Oil Crunch Cometh....In 2015?

Discussing the probability of an oil shortage in 2015, with John Kilduff, Round Earth Capital, and Dr. Robert Hirsch, Management




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Crude Oil Market Commentary For Monday Evening

Crude oil closed higher due to short covering on Monday as it rebounded off the 87% retracement level of the September-January rally crossing at 69.58. The mid range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI have turned bearish again signaling that sideways to lower prices are possible near term.

If March extends the decline off January's high, September's low crossing at 67.46 is the next downside target. Closes above the 20 day moving average crossing at 76.25 are needed to confirm that a short term low has been posted.

Crude oil pivot point for Monday evening is 71.62

First resistance is the 10 day moving average crossing at 73.97
Second resistance is the 20 day moving average crossing at 76.25

First support is last Friday's low crossing at 69.50
Second support is September's low crossing at 67.46

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Natural gas posted a downside reversal on Monday and closed below the 20 day moving average crossing at 5.474. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term.

If March extends the rally off January's low, the reaction high crossing at 5.804 is the next upside target. Closes below last Thursday's low crossing at 5.227 would temper the near term friendly outlook.

Natural gas pivot point for Monday evening is 5.499

First resistance is today's high crossing at 5.680
Second resistance is the reaction high crossing at 5.804

First support is last Thursday's low crossing at 5.227
Second support is January's low crossing at 5.060

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The U.S. Dollar closed lower due to profit taking on Monday as it consolidated some of last week's rally but remains above the 38% retracement level of the 2009-2010 decline crossing at 79.71. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways prices are possible near term.

If March extends this winter's rally, the 50% retracement level of the 2009-2010 decline crossing at 81.32 is the next upside target. Closes below the 20 day moving average crossing at 78.62 are needed to confirm that a short term top has been posted.

First resistance is last Friday's high crossing at 80.82
Second resistance is the 50% retracement level of the 2009-2010 decline crossing at 81.32

First support is the 10 day moving average crossing at 79.54
Second support is the 20 day moving average crossing at 78.62

The "Super Cycle" in Gold and How It Will Affect Your Pocketbook in 2010

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Where is the Oil Price Going....One Chart to Consider

From guest blogger Brian Hoffman....

Oil prices have staged a remarkable rally since a year ago, retracing almost 50 per cent of the drop from the US $147 high of 2008. The price chart for oil has formed a rising wedge during the last six months (see black converging trend lines in the chart below), which is potentially quite bearish since this type of chart formation normally resolves itself sharply to the downside.



Wedge formations are continuation patterns such that a rising wedge is a temporary pause in a falling price trend, whereas a falling wedge is a temporary pause in a rising price trend. During the formation of a rising wedge the selling pressure on prices has started to overwhelm the buying pressure resulting in the slope of the top trend line (resistance) tilting towards the bottom trend line (support). If the support provided by the bottom trend line fails to hold prices and a downward breakout occurs there may be a sharp and significant price drop.

Oil prices are facing resistance at about US$85 and they have really good support should they drop as low as US$60, which they may if there is a downward breakout from the rising wedge. This downward breakout may happen if/when the 50-day moving average crosses below the 200-day moving average. The last time the 50-day MA crossed below the 200-day MA the price then dropped from US$110 to US$32 (see October 2008 cross-over in the chart above).

A drop in oil prices from US$85 to US$60 would retrace about 50 per cent of the increase from the US$32 low of early 2009, which would likely exhaust the selling pressure as there is excellent price support at US$60.

If oil prices were to drop as low as US$60 and find support at that level the stage could be set for the next rally in oil prices. On the upside, oil prices would need to break through US$100 and find support at that level in order to gain momentum to possibly overtake the US$147 high of 2008. A move of that magnitude is unlikely in 2010 unless there is some fairly significant political unrest.

On the downside, should oil prices drop as low as US$60 and fail to find support at that level, then prices could continue lower with several support levels at lower prices. Oil prices have excellent support at US$40 dating back to 2003 should they drop that low.

Conclusion: Oil prices may drop to US$60 in the short-term if there is downward breakout from the rising wedge, which will impact oil-related investments. If prices drop to US$60 then wait for support to establish at level. If there is an upward breakout from the rising wedge, prices should find support at US$85 as resistance would then become support.

The United States Oil Fund, LP (USO-NYSE, US$35.64), an ETF that tracks the performance of oil prices, has a similar price chart to oil prices (see chart below) with a similar steep price decrease subsequent to a 50-day MA cross-over of the 200-day MA in October 2008 along with the recent rising wedge formation. USO faces resistance at US$40 and has support at US$32. Should the price of USO fail to hold at US$32 there is excellent support at US$26 dating back to 2000.




