500

Last week was a relatively strong week for stocks and commodities. Although the SP500 closed slightly lower on the week the price action Friday was strong. The recent pop in commodities has everyone feeling good and bullish again and we all know how the market works… When everyone is feeling good the market has a way of shaking things up.

Below are a few charts showing heavy volume resistance levels that will most likely cause the broad market & commodities to pullback or trade sideways for a few days as buyers and sellers play tug-o-war.

SLV – Silver Bullion ETF Trading
Silver had a very nice pop last week but if you step back and look the recent price action you can see that it’s still trading below the previous major bounce from back in June. It looks as though silver is a little over extended as large percentage moves tend to give back 25-50% of the mover shortly after.

Take a look at the price by volume bar. It shows there has been heavy volume traded at that $19.00 level and the previous time it was reached sellers stepped back in pulling silver down.

GLD – Gold Bullion ETF Trading
Gold is trading deep into the resistance level and struggling to hold up. Last week we went long GLD after the bullish engulfing candle and took profits near the high two days later on Thursday’s price. Although gold is trading at resistance the intraday price action remains somewhat bullish/neutral for the time being.

USO – Oil ETF Trading
The oil ETF broke down from its large multi-month bear flag and is now bouncing up to test that breakdown/resistance level. This could be a possible kiss good bye. I will keep my eye on this commodity as it could provide us with a great shorting opportunity in the coming days.

SPY – SP500 ETF Trading
The equities market has been tried to bottom all week and Friday’s price action looks strong. While the chart looks strong the market internals are telling me the opposite. Last week we saw a gap down and Friday that gap window was filled. With heavy volume resistance just above the current price the odds are pointing to lower prices.

Weekend Equities and Commodities ETF Trading Report:
In short, it looks as though everything is trading just under or at resistance levels. That means sellers will start to enter the market and cause prices to stall (trade sideways/choppy) and or reverse lower.

That being said, with Friday’s strong close for oil and the sp500 I am expecting a gap higher in the morning because traders will review those charts this weekend and enter the market Monday feeling bullish.

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Natural gas's decline extended further last week as expected and the strong break of 3.81 support confirms that whole fall from 6.108 has resumed. Initial bias remains on the downside this week for 161.8% projection of 5.196 to 4.288 from 4.007 at 3.538 first. On the upside, above 3.86 minor resistance will turn intraday bias neutral and bring recovery. But upside should be limited below 4.288 resistance and bring another fall.

In the bigger picture, the strong break of 3.81 support last week confirms that whole decline from 6.108 has resumed. Further fall should be seen to 100% projection of 6.108 to 3.81 from 5.194 at 2.896 next. More importantly, the development revived the case that medium term rebound from 2.409 is completed at 6.108 already. Also, fall from 6.108 might indeed be resuming the long term down trend for a new low below 2.409. We'll pay attention to the structure of the current decline for more hints. On the upside, break of 4.288 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.

In the longer term picture, while the bounce from 2.409 was strong, it's been limited below 55 months EMA (now at 5.877) and reversed. The failure to sustain above 55 weeks EMA (now at 4.617) also argue that 2.409 might not be the bottom yet. We'll stay bearish as long as this year's high of 6.108 holds and favor a new low below 2.409 going forward.

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Saturday, August 28, 2010

Crude Oil Analysts' Horrible Track Record Shows Why Prices Could Super Spike Thanks To China

Last week we highlighted a chart from the Council on Foreign Relations, which showed China's potential to become a truly monstrous oil consumer, should it approach the oil consumption-per-capita levels of Taiwan, Korea, or heaven forbid, the U.S.. Here's a quick refresher of the chart, for those who don't want to check the previous post:

China could rock oil. Basically, China has the potential to truly rock the oil market, just as it has already done for other commodities such as iron ore, given that even at its currently low level of oil consumption per capita, it is the second-largest oil consuming nation in the world.
If so, then why aren't more people talking about this? Is it just a scare story?

