Crude Oil and Natural Gas Technical Outlook For Wednesday Morning

Nymex Crude Oil (CL)
Crude oil rises further to as high as 75.15 today and the break of 75.0 confirms that whole medium term rise has resumed. Intraday bias remains on the upside for 38.2% of 147.27 to 33.2 at 76.77 next. On the downside, below 72.84 minor support will turn intraday outlook neutral and bring consolidation first. But downside should be contained above 68.08 support and bring rise resumption.

In the bigger picture, medium term rise from 33.2 is still in progress and could extend further. Nevertheless, strong resistance should be seen in 76.77/90.24 fibo resistance zone (38.2% and 50% retracement of 147.27 to 33.2) to conclude the medium term rise finally. On the downside, in case of pull back, break of 65.05 is needed to indicate that crude oil has topped out. Otherwise, further rise is still in favor.
.....Crude oil charts.

Nymex Natural Gas (NG)
Natural gas' retreat from 5.12 is still in progress and intraday bias remains neutral for the moment. Some more consolidation could be seen but after all, short term outlook will remain bullish as long as 4.351 minor support holds. Above 5.120 will bring resumption of whole rise form 2.409 and should target 38.2% retracement of 13.64 to 2.409 at 6.7 next. However, considering bearish divergence condition in 4 hours MACD, break of 4.351 will indicate that a short term top is formed and will bring deeper pull back instead.

In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005. The whole consolidation might have completed at 2.409 after meeting 100% projection of 15.78 to 4.593 from 13.69 at 2.50. We'll prefer the bullish case as long 55 days EMA (now at 3.842 holds) and expect the current rise from 2.409 to extend further to 61.8% retracement of 13.64 to 2.409 at 9.38 in medium term.....Natural gas charts.

Oil Rises Fifth Day to Near $75 as OPEC Raises Demand Forecast

Crude oil rose for a fifth day, trading near $75 a barrel in New York, after OPEC increased its world energy demand forecast and the weaker dollar boosted the the appeal of commodities. Oil gained 1.2 percent yesterday as the Organization of Petroleum Exporting Countries raised its 2010 global oil consumption estimate on expansion in emerging economies. The International Energy Agency last week upgraded its demand prediction. Crude also climbed as the dollar fell to the lowest against the euro since August 2008.

“OPEC revised up its global oil consumption forecast for 2010 and that comes on the back of the IEA revising up their forecast,” said Ben Westmore, an energy and minerals economist at National Australia Bank Ltd. in Melbourne. “It is further fueling the sentiment that the demand outlook is better than what a lot of people are expecting.” Crude oil for November delivery gained as much as 81 cents, or 1.1 percent, to $74.96 a barrel in electronic trading on the New York Mercantile Exchange, and traded at $74.77 at 9:27 a.m. Singapore time. Prices last reached $75 on Aug. 25, the highest since October.....read the entire article.

Crude Oil: Is A Breakthrough or Breakdown Coming?

Over the last three months, crude oil prices have acted like a dog with a shock collar around its neck. One minute it's barreling up a hill at warp speed straight for the mailman at the top of the driveway. And then...... ZAP! It's jolted by an invisible electric fence and sent scampering right back down to the place it started. Talking numbers: the market has been range bound between $75 and $65 per barrel.

Which begs the question: Who controls the collar? According to the mainstream experts, oil prices are in a classic holding cell created when two opposing fundamentals reached a standstill. Here, the following October 9 Wall Street Journal explains: "Crude Torn... the market is unsure whether oil is a commodity that should be influenced by supply and demand, or whether it's an asset class that is determined by equities and currencies."

If the former, then energy prices should turn down: U.S. distillates stocks are at a 23 year high, while 2009 demand figures show a CONTRACTION of 1.7 million barrels a day. If the latter, energy should rise alongside a rallying stock market and falling U.S. dollar. Problem is, there's no way of knowing which "IF" applies until AFTER prices break out in a meaningful trend. And even then, the fundamental lines are a blur.....read the entire article and charts.

Phil Flynn: Freezer Frame

Has the coldest winter in a decade, as some experts predict, just begun? Can record cold really overcome record supply if refineries cut back production? Well it seemed a bit more plausible as winter worries helped an oil flurry on a light volume trading session. The cold weather fed into fears that refinery cut backs could cut into a massive oversupply situation when every trader turned on the heat. Throw in a weaker dollar and you have the perfect recipe for a holiday trade oil rally.

Barbara Powell at Bloomberg fed into traders concerns when she reported that, "Oil refiners from Valero Energy Corp. to Sunoco Inc. are cutting the most capacity since the early 1980.” The reason she says is that they fear that even, “the coldest U.S. winter in a decade won’t be enough to soak up a glut of fuel.” Powell said, "returns from processing crude into heating oil for delivery in February are the lowest in six years”.....read the entire article.

