Surging U.S. Dollar Brings High Volatility in Crude Oil, Gold, Silver and Grains

Crude oil futures in the December contract rallied $.65 to finish around 78.60 a barrel after hitting multi-year lows this week at 76.00 and if you’re still short this market I would place my stop above the 10 day high which currently stands at 82.88 a barrel which is around $4 away or $4,000 risk per contract as chart structure is starting to improve on a daily basis. Crude oil futures are trading far below their 20 & 100 day moving averages as prices rose today on rumors of a Saudi Arabia explosion sending prices sharply higher at one point, however I think this is just a dead cat bounce so continue to play this to the downside making sure you place the proper stop loss risking 2% of your account balance on any given trade as the trend clearly is to the downside.

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The U.S dollar was up again this week and continues to surge to the upside and I do believe that the foreign currencies continue to move lower while continuing to pressure crude oil and many of the other commodity prices such as gold, silver, and the grain market, however every market does need a kickback so take advantage of any rally in tomorrow’s trade as I still think oversupply and a strong dollar take this market sharply lower here in the short term.

As I’ve talked about in many previous blogs I have missed this trade to the downside but one of my theories was the fact that the United States government wants lower oil prices not only to help the U.S consumer but to punish Russia which has sanctions and their whole economy is based off of strong crude oil prices so this is the double whammy to Russia and I think this will continue for some time to come.

On Tuesday the Republicans gained power in the Senate and have control in the House and that is rumored to be very bearish crude oil prices as the Keystone pipeline could now take affect which have been blocked by the Democrats and will make the United States even more oil independent and put pressure on prices in the short term as the fundamentals in this market are absolutely terrible. The volatility is very high in crude at the present time so make sure that you trade the proper amount of contracts risking only 2% of your account balance on any given trade because you need to have an exit strategy when you are wrong.
Trend: Lower
Chart Structure: Improving

See you in the markets Monday!
Mike Seery

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Precious Metals Futures Weekly Update

The precious metals rallied on Friday afternoon but have been absolutely crushed this week with gold settling at 1,226 an ounce up around $15, however prices hit a new 3 year low this week trading as low as 1,179 and as I’ve been recommending in many previous blogs to be short the precious metals sector but at this point in time with extreme volatility & very poor chart structure I’m recommending to be taking profits and sit on the sidelines.

Silver futures finished up $.95 today at 19.49 in the July contract and as I stated in previous blogs I thought silver could hit the $18 level and it did trade as low as 18.18 in the early session today, however I still believe prices are headed lower and I would not be bullish the precious metals at this time.

Copper futures which I’ve been recommending short positions across the board finished at 3.0560 a pound unchanged for the trading day but I do believe prices are headed substantially lower from these levels as higher interest rates are keeping a lid on precious metals prices so look for copper prices to possibly hit 2.50 in the next month or so.

The trends have really been strong in recent weeks and if you been listening to any of my recommendations you have been doing extremely well and I do believe that commodity prices are still headed lower so take advantage of it by selling the futures contract or by buying bear put spreads limiting your risk to what the spread premium costs.

Trend: Lower – Chart structure: Terrible

Posted courtesy of our trading partner Mike Seery

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Crude Oils Have Different Quality Characteristics

Many types of crude oil are produced around the world. The market value of an individual crude stream reflects its quality characteristics. Two of the most important quality characteristics are density and sulfur content. Density ranges from light to heavy, while sulfur content is characterized as sweet or sour. The crude oils represented in the chart are a selection of some of the crude oils marketed in various parts of the world. There are some crude oils both below and above the API gravity range shown in the chart.

Source: U.S. Energy Information Administration, based on Energy Intelligence Group—International Crude Oil Market Han

Crude oils that are light (higher degrees of API gravity, or lower density) and sweet (low sulfur content) are usually priced higher than heavy, sour crude oils. This is partly because gasoline and diesel fuel, which typically sell at a significant premium to residual fuel oil and other "bottom of the barrel" products, can usually be more easily and cheaply produced using light, sweet crude oil.

The light sweet grades are desirable because they can be processed with far less sophisticated and energy intensive processes/refineries. The figure shows select crude types from around the world with their corresponding sulfur content and density characteristics.

The selected crude oils in the figure are not intended to be comprehensive of global crude production. Rather, they were grades selected for the recurrent and recently updated EIA report, "The Availability and Price of Petroleum and Petroleum Products Produced in Countries Other Than Iran."