So far the consensus view is that China won't fulfill the scare story shown in the chart above, since the Chinese government is already working to restrain oil consumption growth in the future, via initiatives such as natural gas powered transportation and research into mass market electric cars. The consensus oil view is thus that China's oil demand will rise for the next few decades, but not by as much as the CFR shock chart above would suggest. We even received some push back from an experienced oil analyst for discussing the topic.

Many professionals believe it won't happen. Here's a slightly dated China oil forecast we pulled from the IEA, which shows a rather tame growth trend for Chinese oil consumption. While the chart below is from 2007, the latest China oil consumption forecast is about 9 million barrels per day by the end of 2010, which is similar to what's shown below.

Problem is... professional oil demand forecasts are horribly inaccurate. Thing is, the IEA has been hiking their Chinese demand forecasts for years as shown below. Even as recently as 2004, the IEA expected that China's 2015 oil consumption would be 9 million barrels per day... which is about what today, in 2010, China's consumption is expected to be by the end of this year. Oops. Forecasts just keep rising:

Moral of the story -- commodity price spikes happen because nobody expects them to. Just because many pros think China will diversify its fuel sources into electricity and natural gas, thus keeping oil consumption in check, doesn't mean it will happen. Many oil market pros could easily be wrong, as they've been in the past, and Chinese demand could continue to be revised upwards, just as the CFR chart we showed last week suggests is a possibility.
Sharp spikes in prices happen, after all, since few expect them to happen, and reality keeps bewildering expectations. Does this mean oil prices are guaranteed to super-spike? Of course not. But don't discount the simple historical analysis shown by the CFR chart above, China could easily fail in its quest to reduce its oil dependence, and send oil prices through the stratosphere as a result.

For more check out Vincent Fernando at Business Insider .Com

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Crude Oil Weekly Technical Outlook For Saturday August 28th

Crude oil dropped to as low as 70.76 last week but was supported by 71.09 support and rebounded. As short term bottom should be in place with bullish divergence condition in 4 hours MACD. More recovery would likely be seen in near term. But upside should be limited by 61.8% retracement at 78.31 and bring fall resumption. As discussed before, decisive break of 71.09 support will confirm our bearish view that whole rebound from 64.23 is finished at 82.97 already and target another low below 64.23.

In the bigger picture, choppy rebound from 64.23 is treated as a correction to fall from 87.15 only and has possibly finished at 82.97 already. Decisive break of 71.09 will confirm this case and also indicate that whole fall from 87.15 is resuming for 60 psychological level, (50% retracement of 33.2 to 87.15 at 60.18, 100% projection of 87.15 to 64.23 from 82.97 at 60.05). Decisive break there will indicate that fall from 87.15 is developing into a powerful impulsive wave and would target 33.2 low. On the upside, break of 82.97 resistance is needed to invalidate this view. Otherwise, we'll stay bearish in crude oil.

In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall from 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.

Nymex Crude Oil Continuous Contract 4 Hour, daily, weekly and monthly Charts.

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Friday, August 27, 2010

Sorry BP, No One Wants You Drilling In The Arctic

BP has been dissuaded not to join in on oil drilling operations in the Arctic region around Greenland, according to The Guardian. BP was persuaded not to join in the bidding process by the country of Greenland, which felt that the company's involvement in the project might make a bad PR situation worse.

A Greenpeace ship is already stationed off the coast of Greenland, protesting Cairn Energy's exploration activities there. Cairn announced on Tuesday that it had found natural gas in the area, but not any oil.

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Many traders get so involved with the market on a daily or even an intraday basis, that they somehow lose out on the bigger picture. Weekly charts are enormously helpful in giving clues to the future direction of the market.

In today's video we examine one of the biggest markets in the world, the S&P 500, using a weekly chart. The video runs about two minutes in length and we think you will find it both educational and informative.

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Crude oil was higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are turning bullish hinting that a short term low might be in or is near.

