Crude Oil Bulls Take a Small Advantage Into The Weekend

Crude oil closed lower due to profit taking on Friday as it consolidated some of the rally off last week's low. The mid range close sets the stage for a steady opening on Tuesday.

Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If March extends the rally off last week's low, the reaction high crossing at 78.04 is the next upside target.

First resistance is Thursday's high crossing at 75.69.
Second resistance is the reaction high crossing at 78.04.

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 closed higher on Friday as it extended this month's trading range. The high range close sets the stage for a steady to higher opening on Tuesday.

Stochastics and the RSI are turning neutral to bullish hinting that sideways to higher prices are possible near term. Closes above the reaction high crossing at 5.680 or below 5.060 are needed to confirm a breakout of the aforementioned trading range.

First resistance is today's high crossing at 5.556
Second resistance is Monday's high crossing at 5.680

First support is today's low crossing at 5.204
Second support is January's low crossing at 5.060

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The U.S. Dollar closed higher on Friday as it consolidates above the 38% retracement level of the 2009-2010 decline crossing at 79.71. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI are diverging but are turning neutral signaling that sideways to higher 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 79.24 are needed to confirm that a short term top has been posted.

First resistance is today's high crossing at 80.83
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 79.99
Second support is the 20 day moving average crossing at 79.24


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Oil Falls for First Day in Five as China Seeks to Cool Economic Expansion

Crude oil fell for the first day in five after China, the world’s fastest growing energy consuming country, sought to cool its economic expansion. Oil dropped below $74 a barrel as the People’s Bank of China ordered banks to set aside more deposits as reserves for the second time in a month, boosting the dollar. An Energy Department report today showed a bigger than forecast increase in inventories.

“All of the markets still need every bit of stimulus the central banks can provide,” said John Kilduff, a partner at Round Earth Capital, a New York based hedge fund that focuses on food and energy commodities. “This move augurs for diminished demand and lower prices.” Crude oil for March delivery fell $1.29, or 1.7 percent, to $73.99 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures have dropped 6.8 percent this year. Oil increased for the first week in five.

China’s central bank said today it will raise banks’ reserve requirement ratio by 50 basis points. China’s policy makers aim to avert asset bubbles and restrain inflation after flooding the economy with money last year to drive a recovery from the first global recession since World War II. “This means it’s more difficult for the Chinese banks to lend, and China has been the bright spot in an otherwise unspectacular global economic recovery,” said Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut.....Read the entire article.

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IEA - Oil Market Report

Highlights of the latest OMR dated February 11th 2010.....

Benchmark crude oil prices fell to six week lows by early February, after warmer weather in the Northern Hemisphere, negative macroeconomic news and sudden strength in the dollar set in motion a $12/bbl slide. Prices regained some of their losses in recent days, with WTI last trading at $73.80/bbl and Brent at $72/bbl.

Forecast global oil demand is revised up 170 kb/d for 2010 as more robust IMF GDP projections are partly offset by a higher price assumption and persistently weak OECD oil demand. Global oil demand is estimated at 84.9 mb/d in 2009 (-1.5% or -1.3 mb/d year-on-year) and 86.5 mb/d in 2010 (+1.8% or +1.6 mb/d versus 2009), with growth entirely in non-OECD countries.

Global oil supply fell 45 kb/d to 85.8 mb/d in January, with higher total OPEC output (mostly NGLs) offset by lower non-OPEC production. Average 2009 non-OPEC production is revised 70 kb/d higher at 51.4 mb/d while 2010 supply is revised up by 120 kb/d to 51.6 mb/d on slightly improved US and North Sea crude prospects.

OPEC crude output was up 105 kb/d at 29.1 mb/d in January. OPEC NGL production is forecast to rise 0.8 mb/d to 5.5 mb/d in 2010, with just over half of the increase related to ramp up from 2009 project start-ups. The call on OPEC crude and stock change for 2010 is revised up 300 kb/d to 29.4 mb/d.

OECD industry stocks fell 67.8 mb in December to 2 678 mb, around 0.8% below 2008’s level, on lower crude and middle distillate inventories. End-December forward demand cover fell to 58.1 days, now only 0.1 day higher than a year ago. Preliminary data point to a January OECD stockbuild of 11.4 mb, but with lower floating storage.