Source: U.S. Energy Information Administration. 

Notes: Locations on the map are based on the pricing point, not necessarily the area of production. Locations are approximate. Points on the map are labeled by country and benchmark name. United States-Mars is an offshore drilling site in the Gulf of Mexico. WTI = West Texas Intermediate; LLS = Louisiana Light Sweet; FSU = Former Soviet Union; UAE = United Arab Emirates

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Rising Production in the Permian Basin

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The Permian Basin, a long time oil and natural gas producing region in west Texas and eastern New Mexico, is showing signs of new life. The active rig count has grown from 100 rigs in mid 2009 to over 500 rigs in May 2012. According to data from the Texas Railroad Commission and the New Mexico Energy, Minerals and Natural Resources Department, oil production from the Permian has increased fairly steadily over the past few years, reaching the 1 million barrels per day (bbl/d) threshold in late 2011, the first time since 1998.

Sources: U.S Energy Information Administration, based on Baker Hughes, Railroad Commission of Texas, and New Mexic

Growing oil production in the Permian Basin and other Texas plays, most notably the Eagle Ford shale, may be starting to strain existing takeaway capacity and is creating a need for Texas oil to serve more distant refineries. While new pipeline projects are scheduled to come online, current transportation constraints have caused Permian crude oil, which is priced in Midland, Texas, to sell at a significant discount to WTI beginning in January 2012.

Annual Energy Outlook 2012.....Three Cases for the Future of World Oil Prices

The Annual Energy Outlook 2012 (AEO2012) presents three alternative paths for world oil prices based on different production and economic assumptions. Among these cases, the real (constant 2010 dollars) oil price in 2035 ranges from $62 per barrel in the Low Oil Price case to $200 per barrel in the High Oil Price case, with the Reference case at $145 per barrel.

The oil price in AEO2012 is defined as the average price of light, low-sulfur crude oil delivered to Cushing, Oklahoma, which is similar to the price for light, sweet crude oil traded on the New York Mercantile Exchange (West Texas Intermediate, or WTI).



Factors considered in AEO2012 that affect supply, demand, and prices for petroleum in the long term are:

* World demand for petroleum and other liquids

* Organization of the Petroleum Exporting Countries (OPEC) investment and production decisions

* The economics of non OPEC petroleum supply

* The economics of other liquids supply

The Reference case of AEO2012 indicates a short term increase in oil price, returning to price parity with the Brent oil price by 2016, as current constraints on pipeline capacity between Cushing and the Gulf of Mexico are moderated.

The Low Oil Price case results in a projected oil price of $62 per barrel in 2035. The Low Oil Price case assumes that economic growth and demand for petroleum and other liquids in developing economies (which account for nearly all of the projected growth in world oil consumption in the Reference case) is reduced.

Specifically, the annual gross domestic product (GDP) growth for the world, excluding the mature market economies that are members of the Organization for Economic Cooperation and Development (OECD), is assumed to be 1.5 percentage points lower than that of the Reference case in 2035 (only a 3.5% annual increase from 2010 to 2035), which reduces their projected oil consumption in 2035 by 8 million barrels from the Reference case projection.

While non OECD oil consumption is more responsive to lower economic growth than to prices, oil use in the OECD region increases modestly in the Low Oil Price case. In this lower price case, the market power of OPEC producers is weakened, and they lose the ability to control prices and to limit production.

In contrast, the High Oil Price case assumes prices rise to $186 per barrel by 2017 (in 2010 dollars) and then increase to $200 per barrel by 2035. These higher prices result from higher demand for petroleum and other liquid fuels in non OECD regions than projected for the Reference case. In particular, the projected GDP growth rates for China and India are 1.0 percentage point higher in 2012 and 0.3 points higher in 2035 than the rates in the Reference Case.

Overall, in 2035 it is projected that 4 million barrels per day will be produced above the Reference Case level, even though projected oil consumption in the mature, industrialized economies is reduced.

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Drop in U.S. Gasoline Prices Reflects Decline in Crude Oil Costs

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Since reaching a recent peak of $3.94 per gallon on April 2, the average retail price U.S. drivers paid for gasoline has fallen for 12 weeks in a row to $3.44 per gallon, according to EIA's weekly motor fuel survey. The drop in gasoline prices largely reflects the decline in crude oil prices (see chart below), which have historically comprised the biggest part of the pump price.