Closes above the 20 day moving average crossing at 77.23 are needed to confirm that a short term low has been posted. If October extends this month's decline, May's low crossing at 70.35 is the next downside target.

First resistance is the 10 day moving average crossing at 74.03
Second resistance is the 20 day moving average crossing at 77.23

Crude oil pivot point for Friday morning is 73.29

First support is Wednesday's low crossing at 70.76
Second support is May's low crossing at 70.35

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Thursday, August 26, 2010

Crude Oil Falls on Concerns About Economic Recovery, Spain's Deficit

Crude oil declined for the first day in three after equities fell as a slowdown in U.S. manufacturing added to concern that economic growth is faltering, curbing fuel demand. Oil is dropping for the third week, the longest losing streak since May, as Asian stocks slipped on expectations of revisions to U.S. economic growth figures later today. A Federal Reserve Bank of Kansas City report yesterday showed manufacturing slowed in August. U.S. crude inventories climbed more than expected last week, an Aug. 25 report from the Energy Department showed.

“The oil market is very bearish,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “The fundamental picture is just not positive at all. If oil breaks $70, it will come under pressure and then you’ll see it substantially lower.” Crude oil for October delivery dropped as much as 49 cents, or 0.7 percent, to $72.87 a barrel in electronic trading on the New York Mercantile Exchange and was at $73.03 at 11:27 a.m. Singapore time. Yesterday, the contract rose 84 cents, or 1.2 percent, to $73.36. Prices have dropped 0.6 percent this week and 8 percent since the start of the year.

Economists who projected the U.S. recovery would gain speed in the second half of the year are now scaling back those forecasts as the outlook for jobs and business investment dims. Second quarter gross domestic product growth may be revised down to 1.4 percent from 2.4 percent earlier , according to a Bloomberg News survey of economists.....Read the entire article.

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Where is Crude Oil and Gold Headed on Friday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets and looks ahead to where oil and gas are likely headed tomorrow.

The S&P 500 index closed lower on Thursday as it consolidates some of Thursday's rally. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that additional weakness is possible near term. If September extends this month's decline, July's low crossing at 1003.10 is the next downside target. Closes above the 20 day moving average crossing at 1090.13 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 1068.71. Second resistance is the 20 day moving average crossing at 1090.13. First support is Wednesday's low crossing at 1037.50. Second support is July's low crossing at 1003.10.

Crude oil closed higher due to short covering on Thursday despite record high US oil stockpiles. The mid-range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are oversold and are turning neutral to bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 77.53 are needed to confirm that a short term low has been posted. If October extends this month's decline, May's low crossing at 70.35 is the next downside target. First resistance is the 10 day moving average crossing at 74.27. Second resistance is the 20 day moving average crossing at 77.53. First support is Wednesday's low crossing at 70.76. Second support is May's low crossing at 70.35.

Natural gas closed lower on Thursday as it extends this month's decline. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If October extends this month's decline, weekly support crossing at 3.810 is the next downside target. Closes above the 20 day moving average crossing at 4.343 would confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 4.138. Second resistance is the 20 day moving average crossing at 4.343. First support is Today's low crossing at 3.825. Second support is weekly support crossing at 3.810.

The U.S. Dollar closed lower due to profit taking on Thursday as it consolidates some of this month's rally. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If September extends this month's rally, the reaction high crossing at 84.73 is the next upside target. Closes below the 20 day moving average crossing at 82.07 would temper the near term friendly outlook. First resistance is Tuesday's high crossing at 83.64. Second resistance is the reaction high crossing at 84.73. First support is the 20 day moving average crossing at 82.07. Second support is the reaction low crossing at 81.99.

