The Crude Oil Trader

Thursday, March 18, 2010

Crude Oil Market Commentary For Thursday Evening

Crude oil closed lower due to profit taking on Thursday as it consolidates some of Wednesday's rally. The mid range close sets the stage for a steady opening on Monday. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. If May renews the rally off February's low, January's high crossing at 85.43 is the next upside target. Closes below Monday's low crossing at 79.41 would confirm that a short term top has been posted. First resistance is the reaction high crossing at 83.47. Second resistance is January's high crossing at 85.43. First support is the 20 day moving average crossing at 81.03. Second support is Monday's low crossing at 80.89.

Natural gas closed sharply lower on Thursday and below weekly support crossing at 4.157 as it extends this winter's decline. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If May extends this winter's decline, weekly support crossing at 4.035 is the next downside target. Closes above the 20 day moving average crossing at 4.671 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 4.483. Second resistance is the 20 day moving average crossing at 4.671. First support is today's low crossing at 4.119. Second support is weekly support crossing at 4.035.

The U.S. Dollar closed higher on Thursday as it consolidates some of this week's decline while renewing the late winter trading range. The dollar rose sharply due to dealer talk that the Federal Reserve would raise the discount interest rate. Today's chatter among traders reflected fears that the Feb may raise interest rates sooner than later. Additional support came from renewed concerns over Greece's debt concerns. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If June extends this week's decline, the 38% retracement level of the November-February rally crossing at 79.17 is the next downside target. Closes above the 20 day moving average crossing at 80.70 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 80.70. Second resistance is the reaction high crossing at 81.20. First support is Wednesday's low crossing at 79.73. Second support is the 38% retracement level of the November-February rally crossing at 79.17.

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Crude Oil Declines as Dollar Strengthens, Inventory Stockpiles Increase

Oil fell for the first time in three days as a stronger dollar trimmed demand for commodities as an alternative investment and a report showed U.S. crude stockpiles increased. Oil fell as much as 1.5 percent as the dollar gained against the euro amid concern Greece will fail to secure financial assistance from the European Union. Crude oil inventories grew last week to the highest level since August, according to a U.S. government report yesterday.

“The strong dollar has been the major factor here,” said Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut. “The dollar strength has got the risk takers or the risk buyers on the sidelines, but they’re only going to wait so long before getting back into the water.” Crude oil for April delivery fell 49 cents, or 0.6 percent, to $82.44 a barrel at 1:35 p.m. on the New York Mercantile Exchange. It settled at $82.93 yesterday, the highest close since Jan. 6. Oil has risen 71 percent in the past year.

The dollar gained 0.8 percent against the euro to $1.3629 from $1.3738 yesterday. Greek Prime Minister George Papandreou set a one week deadline for the EU to craft a financial aid mechanism. Greece needs to raise about 10 billion euros ($14 billion) to refinance bonds due on April 20 and May 19. The Reuters/Jefferies CRB Index of 19 commodities declined 0.4 percent to 275.30, the first drop in three days. Ten of the commodities traded lower.....Read the entire article.

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28 Day Sector Rotation, Commodity & Index Update

From guest analyst Chris Vermeulen.....

Earlier this week I noticed a pattern in the market throughout an entire trading session that has inspired me to write a short piece on sector rotation.

On Tuesday March 16th, my quote screen was flashing green as sectors reached new intraday highs or 52 week highs. The interesting part was that every sector that was flashing green happened to be in sectors that strengthen at the end of a bull market cycle or strong rally. This would include basic materials, staples, services, utilities and financial.

Today I investigated the different sectors and came across some interesting numbers between the January market peak and this week’s price action as I show in the charts below.

JANUARY – ETF Sector Rotation Trading – 28 Day Cycle
I may not explain this well but try to follow me here
Just before the market rolled over and lost over 9% last January, all the proper bull market sectors were very strong during the previous 28 days. This is normal and a strong sign that market participants were bullish on the overall market.

But the market was overbought; trading volume was light indicating that not many people are willing to buy at these lofty prices. And the VIX (volatility index) had reached an extreme low (a level that has triggered large sell offs in the past). All this means one thing to me. And that is, trade with caution and tighten your protective stops.