Global 4Q09 and 1Q10 refinery crude throughput forecasts remain unchanged at 72.3 mb/d and 72.6 mb/d respectively, though in the latter’s case, higher Canadian, Mexican and OECD Pacific runs offset lower non-OECD throughputs. Despite some signs of improvement for the refining industry, the sector’s short-term outlook remains fundamentally bearish.

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Crude Oil Pivot, Support and Resistance Numbers For Friday Morning

Crude oil was lower overnight as it consolidates some of the rebound off last Friday's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

Multiple closes above the 20 day moving average crossing at 74.92 are needed to confirm that a short term low has been posted. If March renews last week's decline, last September's low crossing at 67.46 is the next downside target.

Crude oil pivot point, our line in the sand is 74.78

First resistance is the 20 day moving average crossing at 74.92
Second resistance is Thursday's high crossing at 75.69

First support is the overnight low crossing at 73.50
Second support is last Friday's low crossing at 69.50

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Natural gas was lower overnight as it extends this month's choppy sideways trading pattern. Stochastics and the RSI are neutral signaling that sideways to lower prices are possible near term.

If March extends Tuesday's decline, the reaction low crossing at 5.227 is the next downside target. Closes above the 20 day moving average crossing at 5.427 would temper the near term bearish outlook.

Friday's pivot point for natural gas is 5.366

First resistance is the 20 day moving average crossing at 5.427
Second resistance is Monday's high crossing at 5.680

First support is Tuesday's low crossing at 5.330
Second support is the reaction low crossing at 5.227

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The U.S. Dollar was higher overnight as it extends the recent breakout above the 38% retracement level of the 2009 decline crossing at 79.71. Stochastics and the RSI are diverging but are turning bullish signaling that additional gains 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 79.26 are needed to confirm that a short term top has been posted.

First resistance is the overnight high crossing at 80.83
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 80.03
Second support is the 20 day moving average crossing at 79.26

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Crude Oil Technical Outlook For Friday Morning

With 4 hours MACD crossed below signal line, crude oil's recovery from 69.50 might have completed at 75.69 already. Break of 72.60 will flip intraday bias back to the downside for retesting 69.50 first. Break will confirm decline resumption towards 68.59 support next. On the upside, above 75.69 will turn focus to 78.04 minor resistance. Break there will argue that whole fall from 83.95 has finished and will bring stronger rebound instead.

In the bigger picture, prior 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 confirm that fall from 83.95 has completed. Otherwise, outlook will remain bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.


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Oil Falls First Day in Five on Stronger Dollar, Forecast for Supply Gain

Crude oil fell in New York for the first day in five as the dollar extended gains against the euro and analysts forecast an increase in U.S. stockpiles, signaling weak demand in the biggest energy consuming nation. Oil slipped below $75 a barrel after the dollar strengthened on speculation the European Union will fail to take sufficient measures to help Greece tackle its fiscal deficit, damping the investment appeal of commodities. A weekly Energy Department report today may show crude and gasoline supplies increased last week, according to a Bloomberg News survey.

“The market is hanging on its edge, waiting for the Department of Energy numbers,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “Prices could still come under pressure because there is still that inventory rise overhang in the market.” Crude oil for March delivery fell as much as 53 cents, or 0.7 percent, to $74.75 a barrel in electronic trading on the New York Mercantile Exchange. It was at $74.82 at 12:52 p.m. Singapore time. Yesterday, the contract rose 1 percent to settle at $75.28. Futures have gained 5.1 percent this week, poised for the first weekly gain in five.

The 16 nation euro dropped to near a one week low against the dollar after the European Union stopped short of offering concrete steps to help Greece. The U.S. currency traded at $1.3665 per euro at 12:28 p.m. in Singapore from $1.3693 yesterday in New York.....Read the entire article.

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Crude Oil Market Commentary For Thursday Evening

Crude oil closed higher on Thursday and tested the 20 day moving average crossing at 75.21. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If March extends the rally off last week's low, the reaction high crossing at 78.04 is the next upside target.

First resistance is today's high crossing at 75.69
Second resistance is the reaction high crossing at 78.04

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 closed higher due to short covering on Thursday as it consolidates some of this week's decline. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are turning bearish hinting that sideways to lower prices are possible near term.

