Open Interest Surge Signals Peak as Traders See Slump

Investors are snapping up commodities at the fastest pace in 18 months just as stockpiles of raw materials rise and shipping rates plunge, signaling that prices may be poised to fall. Open interest, or contracts yet to be closed, liquidated or delivered, rose 6.6 percent in the third quarter for the 20 most traded U.S. commodities, exchange data compiled by Bloomberg show. That’s the steepest gain since the first three months of 2008, just before the credit market freeze sent prices plunging from records.

While the U.S. economy shows signs of bottoming after the deepest financial crisis since the Great Depression, supplies of raw materials are growing faster than demand. Oil inventories rose 15 percent in the past year, Energy Department figures show. The Baltic Dry Index, a barometer for raw material demand, slid 41 percent in the third quarter. Alcoa Inc., the largest U.S. aluminum company, will report an adjusted loss of 83 cents a share this year, based on the average estimate of analysts. “We’ve been moving out of our commodity holdings and into cash,” said Peter Sorrentino, who.....Read the entire article

Here is Some Potential Mega Trades For Q4

It seems to me that we are at an inflection point in the economy. The government has blown pretty much all of its money and the economic recovery and the economy is still sputtering along. No surprise there.

So what’s going to happen? We believe that we’ll have another economic downturn which is going to push the dollar to new lows, push gold to new highs, and push the equity markets back down to their March lows.

Yes, I know it’s a scary scenario but that’s what could potentially happen. We are just looking for one or two more pieces to fall into place and then we could see the unfolding of a very dramatic set of economic conditions here in the United States.

This new video looks at gold, the dollar, and the S&P 500. I believe if you’re interested in your economic future you need to watch this video.

Just Click Here to watch the video, and as always our videos are free to view and do not require any registration. If you think this is an important video, I strongly suggest you share with your friends and comment about it on our blog.

Crude Oil Trades Below $70 After Falling on Recovery Concern

Crude oil traded below $70 a barrel in New York after falling on concern that oil demand in the U.S., the biggest energy consuming nation, will be slow to rebound after the jobless rate increased. Oil prices dropped as much as 3.5 percent on Oct. 2 after the U.S. lost more jobs than estimated in September. Economist Nouriel Roubini, the New York University professor who predicted the financial crisis, said Oct. 3 that stock and commodity markets may drop in coming months as the gradual pace of the economic recovery disappoints investors.

“There was weak data coming out of the U.S. and equity markets were weaker,” Mark Pervan, senior commodity strategist at ANZ Banking Group Ltd. in Melbourne, said by phone today. “It’s all pointing downwards.” Crude oil for November delivery traded at $69.88 a barrel, down 7 cents, in electronic trading on the New York Mercantile Exchange at 10 a.m. Singapore time.....Read the entire article

Commodities Consolidate as Economic Outlook is Mixed

Crude oil price plunged to as low as 68.32 Friday as the US Labor Department reported disappointing employment data for September. Investors worried the pace of economic recovery will be delayed and thus took profits from long positions in oil. Although buying interest emerged afterward, WTI crude oil settled -1.2% at 69.95 during the day. On weekly basis, the benchmark contract gained +6%. After plummeting to the lower end of recent trading range of 65-75, oil price recovered in the middle of the week although the US Energy Department reported larger than expected crude builds in the week ended September 25.

Investors used the surprising draw in gasoline stockpile, lower than expected rise in distillate stockpiles and rise in fuel demand as reasons to bid up prices. However, we retain out views that crude oil price will continue move range bounded in coming weeks and occasional rise in demand does not alter the fact that fuel consumptions remain in depressed levels. Gasoline demand rose to 9.126M bpd last week, representing increases of +3.8% on weekly basis and +4.5% on annual basis. However, Exxon's CEO said that gasoline demand has already peaked in 2007 and will decline into the futures. In the US, oil product demand was 20M bpd in 2007 and should fall to about 17M bpd by 2020.....Read the entire article and charts!

So You Think It's Time to Buy UNG? Let's go to The Chart!

In all of my years of trading I have never seen so much attention given to natural gas by the retail investor. Nat gas has been trading at historic low prices recently so it must be ready to skyrocket, right? Well for you traders out there that like me are old enough to remember the sugar market of many years ago, you have to admit natural gas and especially UNG is starting to show some similarities.

So where is UNG headed? Let's see what our MarketClub tools tell us....

UNG Smart Scan Chart Analysis is showing a downtrend with Up arrow, meaning there is some near term rallying power. However, this market remains in the confines of a longer term downtrend Downtrend, trade with tight money management stops.

Based on a pre-defined weighted trend formula for chart analysis, UNG scored -75 on a scale from -100 (strong downtrend) to +100 (strong uptrend):

-10.....Last Hour Close Below 5 hour Moving Average
-15.....New 3 Day Low on Thursday
-20.....Last Price Below 20 Day Moving Average
+25.....New 3 Week High, Week Ending October 3rd
-30.....New 3 Month Low in September
-75.....Total Score



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How to Invest in Oil & Gas Stocks

Investing in oil and gas stocks is actually quite simple, even if you don’t know anything about the energy industry. (My friends in Calgary would say I am living proof of that.)