Gold closed lower due to a decline in jobless data on Thursday as it consolidates around the 75% retracement level of the June-July decline crossing at 1239.60. Stochastics and the RSI are overbought, diverging but are turning bullish signaling that sideways to higher prices are possible near term. If August extends the rally off July's low, the 87% retracement level of the June-July decline crossing at 1253.30 is the next upside target. Closes below the 20 day moving average crossing at 1212.80 would temper the friendly outlook. First resistance is today's high crossing at 1244.50. Second resistance is the 87% retracement level of the June-July decline crossing at 1253.30. First support is the 10 day moving average crossing at 1229.70. Second support is the 20 day moving average crossing at 1212.80.

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Phil Flynn: When Bad News Becomes Good News

Oh sure the economic data did not get any better. New homes sales were a disaster and the Energy Information Agency report was very bearish yet the good news is that a lot of the bad news was already priced in. Now doesn’t that make you feel better? Yes things are lousy but as bad as they are at this point in time we actually priced in that things were even worse! Yippee!! Time to celebrate! Forget that doom and gloom of Tuesday. Now its doom and zoom as the market tries to tell itself hey nothing can be that bad! Can it?

Well I hate to be a bummer but it can. The oil inventory report shows that the economy has slipped back into recession. It is a portrait of everything that is wrong about the economy. Oil and product supplies are surging reflecting the same things we have seen in other markets. It shows that the economy, somewhere in the middle of summer, hit a brick wall and went back into recession. Oh sure some may say that the builds are seasonal and that this is to be expected yet the magnitude of oil supply and the direction demand is going is sending out clear signals that.....Read the entire article.

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Crude Oil Rises for Second Day on U.S. Jobless Claims Report

Crude oil rose the most in more than three weeks as applications for U.S. unemployment benefits dropped more than forecast, easing concern about the labor market amid other signals the economy is slowing. Oil jumped as much as 2 percent after the Labor Department in Washington reported initial jobless claims fell for the first time in a month in the week ended Aug. 21. The Standard & Poor’s 500 Index fluctuated after yesterday’s gain and the dollar fell against the euro, boosting commodities as an alternative investment.

“The four horsemen that matter to oil are all galloping in the same direction today, with a stronger stock market, weaker dollar, better than expected jobs and lower Cushing inventories,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington. Crude oil for October delivery rose $1.01, or 1.4 percent, to $73.53 a barrel at 11:34 a.m. on the New York Mercantile Exchange. Futures have dropped 11 percent since Aug. 3. They have risen 2.9 percent in the past year.

Jobless claims declined by 31,000 last week to 473,000. The median estimate of 48 economists surveyed by Bloomberg News forecast the figure would drop to 490,000. The S&P 500 gained 0.72 points to 1,056.05. The Dow Jones Industrial Average fell 2.2 points to 10,057.86. The dollar traded at $1.2706 per euro, down 0.4 percent from $1.2659 yesterday. The Reuters/Jefferies CRB Index of 19 commodities advanced 0.8 percent to 263.99, the first increase in seven days. Seventeen of the commodities gained, led by copper, heating oil and gasoline.
....Read the entire article.

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Smart Scan Chart Analysis For Crude Oil ETF....USO

Smart Scan Chart Analysis continues negative longer term. Look for this market to remain weak. As always trade this strong downtrend with tight stops. A triangle indicates the presence of a very strong trend that is being driven by strong forces and insiders.
Based on a pre-defined weighted trend formula for chart analysis, USO scored -90 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

+10.....Last Hour Close Above 5 Hour Moving Average
-15.....New 3 Day Low on Wednesday
-20.....Last Price Below 20 Day Moving Average
-25.....New 3 Week Low, Week Ending August 28th
-30.....New 3 Month Low in May
-90.....Total Score

Here is a preview of our MarketClub Trade Triangle Chart Analysis and Smart Scan technology

Just click here for your FREE trend analysis of crude oil ETF USO

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Crude Oil Stochastics-RSI Oversold, is This The Near Term Bottom For Oil?

Crude oil was higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are oversold and are turning bullish hinting that a short term low might be in or is near.