UNG Mulls Investment in Interests Outside Futures

NEW YORK, Oct 13 (Reuters) - United States Natural Gas Fund (UNG.P), an exchange traded fund in the natural gas market, reiterated on Tuesday that it could invest in interests other than futures contacts to comply with accountability levels and position limits.

UNG told Reuters last month it rebalanced its portfolio to decrease positions in listed natural gas futures, while increasing the fund's holdings in over the counter natural gas swaps.

In a filing Tuesday, UNG said it may invest in other interests including cash-settled options on futures contracts, forward contracts for natural gas, cleared swap contracts and over the counter transactions based on natural gas, crude oil and other petroleum based fuels.

UNG said that despite the move futures contracts will remain its principle investment. (Reporting by Edward McAllister; Editing by Lisa Shumaker)

Crude Oil Going to Test Key Resistance as USD Tumbles

Crude oil price surges to 74.47 in European morning as USD continues to decline against major currencies except for British pound. Moreover, advance in stock markets in Asia also helps boosts demand for oil as well as other risky assets. Leading the rally in the Nymex energy complex is heating oil which adds +1.9% to 1.926. The benchmark contract has soared for 4 straight days and accumulated more than +8% gains. RBOB gasoline rises for the second day to 1.828.

As the driving season is over and the heating season approaching, investors have shifted their focus to heating oil from gasoline. Gold price strengthens and rises to a new record high of 1069.7 amid dollar's weakness. Others in the precious complex such as silver and platinum also rally with silver gaining +1% to 18 and platinum jumping +1.5% to 1370, the highest level....read the entire article.

Bloomberg Analysis: Commodities to Gain 10% If Crude Breaks $75

The S&P GSCI Index is poised to surge 10 percent by the end of the year if oil prices breach resistance above $75 a barrel this week, according to a technical analysis from Oscar Gruss & Son in New York. The GSCI has just broken out of a four month consolidation after moving above resistance at 481, and if crude oil rallies, “this index could easily move significantly higher,” said Michael Shaoul, chief executive officer at Oscar Gruss.

The index soared as much as 2.7 percent today to 485.03, the highest level since Oct. 20, 2008. The next resistance for the GSCI is at 530 points, marking a 38.2 percent retracement of the 2008 collapse, he said. The index tumbled from a high of 893.86 on July 3, 2008 to 305.59 on Feb. 19. “This target is comfortably achievable during this quarter,” Shaoul said.....read the entire article.

ALERT: Weekly Trade Triangle Buy Signal For Crude Oil

Attention all MarketClub Members: Our Weekly Trade Triangle strategy flashed a buy signal on November crude oil this morning at 72.65.

Here's what You Get with Your MarketClub Membership

Dow Jones Commodity Index Fund Trading Opportunity

From guest analyst Chris Vermeulen of The Gold and Oil Guy.....

Dow Jones Commodity Index Fund
This index tracks the entire commodity market as a whole. Over the past two years we have seen commodities drop in value substantially. The good news is that we could be seeing prices rise going forward from here.

2009 has been a fantastic year for trading commodities with the market bottoming and starting to move higher. This commodity index clearly shows a Cup & Handle pattern and is looking ready to breakout in the coming weeks. The C & H pattern is the best chart formation we could get. Breakouts from these patterns generally provide a rally which can last months at a time.

Let’s take a look at what kind of opportunity looks to be just around the corner.

Dow Jones Commodity Index Chart – Weekly
Commodities appear to have bottomed and are getting squeezed into the apex of the bullish wedge. This index could easily rally to the 180 level which is about 35-40% Gain.


DJP iPath Commodity Index Fund – Weekly
After reviewing several different commodity index funds I like the characteristics for DJP the most. There is enough volume traded which makes for a smooth trading fund on an intraday basis when looking at the 10 minute chart. Several other funds were choppy and thinly traded.

This is Exciting, everyone knows how most commodity funds vary from the underlying commodity price, well this fund trades identical to the index. What does this mean? It means we can trade the DJP commodity index fund for short term and long term positions because there isn’t any price decay over time.


Performance Chart of Commodity Index & Fund
This chart goes back almost 2 years. As you can see the % change for the index and the fund are virtually identical. We do not need to worry about Contango with this fund.


Major Commodities Breaking Out or Bottoming
Gold, Crude Oil and Natural Gas are highly traded commodities and will play a large role in the direction of the commodity index.

Gold is breaking out to a new high – Bullish


Crude Oil is consolidating in a bullish wedge – Bullish



Natural Gas is trying to bottom and should move higher into the winter – Bullish



Dow Jones Commodity Index Trading Conclusion:
Money has been moving into the commodity sector since March of this year. As a technical trader this opportunity jumps out at me. I wanted to share it with fellow traders because this could be once of the easiest trades of the year if the index breaks out in the coming weeks.

If you would like to receive my Free Weekly Trading Newsletter please visit my website, The Gold and Oil Guy.

Chris Vermeulen

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