General rule, if everyone is buying all the hot stocks at these over bought levels then you can’t help but think its time for the market to roll over and shake them all out.

MARCH – ETF Sector Rotation Trading –28 Day Cycle
The chart of March shows where the sectors have finished over the past 28 days. Notice how similar the sectors have appreciated in price…

I have overlaid John Murphy’s sector rotation image to show which sectors are strongest in a bull market.

Now the interesting part is that it appears to be the setup as in January. My quote system is flashing new highs for the bear market cycle sectors which are the one which have not performed well (Stapes, Services & Utilities) and I have to think the market is about to take a breather or do a swan dive.

Don’t get me wrong, I am not saying we are on the verge of a bear market. I actually think the market is strong and will trade sideways in a large range for most of this year or just continue to trend up.
What I am saying is that these sectors go in and out of favor during smaller market cycles and that can be very useful information.

Sector Rotation Explained
You can learn more about sector rotation from this detailed course How to Profit From Sector Rotation Using ETFs. This course explains how different sectors are stronger during different points within the economic cycle. The chart above shows the relationships and which of the various sectors should strengthen from the economy. The financial Market Cycle leads the Economic Cycle because traders try to anticipate the economy.

Market Update & Trading Conclusion:
Stock Indexes: The market in my opinion is way over bought on the daily chart and needs a breather. Volume is light, VIX is at the same level we saw in January just before the top and the bullish sectors are firing on all pistons. You won’t catch me buying up here. Any type of pullback will most likely be sharp and there is no need to put money to work right now.

Precious Metals: Gold and silver had a nice pop this week off of a support level. I did not have a low risk setup as momentum was not on my side at the time of the pop. Also the large gap up on GLD makes me nervous as gaps tend to get filled. I am just waiting for something to unfold which looks to be a few days away still.

Oil: It has popped higher also and is trading at resistance. As I mentioned in Sundays report, if the USD dollar completes this breakdown then we will see commodities and stocks surge to higher prices and most likely post a nice multi month rally.

Natural Gas: We are seeing natural gas prices dip below support, shaking out traders who had their protective stops set just beneath the previous low. Natural gas is a silent killer as it will shake even the best traders out of the market. I feel natural gas is over sold and ready for a bounce but until I get a low risk setup I remain on the side lines.

Just click here if you would like to receive Chris Vermeulen's Free Technical Trading Reports in your email inbox.

Crude oil is still staying below 83.16 resistance for the moment and hence, intraday bias remains neutral. Consolidations from 83.16 could still continue with another fall. But downside is expected to be contained by 38.2% retracement of 69.50 to 83.16 at 77.94 and bring another rise. On the upside, however, decisive break will confirm rally resumption for 83.95 high next.

In the bigger picture, crude oil is still trading well inside medium term rising channel and the rise from 33.2 might still be in progress. Nevertheless, as such rise from 33.2 is treated as a correction to whole decline from 147.27 only, even in case of another high above 83.95, we'd continue to expect strong resistance near to 50% retracement of 147.27 to 33.2 at 90.24 to bring reversal. On the downside, though, break of 69.50 support will now indicate that crude oil has topped out in medium term already and turn outlook bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Wednesday, March 17, 2010

Where is Crude Oil Headed on Thursday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed tomorrow.

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Crude Oil Market Commentary For Wednesday Evening

Crude oil closed higher on Wednesday as it rebounded off Monday's low. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are turning neutral to bullish signaling that sideways to higher prices are possible near term. If May renews the rally off February's low, January's high crossing at 85.43 is the next upside target. Closes below Monday's low crossing at 79.41 would confirm that a short term top has been posted. First resistance is the reaction high crossing at 83.47. Second resistance is January's high crossing at 85.43. First support is Monday's low crossing at 80.89. Second support is the reaction low crossing at 77.44.

Natural gas closed lower on Wednesday as it extends this winter's decline. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If May extends this winter's decline, weekly support crossing at 4.157 is the next downside target. Closes above the 20 day moving average crossing at 4.724 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 4.531. Second resistance is the 20 day moving average crossing at 4.724. First support is today's low crossing at 4.352. Second support is weekly support crossing at 4.157.