The national average price for regular unleaded gasoline fell 50 cents per gallon over the 12-week period, while the spot prices for West Texas Intermediate (WTI) crude oil declined the equivalent of 63 cents per gallon and Brent crude oil fell the equivalent of 81 cents per gallon. WTI and Brent are among the world's leading oil pricing benchmarks.



If crude oil price changes are fully passed through to consumers, for every $1 per barrel change in crude oil prices, consumers could expect to see a 2.4-cent-per-gallon change in retail gasoline prices. However, EIA analysis indicates that generally about 50% of the crude oil price change is usually passed on to consumers at the pump within two weeks, and 80% is generally passed on within four weeks. Gasoline prices are also sensitive to conditions affecting particular regional markets, such as significant refinery outages on the West Coast this spring that led to higher prices in that area.

The price of crude oil accounts for about two thirds of the retail price of gasoline. Refining costs, distribution and marketing costs, and state and federal taxes make up the rest of the retail gasoline price. Pump prices vary by region, with some drivers paying more or less for gasoline than the national average depending on where they live (see chart below).



Concerns that a weak global economy will lead to reduced petroleum demand has contributed to lower crude oil prices. However, part of the reason retail gasoline prices have not dropped as much as crude oil prices is that U.S. gasoline demand has started to show some growth in recent months. During the first quarter of 2012, monthly EIA data shows U.S. gasoline demand was down about 1.4% from the first quarter of last year. However, since the gasoline price peak, weekly EIA data indicate that gasoline demand has started to strengthen, with demand down only 0.9% in April compared to a year earlier and up by 0.2% in May.

The current 12 week drop in gasoline costs is the second longest period of declining pump prices recorded by EIA's weekly fuel price survey since the drop at the end of 2008, when pump prices fell for 15 straight weeks.

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North American Spot Crude Oil Benchmarks Likely Diverging Due to Bottlenecks

Gold and Silver on the Verge of Something Spectacular

West Texas Intermediate at Cushing, Oklahoma (WTI Cushing), a light, sweet crude grade, is North America's most closely observed crude oil price benchmark and the underlying commodity of the NYMEX crude futures contract. Until 2008, all North American crude grades broadly tracked fluctuations in WTI Cushing prices and were clustered within about $8 per barrel of the WTI Cushing price. Pricing differences between crude grades were largely explained by the different quality characteristics of the crude oil in each location and transportation costs to Cushing, the delivery point of the NYMEX contract.

Since 2008, however, the price differences between WTI Cushing and other North American crude oil benchmarks have increased sharply (see chart below). In addition to WTI, other crude grades have emerged as alternative benchmarks. In particular, the Argus Sour Crude Price Index (ASCI), a weighted average of prices for several offshore Gulf of Mexico sour crude grades, has become the benchmark or reference used for assessing the price of several imported grades sold on a long-term contract basis, including Saudi Arabian and Kuwaiti crude grades.



Transportation constraints in the wake of rising production from inland fields in Canada, North Dakota, and Texas are one of the main drivers of the growing price discrepancy between crude grades since 2008. Limited pipeline capacity has made it difficult to bring crude oil out of the center of the continent, lowering all the affected benchmarks compared to prices outside the area. But within the constrained area, prices have also diverged from each other, reflecting local transmission bottlenecks within the larger constrained area. For example, crude oil benchmarks for the Bakken, Western Canada, and West Texas Sour (Midland, Texas) have traded at a discount to WTI Cushing. Rising production in the Bakken and West Texas have exacerbated these price differences. Outside the constrained areas, benchmarks like Louisiana Light Sweet, Alaska North Slope, and Mars Blend in the Gulf of Mexico reflect premiums to WTI Cushing, sometimes significant.

The phrase "transportation constraints" refers to a broad range of logistic issues, with inadequate pipeline capacity being the most common issue. However, EIA is not aware of any crude oil production capacity being shut in because of a lack of capacity to move the oil. In the short term, production surges and/or pipeline shutdowns force oil producers to compete with each other for more expensive transport options: rail and then truck. In the longer term, additional transportation capacity (rail and pipeline) is likely to be built, which should lower the cost of transporting the oil to markets.

Some North American crude oil benchmark locations are identified in the map below.