Closes above the 20 day moving average crossing at 77.53 are needed to confirm that a short term low has been posted. If October extends this month's decline, May's low crossing at 70.35 is the next downside target.

First resistance is the 10 day moving average crossing at 74.26
Second resistance is the 20 day moving average crossing at 77.53

Crude oil pivot point for Thursday morning is 72.08

First support is Wednesday's low crossing at 70.76
Second support is May's low crossing at 70.35

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Wednesday, August 25, 2010

Chris Vermeulen: How To Trade Gold and Silver’s Volatility

Understanding the key differences between both gold and silver’s risk/volatility levels plays a large part in how I choose a low risk trade setup. Those of you who follow me already know the GLD etf is my favorite trading vehicle as it provides me with low risk trading setups along with a very high win rate.

Ok, let’s jump into to comparing gold and silver as trading instruments. I get the same questions from new traders all the time and I think these two questions will help clear them up.

The questions are:

1. Why don’t you give silver (SLV) trading analysis/signals?
2. Why don’t you trade silver?

My answer to the questions are simple and the chart below displays my view.

The gold (GLD) signals I provide work with silver so you can just trade silver when I have gold long or short trade. This is the reason I don’t provide much silver analysis because it’s duplicate info.

The chart below shows how gold and silver trade together when it comes to rallies and sell offs. But notice how volatile silver is while gold had a nice slow and steady trend upwards… Gold’s low volatility trending characteristics is what I love about it. Silver on the other hand is all over the place making it easy to have protective stops triggered before the majority of the trend is over. The silver charts almost always look terrible (tough to read for a direction). I really don’t like getting shaken out of a winning trade…

The pink circles show a quick short trade we did this week catching a quick 1% drop. The short trade was for FuturesTradingSignals where we capture 1-3 day extreme market sentiment shifts.

GLD – Gold ETF Trading Chart
The chart below shows several points as to why gold/silver was screaming BUY ME on Tuesday afternoon. The two things that carry 90% of the strength in my opinion are the candlestick pattern (Bullish Engulfing) and the volume surge. Those two things when seeing on virtually any time frame are a good indication to go long for 1-3 candlesticks minimum.

Gold VS Silver – 5 Minute 3 Day Chart
This chart clearly shows the power of trading a more volatile commodity with silver being the one. This week’s buy signal in gold is dwarfed by the performance of silver. Silver has always shined more in my opinion but when it comes to trading… It tougher than it looks to trade because of the wild whipsaw action it makes on a regular basis.

Gold and Silver Trading Conclusion:
In short, gold is the safe haven when it comes to actively trading. I do trade silver here and there but the size of my position is much smaller because of the difficulty level and volatility associated with it. I will not that I do trade gold and silver futures at times but for this report I focused on ETF’s.

IF YOU WANT TO GET Chris Vermeulen's TRADING ANALYSIS AND ETF TRADING ALERTS JOIN HIS NEWSLETTER at > THE GOLD AND OIL GUY .COM

The government is expected to report Wednesday a 1.1 million barrel increase in commercial crude oil supplies for the week ended Aug. 20, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

The Energy Information Administration releases its weekly report at 10:30 a.m. EDT.

Platts said analysts predicted gasoline stockpiles will shrink by 875,000 barrels, distillate stocks, including diesel and heating oil, will increase by 950,000 barrels and refinery utilization will dip by 0.5 percentage point to 89.5 percent.

A reading above or below estimates can influence market trading.

For the week that ended Aug. 13, the department said crude supplies shrank by 800,000 barrels to 354.2 million barrels; gasoline inventories were nearly unchanged at 223.3 million barrels and inventories of distillate fuel rose by 1.1 million barrels to 174.2 million barrels.

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Bulls Make a Stand as Short Covering Takes Crude Oil, Markets Higher

The S&P 500 closed higher due to short covering on Wednesday as it consolidates some of this month's decline. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that additional weakness is possible near term. If September extends this month's decline, July's low crossing at 1003.10 is the next downside target. Closes above the 20 day moving average crossing at 1092.61 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 1071.89. Second resistance is the 20 day moving average crossing at 1092.61. First support is today's low crossing at 1037.50. Second support is July's low crossing at 1003.10.

