Phil Flynn: Oh No, Not Again

I’d like to tell you that the supply report from the American Petroleum Institute matters and that we could go back to find love and happiness continuing to scalp oil in its very defined trading range. I would even like to tell you that todays Energy Information Agency report is going to matter as well. Yet the threat to our little trading range nirvana is being threatened by another potential storm down in the Gulf of Mexico. The National Hurricane Center now shows that a tropical wave that we have been watching now has about a 70% chance to biome a hurricane and play havoc with production and imports into the Gulf of Mexico.

The NHC says that “STRONG TROPICAL WAVE...LOCATED NEAR THE EASTERN DOMINICAN REPUBLIC AND EXTENDING NORTHWARD OVER THE ATLANTIC FOR A FEW HUNDRED MILES...IS PRODUCING A LARGE AREA OF SHOWERS AND THUNDERSTORMS FROM THE NORTHERN LEEWARD ISLANDS WESTWARD TO HISPANIOLA...AND OVER THE ADJACENT WATERS OF THE ATLANTIC AND NORTHEASTERN CARIBBEAN SEA. ALTHOUGH A CLOSED SURFACE CIRCULATION HAS NOT YET DEVELOPED...ENVIRONMENTAL CONDITIONS ARE EXPECTED TO BECOME MORE CONDUCIVE FORTROPICAL CYCLONE FORMATION AS THE SYSTEM MOVES WEST-NORTHWESTWARD AT ABOUT 10 MPH DURING THE NEXT DAY OR SO. THERE IS A HIGH CHANCE...70 PERCENT...OF THIS SYSTEM BECOMING A TROPICAL DEPRESSION OR A TROPICAL STORM DURING THE NEXT 48 HOURS. REGARDLESS OF DEVELOPMENT...LOCALLY HEAVY RAINFALL AND GUSTY WINDS WILL CONTINUETO AFFECT THE VIRGIN ISLANDS AND PUERTO RICO...AND LIKELY AFFECT THE DOMINICAN REPUBLIC...HAITI...EASTERN CUBA...THE TURKS AND CAICOS ISLANDS...AND THE BAHAMAS DURING THE NEXT COUPLE OF DAYS. THE HEAVY RAINS COULD CAUSE LIFE THREATENING FLASH FLOODS AND MUD SLIDES IN MOUNTAINOUS AREAS.”

So there is a possibility that oil and other petroleum products may put in some hurricane premium. The Natural gas seems less worried as on shore production is rising and supplies are ample. Yet we cannot be complacent. The API showed less than exciting numbers showing crude down 241,000 barrels gas down 412,000 barrels and distillates rising by 241000 barrels. Of Course oil may also take its cue from Big Ben and no that is not the name of a hurricane but our name trusty Fed Chairman Ben Bernanke.

Because oil has had a tendency to live and die with the fortunes of the stock market his words may inspire us. Of course the focus may be on the report that a few Fed Banks were pushed for a discount rate increase in an attempt to get credit flowing from banks too scared to lend money. If Ben says that he is considering this oil and stocks should get a quick boost.

Despite the storm threat we still feel oil will be locked in the twilight zone. Not really bearish and not really bullish. Call Phil for the best way to trade it and get signed up for a trial of his daily numbers. Jut call him at 800-935-6487 or email him at pflynn@pfgbest.com


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Natural Gas Weekly Technical Outlook

Natural gas's rebound last week suggests that consolidation from 3.81 is still in progress. Further rise might be seen initially this week but we'd expect strong resistance at 4.494 to limit up side. Below 4.154 minor support will indicate that recovery from 3.986 is completed and will flip intraday bias back to the downside for 3.81/884 support zone. Decisive break there will confirm down trend resumption and should target 3.0 psychological level next.

In the bigger picture, medium term rebound from 2.409 has completed at 6.108 and the three wave corrective structure of the rebound argues that it's merely a correction, or part of the consolidation in the larger down trend. Current fall from 6.108 might extend further for a retest on 2.409 low next after sustaining below 61.8% retracement of 2.409 to 6.108 at 3.822. However, note that decisive break of 38.2% retracement of 5.68 to 3.81 at 4.524 will argue that whole fall from 6.108 has completed and will turn outlook bullish for a possible test on 6.108 high.

In the longer term picture, while the bounce from 2.409 was strong, it's been limited below 55 months EMA (now at 6.047) and reversed. The failure to sustain above 55 weeks EMA (now at 4.679) 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.....Nymex Natural Gas Continuous Contract 4 Hours Chart.

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Bloomberg Analysis: Crude Oil Buyers Risk ‘Bull Trap’ Near $80

Crude oil buyers may misinterpret the market’s climb this week as a signal for further gains, exposing themselves to a potential price reversal, according to Cameron Hanover Inc. Oil, rising for a third week in four, will face stronger resistance the closer it gets to $82 a barrel, a one year high reached on Oct. 21, said Peter Beutel, president of the trading adviser in New Canaan, Connecticut. Buyers should watch for the market to settle higher each day before stepping in, rather than take their cues from intraday price swings, he said.

“We need to be careful of bull traps,” Beutel said in an email. “We should probably look for two closes with a second day higher than the first breakout day to confirm that a real breakout has occurred.” Crude oil touched a one week high above $79 a barrel on Dec. 1 as the dollar’s decline against the euro bolstered the investment appeal of commodities including gold.....Read the entire article.

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