Source: U.S. Energy Information Administration. 

Gold Still at Risk of a Large Downward Move Before the Rally

U.S. Dry Natural Gas Production Growth Levels off Following Decline in Natural Gas Prices

U.S. dry natural gas production has increased since late 2005 due mainly to rapid growth in production from shale gas resources. However, there have been two notable instances (see red ovals in the chart) in the last seven years when natural gas production leveled off during a period of falling spot natural gas prices. The first was during the recent economic recession and the latest began in the fourth quarter of 2011 and continued through the first quarter of 2012.



Weather events (see green ovals) have also affected U.S. natural gas production.
The major events over the past seven years that have caused dry gas output to level off or even decline include:

Hurricanes Katrina and Rita (Sep-Oct 2005) - Disrupted up to 12.2 billion cubic feet per day (Bcf/d) in offshore natural gas production.

Hurricanes Gustav and Ike (Sep 2008) - Disrupted up to 9.5 Bcf/d in offshore natural gas production.

Economic recession and falling prices (Oct 2008- Sep 2009), Reduced industrial and manufacturing activity, and lower electricity use eased demand for natural gas as a feedstock and a power generation fuel. Natural gas prices fell sharply as a result.

Winter well freeze offs (Feb 2011) - Disrupted up to 7.5 Bcf/d in natural gas production from Texas to Arizona, when water froze inside wellheads during extremely cold weather and blocked gas flows.

Supply overhang and falling natural gas prices (Oct 2011-Mar 2012) A warm winter that reduced heating fuel demand and record high gas inventories resulted in a nearly 50% drop in gas prices, causing some energy companies to postpone new drilling and cut back on some existing operations.

Natural gas production was relatively flat between October 2011 and March 2012, when Henry Hub spot gas prices declined from just above $3.50 to around $2.00 per million British thermal units in March. Preliminary EIA data indicate a slight drop in production during March, according to the Natural Gas Monthly report released on May 31.

Of the five large gas producing states tracked monthly by EIA Texas, Louisiana, New Mexico, Oklahoma, and Wyoming, New Mexico had the highest percentage decline in its March gross natural gas production, down 2.2 percent from the previous month, while Texas had the largest volumetric drop, down 150 million cubic feet per day. States that EIA does not presently track on a monthly basis, such as Pennsylvania, may have seen their gas output increase during March.

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OPEC Spare Capacity in the First Quarter of 2012 at Lowest Level Since 2008

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The U.S. Energy Information Administration (EIA) estimates that global spare crude oil production capacity averaged about 2.4 million barrels per day (bbl/d) during the first quarter of 2012, down about 1.3 million bbl/d from the same period in 2011 (see chart below). The world's spare crude oil production capacity is held by member countries of the Organization of the Petroleum Exporting Countries (OPEC). Spare capacity can serve as a buffer against oil market disruptions, and it gives OPEC additional political and economic influence in world markets. There is little or no spare capacity outside of the OPEC member countries.



Spare crude oil production capacity is now less than 3% of total world crude oil consumption—the lowest proportion since the fourth quarter of 2008—based on EIA estimates.

Spare crude oil production capacity is an important indicator of producers' ability to respond to potential disruptions; consequently, low spare oil production capacity tends to be associated with high oil prices and high oil price volatility. Similarly, rising spare capacity tends to be associated with falling oil prices and reduced volatility. However, spare capacity must also be considered in the context of a number of other market factors that can drive crude oil prices, such as global supply, demand, and inventory levels.

EIA defines spare crude oil production capacity as potential oil production that could be brought online within 30 days and sustained for at least 90 days, consistent with sound business practices. This does not include oil production increases that could not be sustained without degrading the future production capacity of a field.


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Williston Basin Crude Oil Production and Takeaway Capacity are Increasing

Crude oil production from the Williston Basin (primarily the Bakken formation) recently increased to more than 600 thousand barrels per day (bbl/d), according to Bentek Energy, LLC (Bentek), testing the ability of the transportation system, oil pipelines, truck deliveries, and rail to move crude oil out of the area (see chart below). The current price gap between Bakken crude oil and West Texas Intermediate (WTI) shows the effects of this constraint. Bentek projects more transportation capacity coming online in 2012, potentially alleviating this constraint.