The U.S. Dollar closed lower on Wednesday and below the lower boundary of the trading range of the past six weeks, which crosses at 79.92. The mid range close sets the stage for a steady opening on Thursday. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term. If June extends this week's decline, the 38% retracement level of the November-February rally crossing at 79.17 is the next downside target. If June renews this winter's rally, weekly resistance crossing at 81.97 is the next upside target. First resistance is the 10 day moving average crossing at 80.50. Second resistance is the 20 day moving average crossing at 80.72. First support is today's low crossing at 79.73. Second support is the 38% retracement level of the November-February rally crossing at 79.17.

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Crude Oil Rises Above $82 as U.S. Imports, Fuel Supplies Drop

Crude oil rose above $82 a barrel after the Energy Department reported U.S. imports fell to a seasonal low and fuel inventories dropped. Crude imports slipped 0.8 percent last week to the smallest level for the second week in March since 2002. Supplies of gasoline and distillate fuels, which include heating oil and diesel, decreased more than forecast by analysts in a Bloomberg News survey. OPEC ministers meeting in Vienna today left production targets unchanged to support current price levels.

“Imports are down to a really, really small trickle,” said Carl Larry, president of Oil Outlooks & Opinions LLC in Houston. “We’re not able to bring in as much oil as we’d like to because the oil that is out there is going elsewhere. When the economy does start to grow and the refineries start to pick up runs, that crude isn’t going to be there.” Crude oil for April delivery gained $1.22, or 1.5 percent, to $82.92 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices have increased 69 percent in the past year. Oil traded at $82.50 a barrel before the release of the inventory report at 10:30 a.m. in Washington.

Oil imports decreased by 64,000 barrels a day last week to 8.43 million. The Organization of Petroleum Exporting Countries delivered 47 percent of its crude and refined products to the Asia Pacific region in 2008, up from 45 percent the year before, according to data on its Web site. That compares with a decline in the U.S. to 22 percent in 2008 from 26 percent in 2007.....Read the entire article.

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New Video: Dan Dicker and Stephen Schork "Avoid Refiners"

Dan Dicker, expert trader and Stephen Schork, president of the Schork Report, break down oil refiners and whether or not now is the time to buy.

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Crude Oil Numbers For Wednesday Morning

Crude oil was higher overnight as it extends Tuesday's rally. Stochastics and the RSI remain neutral to bearish signaling that sideways to lower prices are possible near term. If May renews the rally off February's low, January's high crossing at 85.43 is the next upside target. Closes below Monday's low crossing at 79.41 are needed to confirm that a short term top has been posted. Wednesday's pivot point is 81.04. First resistance is the overnight high crossing at 82.78. Second resistance is last Friday's high crossing at 83.47. First support is Monday's low crossing at 79.41. Second support is the reaction low crossing at 77.44.

Natural gas was slightly lower overnight as it extends this winter's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If May extends the decline off January's high, weekly support crossing at 4.157 is the next downside target. Closes above the 20 day moving average crossing at 4.726 would confirm that a short term low has been posted. Wednesday's pivot point is 4.364. First resistance is the 10 day moving average crossing at 4.535. Second resistance is the 20 day moving average crossing at 4.726. First support is Tuesday's low crossing at 4.400. Second support is weekly support crossing at 4.157.

The U.S. Dollar was lower overnight and has broken out below the lower boundary of trading range of the past six weeks, which crosses at 79.92. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. Closes below the reaction low crossing at 79.92 would open the door for a larger degree decline during March. If June renews this winter's rally, the 50% retracement level of the 2009 decline on the weekly continuation chart crossing at 81.97 is the next upside target. First resistance is the 10 day moving average crossing at 80.50. Second resistance is the 20 day moving average crossing at 80.71. First support is the overnight low crossing at 79.74. Second support is the 38% retracement level of the November-February rally crossing at 79.17.

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Is The US Dollar Reversing Again?

A Sneak Peek At Gold

A Quick Peek at Crude Oil

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