Brian Hoffman is an affiliate of the Market Technicians Assoc. and a member of the Canadian Society of Technical Analysts


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Oil Rises From Seven Week Low on Forecast for More U.S. Storms

Oil rose for the first time in four days as the U.S. mid-Atlantic region braced for a new winter storm in coming days and dug out from a weekend blizzard. Oil rebounded from a seven week low after the National Weather Service issued storm warnings from Utah to New Jersey and advisories for below-normal temperatures in the East that would increase demand for heating fuel. The weekend storm left almost 40 inches of snow in some places and shut government offices today in Washington.

“The cold weather is persisting here, and it’s not relenting,” said John Kilduff, a partner at Round Earth Capital, a New York based hedge fund that focuses on food and energy commodities. Oil prices also advanced amid technical support at the 200 day moving average of $70.72, he said. Crude oil for March delivery rose 85 cents, or 1.2 percent, to $72.04 a barrel at 11:02 a.m. on the New York Mercantile Exchange. Oil settled at $71.19 on Feb. 5, the lowest price since Dec. 15. Futures have gained 79 percent in the past year.

The National Weather Service is forecasting temperatures will be below normal for the next six to 10 days along the Eastern Coast, from Florida to Maine. “A very wintry and unseasonably cold week remains on tap from the southern plains and Midwest to the Northeast and mid-Atlantic,” said Jim Rouiller, a senior energy meteorologist at private forecaster Planalytics Inc., in Wayne, Pennsylvania. The new storm may reach “crippling proportions from Washington and Philadelphia to New York City and possibly Boston by Wednesday”....Read the entire article.


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Crude Oil Market Commentary For Monday Evening

Crude oil was steady to slightly higher overnight as it consolidates some of last Friday's decline. Stochastics and the RSI are diverging and have turned bearish again signaling that sideways to lower prices are possible near term.

If March extends last week's decline, last September's low crossing at 67.46 is the next downside target. Closes above the 20 day moving average crossing at 76.22 would confirm that a short term low has been posted.

Monday's pivot point, our line in the sand is 71.54

First resistance is the 10 day moving average crossing at 73.90
Second resistance is the 20 day moving average crossing at 76.22

First support is last Friday's low crossing at 69.50
Second support is last September's low crossing at 67.46

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

Natural gas was higher overnight as it extends last Friday's close above the 20 day moving average crossing at 5.484. Stochastics and the RSI remain bullish signaling that additional strength is possible near term.

If March extends the overnight rally, the reaction high crossing at 5.804 is the next upside target. Closes below the 10 day moving average crossing at 5.278 are needed to confirm that a short term top has been posted.

Natural gas pivot point for Monday is 5.499

First resistance is the overnight high crossing at 5.680
Second resistance is the reaction high crossing at 5.804

First support is the 20 day moving average crossing at 5.484
Second support is the 10 day moving average crossing at 5.378

Just click here for your FREE trend analysis of natural gas ETF UNG

The U.S. Dollar was lower due to profit taking overnight as it consolidates some of last week's rally but remains above the 38% retracement level of the 2009 decline crossing at 79.71. Stochastics and the RSI are overbought but are neutral to bullish signaling that sideways to higher prices are possible near term.

If March extends this winter's rally, the 50% retracement level of the 2009 decline crossing at 81.32 is the next upside target. Closes below the 20 day moving average crossing at 78.63 would confirm that a short term top has been posted.

First resistance is last Friday's high crossing at 80.82
Second resistance is the 50% retracement level of the 2009 decline crossing at 81.32

First support is the 10 day moving average crossing at 79.55
Second support is the 20 day moving average crossing at 78.63

Just click here for your FREE trend analysis of the U.S. Dollar ETF UUP

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Crude Oil Technical Outlook For Monday Morning

Crude oil continues to stay in tight range above 69.50 low made last week but after all, intraday bias remains on the downside with 73.94 minor resistance intact. Deeper decline is still expected to 100% projection of 83.95 to 72.43 from 78.04 at 66.52 next. On the upside, above 73.94 minor resistance will turn intraday bias neutral and bring more consolidations. But upside should be limited below 78.04 resistance and bring fall resumption.

In the bigger picture, the strong break of medium term trend line support added much credence to the case of reversal. Medium term rise from 33.2, which is treated as a correction to fall from 147.27, should have completed at 83.95 already, on bearish divergence condition in daily MACD. Current fall from 83.95 should extend through 68.59 support towards next key cluster level at 58.32 (50% retracement of 33.2 to 83.95 at 58.58). Decisive break there will strongly suggest that whole decline from 147.27 is resuming for a new low below 33.2. On the upside, break of 78.04 resistance is needed to indicate that fall from 83.95 has completed. Otherwise, outlook will remain bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Gold & SP500 Psychology: They Bail, We Buy

From guest blogger Chris Vermeulen....