 Due to pipeline capacity constraints, Williston Basin producers rely on rail and trucks to move additional crude oil out of the region. Because of these transportation constraints, Bakken crude oil currently sells at a discount of $7.50 per barrel to WTI. This discount was as much as $28 per barrel in February 2012 and is expected to continue as long as transportation constraints persist.

Currently, North Dakota has only one refinery, which processes about 58 thousand bbl/d of crude oil. Crude oil is delivered to other markets using a combination of pipeline, rail, and truck. Delivery capability as of April 2012 was: 450 thousand bbl/d by oil pipeline; 150 thousand bbl/d by rail; and small volumes by truck. However, in 2012, incremental additions to rail and oil pipeline capacity for the Williston Basin could total 350 thousand bbl/d.

Which Bakken picks should you trade? Here is a preview of our MarketClub Trade Triangle Chart Analysis and Smart Scan technology that will help you get in and out of those trades.

Refinery Utilization Rates React to Economics in 2011

The divergence of West Texas Intermediate (WTI) and Brent crude oil prices in 2011 affected refinery utilization in the United States, particularly in the East Coast (PADD 1) and Midwest (PADD 2) regions. Historically, refineries in these districts operated at 80-90% of their capacity. Changes in refining economics last year contributed to real contrasts in refinery utilization in some of the PADDs (see Overview chart).

Source: U.S. Energy Information Administration, Refinery Utilization and Capacity.

 Some key findings by PADD include:

• PADD 1. East Coast refining typically relies on imports of crude oil based on the Brent crude price, which, on average, increased to a $16-per-barrel premium over WTI spot prices in 2011. As a result, two East Coast refineries idled capacity due to poor economics, while another is considering selling or shutting down. PADD 1 utilization averaged only 68% of operable capacity in 2011, which includes the idle capacity of closed refineries. This utilization rate reflects both the drop in East Coast refining capacity and lower crude oil inputs.
• PADD 2. Midwest refineries benefitted from supplies of less expensive crude oil coming from Canada and increased production in the Bakken formation. Thus, PADD 2 refineries averaged about 91% utilization in 2011, even with increased refining capacity. As a result, PADD 2 average crude oil inputs of nearly 3.4 million barrels per day were at the highest level since 2000.
• PADD 3. Gulf Coast (PADD 3) continued capacity expansions as refineries upgraded infrastructure to maximize yields. Growing oil production in Texas and the Midwest contributed to increased inputs. The Gulf Coast refineries were able to use different types of crude oil to maximize production. Refineries in this region used cheaper sources of crude compared to the rest of the country.
• PADDs 4 and 5. Refinery closures, outages, and a lack of access to less expensive crude oil reduced inputs in 2011 to refineries in PADDs 4 and 5 and helped drive down utilization rates.

 

Natural Gas Spot Prices Near 10 Year Lows Amid Warm Weather

 Natural gas prices have continued their downward trend this winter as a result of warmer than normal temperatures, ample natural gas in storage, and growing production. Population weighted heating degree days since November 1, 2011 are down 12% nationally from the 30 year average. Total working natural gas in underground storage in the lower 48 states was 3,098 Bcf for the week ending January 20, 21% above the storage levels from one year ago. Daily dry gas production averaged about 64.2 billion cubic feet per day (Bcfd) in January, up almost 10% from last January.

Click on the tab headers below to see charts highlighting factors affecting natural gas prices.

Spot Prices      Weather       Storage         Production       Weather Outlook        Futures Prices

Average spot natural gas prices for January were $2.68/MMBtu. Spot natural gas prices in January 2012 reached their lowest level in 10 years except for a 4-day period over the Labor Day weekend in 2009.


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EIA: Current Natural Gas Forward Prices Signal Rising....But Still Low Prices in 2012

Source: U.S. Energy Information Administration, based on Bloomberg.

Note: Forward prices are derived each month (January-December) by adding the locational basis swap to the NYMEX Henry Hub futures price for the given month at each location. The ranges reflect the minimum and maximum monthly price for months in 2012. For example, a January 2012 NYMEX Henry Hub futures contract valued at $3.50/MMBtu and a January 2012 Transco Zone 6-NY basis swap valued at $2.50/MMBtu would yield a $6.00/MMBtu price at Transco Zone-6 NY.