Closes below last Thursday's low crossing at 5.227 are needed to confirm that a short term top has been posted. If March renews the rally off January's low, the reaction high crossing at 5.804 is the next upside target.

First resistance is the 20 day moving average crossing at 5.438
Second resistance is Monday's high crossing at 5.680

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

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

The U.S. Dollar closed slightly lower on Thursday while consolidating above initial support marked by the 10 day moving average crossing at 79.92. The mid-range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are turning bearish signaling that a short term top might be in or is near.

Closes below the 20 day moving average crossing at 79.09 are needed to confirm that a short term top has been posted. If March resumes this winter's rally, the 50% retracement level of the 2009-2010 decline crossing at 81.32 is the next upside target.

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 79.92
Second support is the 20 day moving average crossing at 79.09


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Have Metals and Stocks Bottomed Yet?

From guest analyst Chris Vermeulen at The Gold and Oil Guy .Com....

Everyone is wondering if gold, silver and the indexes have bottomed after last week’s heavy selling. To put things into perspective there were over 30 sell orders for every 1 buy order at the NYSE. That is pure panic and to confirm extreme fear, several of my broker buddies said last week was crazy with clients demanding to liquidate their positions ASAP to be 100% in cash.

This type of sentiment and price movement warns us of a possible market bottom. I am getting the feeling that traders and investors have been expecting this sharp drop I don’t see or feel a large amount of fear in the marketplace. Last Thursday and Friday war crazy but I think we need one more drop to really shake things up before a bottom is set.

Below are some charts showing where the market currently stands and what the charts are pointing to.

GLD Gold ETF Trading – Daily Chart

Gold is clearly trending down on the daily chart. One more thrust down should shake things up enough to trigger the next rally.



SLV Silver ETF Trading – Daily Chart

Silver has formed a Head & Shoulders pattern and has broken through multiple support levels. A measured move to the down side would be $14 for silver which could happen in the coming days.



SP500, NYSE, GOLD Futures, US Dollar Index – Intraday Charts

These charts clearly show the price action of the past month. As you can see the trend of stocks and gold are down with consolidations (pauses). This is the exact reason why you must trade with the trend and not do counter trend trades. Bounces are more like sideway movements making it very difficult to try and play bounces in a down trend.

If you focus on selling at key resistance levels then moves tend to be much more profitable. That being said, we did go long last Friday because of the extreme oversold market level. I was expecting a follow through Monday or Tuesday which has yet to happen. We have now moved our stops to break even or better to eliminate our down side risk.



Spot Gold 24Hr Trading Chart

This chart says it all. The market and gold is very volatile making it difficult to trade right now. Bulls and bears are battling it out. Only time will tell!



Stocks & Commodity Trading Conclusion:

In short, it’s been a slow week without any real exciting moves. Thursday and Friday could be interesting if traders exit their positions going into the long weekend in order to protect themselves from any surprise economic news.

From the looks of gold, silver and the indexes I sense selling could be just around the corner. We are currently long a few positions with our stops are break even or better in hopes for a pop and rally going into the holiday weekend but only time will tell.


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IEA Raises This Year's Estimate for Oil Demand on Economic Recovery, Asia

The International Energy Agency raised its forecast for global oil demand this year as developing countries need more crude to fuel their economies. The IEA increased its estimate for world demand in 2010 by 170,000 barrels a day to 86.5 million barrels a day. That would mean a gain of 1.6 million barrels a day, or 1.8 percent, from 2009 levels, it said. Consumption growth is driven entirely by economies outside the Organization for Economic Cooperation and Development, the IEA said.

“Global oil demand now takes its cue primarily from rising emerging country incomes,” the Paris-based agency said in its monthly oil market report today. “More robust economic projections by the International Monetary Fund, notably for 2010, are partly counterbalanced by a higher price assumption and persistently weak OECD oil demand data.” The IMF forecasts world economic growth of 3.8 percent this year, up 0.8 percentage point from its previous estimate. While the estimates for both OECD and non-OECD economies were revised up, it is emerging and developing economies that are the key driving force in the economic recovery and rebound in oil demand, the IEA said.

Oil consumption in those countries, where economic growth is forecast at 6.1 percent, is expected to average 41 million barrels a day in 2010, an increase from last year of 1.6 million barrels a day, or 4 percent, according to the IEA. That is 170,000 barrels a day more than the agency estimated last month.....Read the entire article.