Understanding market psychology is crucial for a trader’s success. But so many people get caught up in the daily market volatility, media coverage and “noise” of the trading environment, it’s almost impossible to not think and trade in agreement with the majority of traders.

However, effective technical analysis allows us to use trends, patterns and other indicators to evaluate the market’s current psychological state. Fortunately, this analysis can both enable us to independently forecast whether the market is heading in an upward or downward trend and do so against the grain of the majority.

It takes a disciplined trader to be able to watch and listen to the market doing one thing, filter out the noise, then do the opposite – all in a controlled manor. To this day I still find myself fighting the herd mentality at times and that is when I step away from the computer and regroup.

I have a simple rule that has saved me thousands over the years. I would rather miss a trade and learn what caused me to get confused, then to take a loss.

Rule # 1 – When in Doubt, Stay Out!

There are two types of traders:

1. Herd Mentality Trader – Someone who trades off fear and greed buying near tops and panic selling out at the bottom with the masses.
2. Black Sheep Trader – A trader who stand out from the masses and trades opposite to the “herd” during extreme levels.

Last weeks market action really allowed us to see which way the masses were moving. The extremely high selling volume and sharp price decline notified us that the market was trading off FEAR. And, last Thursday we actually saw PANIC which tells us the balance of the market (retail investors, John Doe’s, The “Herd”) were exiting their positions.

When we see this happen, it’s generally a good time to start scaling into long positions, as most of the down side has already happened.

I have been talking about an ABC retrace pattern for the indexes and gold for some time and last week we got just that. An ABC retrace is when we have 3 waves which are, down, small up, then another leg down.
In short this wave breaks the uptrend of higher highs and lows, as it forms a lower low telling novice traders to sell and go short. This is what causes the high volume and sharp sell offs.

Below are a few charts showing the 2009 July lows and where we are now, February 2010:

SP500 – Daily Trading Chart


Gold – Daily Trading Chart


Silver – Daily Trading Chart


Oil – Daily Trading Chart


Intraday Price Action – Just click here if you want to see some of my exciting intraday trading charts check out the setups last week.

Market Psychology Trading Conclusion:
Most get involved with the stock market because it looks like something they can quickly learn and start making money from home. But it doesn’t take long before they quickly realize there is more to trading than meets the eye.

While trading looks easy from a glance, in actuality I think its one of the toughest jobs out there.

Why? Well, this is what you are up against:
1. You are trying to predict something that is unpredictable
2. You are trading against millions of other highly skilled traders
3. You are trading against automated computers with complex algorithms
4. You are trading with your hard earned money which causes fear and greed
5. You must accept losing trades as that is part of the business
6. You must trade with a proven trading strategy and follow the system
7. You must understand money management and apply it to every trade
8. You must truly love the market cause it will break you down mentally

I don’t want to say you must be a contrarian, but in reality you must do the opposite of the masses during times of extreme price behavior.

These extremes happen on a daily basis when trading intraday charts and every 4-6 weeks when looking at daily charts. The toughest part is to pull the trigger when emotions are flying high in the market and you are looking to do the opposite. It takes several trades before you even start to get comfortable doing this.

I hope this helps shed some light on market psychology.

Just click here if you would like to Receive Chris Vermeulen's Gold Trading Newsletter and Analysis.

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Crude Oil Weekly Technical Outlook

Crude oil's rebound from 72.43 was limited at 78.04 last week and fall from 83.95 then resumed by diving to as low as 69.50 before closing at 71.19. Initial bias remains on the downside this week and deeper decline should now be seen to 100% projection of 83.95 to 72.43 from 78.04 at 66.52 next. On the upside, above 73.94 minor resistance will turn intraday bias neutral and bring consolidations. But upside should be limited below 78.04 resistance and bring fall resumption.

In the bigger picture, the strong break of medium term trend line support added much credence to the case of reversal. Medium term rise from 33.2, which is treated as a correction to fall from 147.27, should have completed at 83.95 already, on bearish divergence condition in daily MACD. Current fall from 83.95 should extend through 68.59 support towards next key cluster level at 58.32 (50% retracement of 33.2 to 83.95 at 58.58). Decisive break there will strongly suggest that whole decline from 147.27 is resuming for a new low below 33.2. On the upside, break of 78.04 resistance is needed to indicate that fall from 83.95 has completed. Otherwise, outlook will remain bearish.

In the long term picture, there is no change in the view that fall from 147.27 is part of the correction to the five wave sequence from 98 low of 10.65. While the rebound from 33.2 is strong and might continue, there is no solid evidence that suggest fall 147.27 is completed and we're still preferring the case that rebound from 33.2 is merely a corrective rise only. Having said that, strong resistance should be seen between 76.77/90.24 fibo resistance zone and bring reversal for another low below 33.2 before completing the whole correction from 147.27.....
Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Phil Flynn: PIGS in Space

When I go down on the trading floor and talk about pigs, normally I am referring to hogs or pork bellies. But this week is something different. We'll focus our attention on Portugal, Ireland, Greece and Spain. Or you can exchange or add another I if you want to throw in Italy. In this case PIGS - or PIIGS - is not the other white meat, but a cause of great concern on the global economic scene.