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Natural gas forward market prices (as of December 28, 2011) signal a continuation of low natural gas prices into 2012. Winter 2011-2012 forward prices were recently the lowest in over ten years, and, of the eight trading points identified, only Transco Zone 6-NY (New York City) and PG&E Citygate (Northern California) show 2012 forward monthly price ranges that include prices above $4/MMBtu. Natural gas spot prices remained low throughout 2011 relative to prior years, reaching a two-year low in November. The spot natural gas price at Transco Zone 6 New York, shown in the graph, is above next year's average monthly trading ranges due to recent cold weather-driven demand. Current spot natural gas prices are lower than the 2012 forward contract range at several natural gas trading points identified in the chart.

The natural gas price at the Henry Hub in Louisiana informs much of the rest of the country, with prices largely following price movements at Henry. Similarly, forward prices, except for the Northeast (represented here by the Transco Zone 6-NY trading point), closely mirror 2012 forward prices at the Henry Hub. Northeast gas prices behave differently, with spot and forward prices higher during colder months due to expectations regarding pipeline constraints in transporting natural gas to the Northeast during times of high natural gas demand.

Source: U.S. Energy Information Administration, based on Ventyx's Energy Velocity Suite.

Spot Natural Gas Prices Dipped to Two Year Low in November

Spot natural gas prices at the Henry Hub in Erath, Louisiana fell to $2.83 per million British thermal units for delivery on November 24, 2011, the lowest price since November 17, 2009. Henry Hub is the benchmark location for key natural gas financial instruments on the New York Mercantile Exchange and the IntercontinentalExchange such as futures contracts, swaps, and options.
Key factors affecting natural gas prices include:

• Growing domestic production. U.S. domestic marketed production averaged 65.4 Bcf/d through September, based on EIA data, an increase of about 7% from the same period in 2010, while demand for the corresponding period was up 2% this year.
• High natural gas storage levels. For the week ending November 25, 2011, natural gas storage inventories were 3,851 billion cubic feet (Bcf), down one Bcf from record inventory levels set the prior week but over 7% above the five-year average.
• Seasonal weather. Warmer-than-average weather across most of the United States has delayed the start of winter weather and the corresponding increased natural gas demand for heating. Through November 28, cumulative U.S. population-weighted heating degree-days in the 2011-2012 winter season are 8% below the 30-year average and are down 16% in the natural gas heating-intensive Northeast region.

Spot prices at Henry Hub rose about $0.70 per million British thermal units after the Thanksgiving Holiday weekend due to cooler temperatures and higher demand.

Source: U.S. Energy Information Administration, based on Bloomberg.
Note: Data included through November 30, 2011.

  

The Currency War Big Picture Analysis for Gold, Silver & Stocks

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.

New Report Analyzes Tipping Point of Gold and Equities....Are You Ready?

Equities and Precious Metals are on the edge of another rally and it could start as early as tomorrow.

On March 13th I posted some of my analysis online showing how the market was trading at a key pivot point and that a sharp price movement was about to unfold. I also provided everyone with the direction in favor which played out perfectly catching a 4.5% in three days.

As of today we are getting the same setup I saw on March 13th [see "It Looks Like Crash or Crush Time For Equities and Gold"] but this time it’s pointing to higher prices. Take a quick look at the charts I was looking at for both the SP500 and gold and you will notice that the SP500 and gold both moved to the support levels before starting to bounce.

While we caught the move down on the SP500 playing the SDS Double leveraged inverse fund we did not take part in falling gold prices. Reason being, there is so much fear in the market and the amount of surprise news popping up each week I don’t think shorting precious metals is a safe call. Rather I am looking for a pullback to cleanse the holders of the commodity then I will buy once price confirms the continuation pattern has completed.

Now, stepping forward to this week’s price action

SPY Daily Chart
We can see in the chart below that price is currently testing a key resistance level. Before the week is over we could see some big price movement equities. I need to see what happens tomorrow but I have a feeling we could see a breakout to the upside for a long position.

Gold Miners Fund Daily Chart
Gold stocks have be under performing the price of bullion for a few months but it looks as though they could be starting a sizable rally. If gold stocks continue to move sharply higher out of this pattern, then it’s a positive sign that gold and silver bullion will both continue to move up.

Mid-Week Trend Report:
In short, stocks and commodities may have shaken the weak positions out of the market during the recent pullback in price. Things could be ready to start another multi month rally and trade setups. Keep your eyes on the charts....

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