From my experience in speaking with management teams and reading research reports, I’ve put together a basic information list for retail investors doing initial research into oil & gas companies. It’s not exhaustive, but the answers should provide the basic information to decide if you want to do more due diligence.

Either call management, or go to the company’s website and look at its corporate presentation. The Top 10 bits of information I want to find out initially is:

1. How many barrels of oil per day (bopd, or “boe” for natural gas – barrels of oil equivalent) is the company producing, and how quickly have they grown production in each of the last 3 quarters.
2. How much of their production is oil and how much is natural gas (gas prices are very low right now and doesn’t produce much if any cash flow for companies)
3. How much net cash or net debt do they have? This industry uses a lot of debt, so if a company actually has net cash, they could grow more quickly because they have an entire untapped line of credit waiting to go drilling, and grow the business. And of course no debt means no debt payments and flexibility in doing business......Read the entire article

Just Click Here to visit Keith Schaefer's Oil & Gas Investments Bulletin

Natural Gas Fund Issues First New Shares Since July

U.S. Natural Gas Fund, the largest exchange traded fund in the fuel, issued 7 million new shares today, the first new units for the ETF since July because of regulatory efforts to limit market speculation. The new shares, worth $79 million, are backed by a total return swap with an investment grade counterparty, the fund said on its Web site. The Alameda, California based ETF, known as UNG, has said it would offer new shares starting Sept. 28 to purchasers who bought creation baskets of 100,000 units, which are then sold on the open market.

“UNG continues to work to re-balance the existing portfolio of natural gas exposure by using a range of suitable investments including listed futures contracts, listed cleared swaps, as well as over the counter total return swaps,” John Hyland, the fund’s chief investment officer, said in an e-mail. The $4 billion fund grew 11 fold since the start of the year to 347.4 million shares outstanding before it ran out in July. The fund backs its shares with natural gas contracts or swaps, and has been unable to expand its fuel holdings on the New York Mercantile Exchange and the Intercontinental Exchange.....Read the entire article

Crude Oil Bulls Seem to Have The Advantage, Natural Gas Closes Sharply Higher

Crude oil closed lower due to profit taking on Friday as it consolidated some of this week's rally. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. The mid range close sets the stage for a steady to higher opening on Monday.

If November extends this week's rally, September's high crossing at 73.58 is the next upside target. Closes below today's low crossing at 68.32 would temper the near term friendly outlook in the market.

First resistance is Thursday's high crossing at 71.39
Second resistance is September's high crossing at 73.58

First support is today's low crossing at 68.32
Second support is last week's low crossing at 65.05

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Natural gas closed sharply higher due to short covering on Friday as it consolidated some of Thursday's decline but remains below the 10 day moving average crossing at 4.725. The high range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI have turned bearish signaling that sideways to lower prices are possible near term.

Closes below the 20 day moving average crossing at 4.471 are needed to confirm that a short term top has been posted. If November renews last month's rally, the 50% retracement level of this year's decline crossing at 5.320 is the next upside target.

First resistance is last Friday's high crossing at 4.99
Second resistance the 50nq % retracement level at 5.32

First support is the 20-day moving average crossing at 4.42
Second support is today's low crossing at 4.35

It Does Not Matter Which way the market is Moving....How To Find Winning Trades In Any Market

The Your keywordU.S. Dollar closed lower on Friday as it consolidated some of Thursday's rally but remains above the 20 day moving average crossing at 77.10. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If December extends this week's rally, September's high crossing at 79.29 is the next upside target. If December renews September's decline, monthly support crossing at 75.73 is the next downside target.

First resistance is Tuesday's high crossing at 77.73
Second resistance is September's high crossing at 79.29

First support is last Wednesday's low crossing at 76.22
Second resistance is monthly support crossing at 75.73

Natural Gas Fund, UNG, Says New Share Creation Tougher Than Expected

The U.S. Natural Gas Fund,UNG,the largest exchange traded fund in the fuel, has found it more difficult than expected to create units using a new process that has purchasers trade natural gas swaps for shares. The Alameda, California based fund has gotten inquiries from market makers and hedge funds, said Jim Stegall, manager of institutional sales for the fund. Many investors prefer swaps of a few weeks or less, while the fund wants six month swaps.

“The vast majority hear that and they don’t want anything to do with that,” Stegall said. The complex swaps for shares creation process may take several weeks, he said.
The $3.9 billion fund grew 11 fold since the start of the year to 347.4 million shares outstanding before it ran out in July. The fund backs its shares with natural gas contracts.....read the entire article

Can you learn to trade crude oil in just 90 seconds?

Atilla's "Reinforcing Gravity of Price Time Continuum"

As most of my regular readers know I am staying near term bearish on the whole oil and nat gas sector, I still see 58 before 100. And from time to time I like to share the work of some of my favorite bears, don't worry when we are in a bull market I will share the work of my favorite bulls.

Here is a couple of current charts reflecting the work of one of my favorite bears Atilla at the xtrenders website. Check it out and please feel free to leave a comment and our readers know what you are thinking.

$OSX - Oil and Gas Drillers / Monthly


$XOI - Oil Index
Due to the short history of Oil Index ($XOI), I prefer to analyze one of its major and historical component, Exxon. / monthly


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