Crude oil closed higher due to short covering on Wednesday as it consolidated some of this month's decline. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are oversold but remains neutral to bearish signaling that sideways to lower prices are possible near term. If October extends this month's decline, May's low crossing at 70.35 is the next downside target. Closes above the 20 day moving average crossing at 77.80 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 74.54. Second resistance is the 20 day moving average crossing at 77.80. First support is today's low crossing at 70.76. Second support is May's low crossing at 70.35.

Gold closed higher on Wednesday and tested the 75% retracement level of the June-July decline crossing at 1239.60 as it extends the rally off July's low. Stochastics and the RSI are overbought, diverging but are turning neutral to bullish signaling that sideways to higher prices are possible near term. If August extends the rally off July's low, the 87% retracement level of the June-July decline crossing at 1253.30 is the next upside target. Closes below the 20 day moving average crossing at 1209.40 would temper the friendly outlook. First resistance is today's high crossing at 1242.00. Second resistance is the 87% retracement level of the June-July decline crossing at 1253.30. First support is Tuesday's low crossing at 1210.90. Second support is the 20 day moving average crossing at 1209.40.

The U.S. Dollar closed higher on Wednesday as it extends this month's rally. The mid range close sets the stage for a steady opening on Thursday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If September extends this month's rally, the reaction high crossing at 84.73 is the next upside target. Closes below the 20 day moving average crossing at 82.01 would temper the near term friendly outlook. First resistance is Tuesday's high crossing at 83.64. Second resistance is the reaction high crossing at 84.73. First support is the 10 day moving average crossing at 82.85. Second support is the 20 day moving average crossing at 82.01.

Crude oil fell to its lowest price in seven weeks before a report forecast to show that U.S. inventories of crude increased as summer driving demand ebbs. The U.S. Energy Department will probably report today that crude stockpiles gained 300,000 barrels last week after three weeks of declines, a Bloomberg survey showed. Oil extended losses after the U.S. Commerce Department reported a smaller increase in durable goods orders than analysts had predicted.

“U.S. consumption is still very low; product inventories are sky-high,” said Tobias Merath, Zurich based head of commodity research at Credit Suisse Group AG. “In every market we’ve seen fears of a double dip recession and oil has been particularly affected.” Crude for October delivery declined as much as 53 cents, or 0.7 percent, to $71.10 a barrel, in electronic trading on the New York Mercantile Exchange, its lowest since July 6. It traded for $71.36 as of 1:38 p.m. London time. Brent crude for October delivery dropped 20 cents to $72.18 a barrel on the London based ICE Futures Europe Exchange.

Figures from the Commerce Department showed that bookings increased 0.3 percent, compared with the 3 percent median estimate of 75 economists surveyed by Bloomberg News. Excluding transportation equipment, demand unexpectedly fell. The Energy Department will issue its weekly report at 10:30 a.m. local time in Washington D.C. today. U.S. gasoline stockpiles probably declined 450,000 barrels in the week ended Aug. 20, based on the median estimate from 18 analysts surveyed.....Read the entire article.

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Crude Oil Daily Technical Outlook Wednesday Morning

Crude oil was slightly higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that additional weakness is possible near term.

If October extends the aforementioned decline, May's low crossing at 70.35 is the next downside target. Closes above the 20 day moving average crossing at 77.75 would confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 74.44
Second resistance is the 20 day moving average crossing at 77.75

Crude oil pivot point for Wednesday morning is 72.00

First support is the overnight low crossing at 71.32
Second support is May's low crossing at 70.35

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Tuesday, August 24, 2010

Where is Gold and Crude Oil Headed on Wednesday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets and looks ahead to where oil and gold are likely headed tomorrow.