Portugal now seems to be the main epicenter of the constantly shifting risk factors in the ongoing global economic crisis. Even casual observers of the global market place have been aware of the recent problems growing in the Eurozone particularly with Greece. The massive debt in Greece has roiled the global market for most of the year and now there are fears that their problems may be spreading throughout the region. Oh sure, the other countries within the designation PIGS or PIIGS if you prefer, did not want to be coupled together with Greece perhaps because they did not want to be part of something called PIGS or because they were fearful that the association with Greece and their problems could spread to them faster than a winter cold. Spain’s Finance Minister Elena Salgado was one of the first to speak out and said that Spain's situation is not like that of Greece. Yet earlier this week it seems that when one of these little PIGS’s went to the market and found that things were not that good.

The market really got fearful after Portugal basically had a failed bond auction. The Portuguese treasury and Government Debt Agency tried to sell €500 million in 12 month bills but was only able to sell €300 million. This raised concern that buyers of debt are getting tired of getting low rates of return when sovereign countries credit worthiness is not what should be. Last year Portugal’s debt was 9% of its GDP and with a potential softening in the EURO zone, bond buyers think that their chances to be paid back might not be that good. Obviously that means that bond buyers will demand a higher rate of return to take on more risk thus ultimately driving up interest rates in Portugal and throughout the region as debt strapped nations vie for capital to fund their out of control spending.....Read the entire article.

The "Super Cycle" in Gold and How It Will Affect Your Pocketbook in 2010

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Oil Futures Plunge, Bond Markets Vote America

Statsweeper registered alerts across the entire WTI oil futures complex yesterday.

Prices fell dramatically, with all six of the nearest contracts down over 5%. Four-month futures took the biggest percentage dive, dropping 5.6% from $78.60 to $74.21 per barrel.

Front month futures fell 5.1%, from $77 to $73.06.



As widely reported, the fall in WTI was part of a larger sell off in commodities. Triggered by strengthening of the U.S. dollar.

With all the focus on yesterday's selling, there was less press on the things being bought. Most notably U.S. Treasury notes.

Alerts registered for falling yields on three-, five- and ten-year Treasury securities. Yields plunged as traders piled into these investments, driving up prices.

This is significant. Many analysts recently predicted investors would shun U.S. government debt as America's deficit spending rises and the nation's monetary base remains ballooned by more than $1 trillion compared to just 18 months ago.

But it appears when the markets get shaky, buyers still see U.S. bonds as the safe haven investment of choice.

Particularly interesting was investors' choice of Treasuries. Yields fell most notably for the three year note, dropping nearly 7% to 1.34% yield. This is the lowest yield registered since late December 2009.



Buying was also strong on the five-year note, which fell 4.6% to 2.29% yield. And the ten-year, falling 2.9% to 3.62% yield.

This contrasts with previous "flight to safety" buying of Treasuries, where purchases were focused on short-dated notes and bills. Often with maturities of 52 weeks or less.

Bill yields did fall yesterday. With the 52 week bill down 12.1% to 0.29% yield. But overall buying of these securities hasn't been as strong as might be anticipated.

52 week bills are still trading in the same range that's prevailed over the last few weeks. By contrast, two-, three- and five-year note yields appear to have broken resistance, moving markedly lower than recent trading ranges yesterday.



If this trend continues, it suggest investors are willing to lock in their money with the U.S. government for longer periods than they were previously comfortable with. A big vote of confidence for America and the U.S. dollar.

From The Staff at Oil Price .Com

Statsweeper is the financial community's premier data monitoring engine. The site tracks commodities, economics and finance data from around the globe, and alerts investors to critical changes and emerging trends. Visit www.statsweeper.com for more, and sign up for Pierce Points daily e-letter (www.piercepoints.com) for commentary on what the data mean for your commodities investments.
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The information provided here is based on data collected by www.statsweeper.com and is intended solely for informative purposes and is not to be construed, under any circumstances, by implication or otherwise, as an offer to sell or a solicitation to buy or trade any securities or commodities named herein. Information contained herein is obtained from sources believed to be reliable, but is in no way assured. All materials and related graphics provided herein and any other materials which are referenced herein are provided "as is" without warranty of any kind, either express or implied. No assurance of any kind is implied or possible where projections of future conditions are attempted. Readers using the information contained herein are solely responsible for verifying the accuracy thereof and for their own actions and investment decisions.
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