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The U.S.-PRC Strategic Divide Begins

From Oil Price .Com.....

The simmering difficulties in the US strategic relationship with the People’s Republic of China (PRC) were, by the beginning of 2010, ready to emerge despite the attempts of the US Administration of Pres. Barack Obama to show a pattern of deference to Beijing. But the internal US economic policies, leading to the de facto devaluation of the US dollar, seemed, if anything, a deliberate move to devalue the worth of the PRC’s massive investments in US dollar instruments.

All that was needed to cause Beijing to vent its frustrations with the US — quite apart from major differences over the demand for Beijing to make economic and social investments in redressing alleged “climate change” — were additional seeming insults to the PRC’s sovereignty and pride. US allegations that the PRC Government was censoring the Google online search engine in China — which evidence indicates was the case — highlighted the sensitivity of Beijing which collectively recognizes (a) the potential of the electronic media to cause social unrest, and (b) the delicacy of the PRC to any social and economic unrest occurring in the near future.

The most significant pretext, however, was the US decision to move ahead with its $6.4-billion defence equipment sales package to the Republic of China (ROC: Taiwan), which was announced by the US Defence Department on January 29, 2010. Given historical precedent, Beijing had no option but to react negatively to the sale, and hoped its early threats of damage to US-PRC relations would sway the now left-leaning US Congress to refuse sanction for the sale, an unlikely occurrence, but one which had a 30-day window of opportunity, the time during which Congress can veto an Administration foreign military sale after it has been proposed.

Perhaps most importantly, however, the incident gave Beijing the long-awaited opportunity to break completely with the US-led packages of measures on trade, economic approaches, and “climate change” accords, which were perceived as being highly detrimental to the PRC’s need to control its domestic agenda and the foreign resources acquisitions needed to support it. Thus, competition between the PRC and the West in Africa, the Middle East, and Central Asia (not to mention East Asia) will intensify with less regard for niceties.

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This will, Defense & Foreign Affairs analysts believe, lead to the more rapid coalescing of new strategic blocs, some of which will be expedient and temporary, including the Russo-Chinese alliance using the Shanghai Cooperation Organization (SCO) as a basis. Within this framework, the PRC will pursue its fundamental and long-term alliance relationships with Pakistan and Myanmar, and in both these countries the development of communications infrastructure linking the PRC with the Indian Ocean can be expected to take precedence. Indeed, the PRC will need to move quickly to ensure that it continues to exert strong influence over the Myanmar Government after the late-2010 elections which could see the military leadership out of the national leadership.

The PRC will attempt to further demonstrate that its strategic relationship with the Iranian Government is separate and equal to the Russo-Iranian relationship, but more friendly to Tehran than Moscow. But there is no escaping Beijing’s need to remain close with Moscow in order to access all of the pipelines linking it through Central Asia to Iran, and then on through Turkey to Europe.

US media speculation that the PRC would support, or not interfere with, a new US-led sanctions regime against Iran — over Iran’s continued pursuit of an indigenous nuclear weapons program — are, according to Defense & Foreign Affairs analysts, naïve. Firstly, the PRC is, with Russia, the major facilitator of trade access to and from Iran and neither will jeopardize its influence with Tehran and the benefits derived there from. That would be akin to suggesting that the Great Game for control of Central Asia and Persia had not just been won by Russia and its allies (in this case, the PRC).

This leads inevitably to the reality that Iran will — with US sensibilities now less of an issue in Beijing or Moscow — be invited to become a full member of the SCO, with the implied military protection of Iran from external attack (“an attack on one is an attack on all”), either formally or de facto.

Most significantly, the changing trends mean that the PRC will no longer have to mask its growing interest in the Indian Ocean and its intention to compete there with the US as well as India. The PRC in January 2010 made it clear that it needed what could be called “temporary home porting” in Gwadar, the Pakistani port being developed by the PRC, of its PLA Navy vessels in the Indian Ocean so that crews could get their necessary shore-time and ships could be revictualed.

The ROC, meanwhile, has a brief respite to build relations with Washington, now that the strenuously leftist Administration of Barack Obama has been rebuffed by the state it felt was a natural ally, the PRC. But within this taut web of competition and dependencies, the US and the PRC will remain careful not to push each other too far.

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