Just click here for your FREE trend analysis of crude oil ETF USO

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OPEC Is Swimming In New Petro Dollars

OPEC's oil revenue is surging, again, and is set to continue growing through 2011 according to the U.S. Energy Information Administration. 2010 oil revenue is likely to be a cool $181 billion higher than that seen in 2009, which makes for a pretty nice rebound.

Rigzone:
Last year, OPEC revenue plummeted to its lowest since 2005, when total revenue exceeded $500B for the first time. EIA forecasts that OPEC members could earn $752B of net oil export revenues in 2010, and with expectations of a slightly higher average in 2011 oil prices, to earn $821B in 2011.

It might take a few years for OPEC to beat 2008's peak oil revenue, but future revenue forecasts could change dramatically should oil prices end up far higher than currently forecast.

Just click here for your FREE trend analysis of crude oil ETF USO

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Phil Flynn: Dancing With Wolves

You know every once in a while someone defines what you have been trying to say and does it a way that is clear and concise and in terms so clear that you have to say yes, that is exactly what I have been trying to say. For months I have been telling you that despite the fact that I am long term bearish on oil I felt the better way to play this market was not to be married to either a dogmatically bull or bear position but to take advantage of the ranges. I said don’t be a hero, oil is making wide swings.

I pointed out that if you sold oil earlier in the year you are making money now but you would have been down as well and given those profits back many times. If you were long you are losing money. Unlike past years when I advocated being long and hanging on or selling and hanging on this year you are better off not being a bull or bear you are better off being a wolf. Yes Wolf! That’s it! That’s what I have been trying to say! Yes I am bearish and I think oil will eventually breakout on the downside but that moment is being delayed mainly by global economic stimulus.....Read the entire article.

Crude oil was lower overnight as it extends this month's decline. Stochastics and the RSI are oversold but are neutral to bearish signaling that additional weakness is possible near term.

If October extends the aforementioned decline, May's low crossing at 70.35 is the next downside target. Closes above the 20 day moving average crossing at 78.07 would confirm that a short term low has been posted.

First resistance is the 10 day moving average crossing at 75.18
Second resistance is the 20 day moving average crossing at 78.07

Crude oil pivot point for Tuesday morning is 73.44

First support is the overnight low crossing at 72.02
Second support is May's low crossing at 70.35

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Monday, August 23, 2010

Crude Oil Falls a Fifth Day on Concern Over U.S. Supply Gains, Slowing Recovery

Oil declined for a fifth day after analysts estimated that U.S. inventories of crude rose last week and as the dollar gained against the euro because of concern the global economy is slowing. Oil dropped to the lowest in almost seven weeks yesterday as investors sought the relative safety of the U.S. currency before economic reports that may show the recovery is faltering. U.S. crude inventories probably increased last week, according to a Bloomberg News survey.

“The price of oil dropped again, showing investor uncertainty over the future of the global economy, mainly that of the U.S.,” said Mike Sander, an investment adviser at Sander Capital Advisors in Seattle. “There just isn’t much positive in the news.” Crude for October delivery dropped as much as 56 cents, or 0.8 percent, to $72.54 a barrel in electronic trading on the New York Mercantile Exchange. It was at $72.79 at 1:02 p.m. Singapore time. Yesterday, the contract lost 72 cents, or 1 percent, to $73.10, the lowest settlement price since July 6. Futures have fallen 8.3 percent since the start of the year.

The dollar rose to $1.2642 per euro at 1:03 p.m. in Singapore, from $1.2657 yesterday, after reaching $1.2621, the highest since July 13. A stronger U.S. currency reduces investor appetite for commodities as a hedge against inflation. Forecasts show sales of existing U.S. homes dropped 13.4 percent in July and gross domestic product growth slowed to a 1.4 percent annual pace in the second quarter, down from 2.4 percent last month.....Read the entire article.

How to Use Money Management Stops Effectively

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Where is Gold and Crude Oil Headed on Tuesday?