Phil Flynn: Big Build Bananza!

Maybe the oil bulls can take some comfort in the fact that oil was unable to close below $80 despite the fact that the euro hit a ten month low and the stock market actually closed lower. (It can do that you know.) Oil prices shook off a mighty crude oil inventory build according to the Department of Energy’s Energy Information Agency. The EIA reported that U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by gigantic 7.3 million barrels from the previous week.

The build was on the back of strong imports which averaged 9.4 million barrels per day which was up a cool 969,000 barrels from last week. Yet draw downs in products kept the oil somewhat supported. The EIA reported a fall of 2.7 million barrels in gasoline supply and a 2.4 million barrel drop in distillates. The drop was inspired in part by strong gasoline demand. The EIA says that gasoline demand rose 2.7%, or 238,000 b/d, to 9.087 million barrels a day which according to David Bird at Dow Jones was the highest weekly level since November 20.

Still year over year demand was down 13,000 barrels per day for the corresponding week a year ago. Bird says that the gain in gasoline led a 504,000 barrel per day, or 2.7%, rise in total oil demand for the week, to 19.336 million barrels per duty which was a two week high.Increasing gas demand usually is a sign that things for consumers are getting a little better and we may see that optimism grow in gas demand numbers first.

Over the last few weeks I have scoffed at strong gas demand numbers but the trend may have to be now taken more seriously. Perhaps the rally in the stock market has been more reflective of an improving backdrop for the economy than we have expected. Assuming we avoid a double dip maybe we can see a better than expected summer driving season. Still that does not mean that retail gas prices will go straight up. With gas production rising we should be close to the seasonal top.

Still for oil the dollar remains the key. Yesterday the flight to the dollar helped sink commodities as Portugal’s debt rating was downgraded. The EU members meet today and tomorrow and the outcome of this meeting may be the catalyst for the next big move in commodities. We are still buying breaks and selling rallies at what we project will be the high or low for that particular day. Long term position traders, both bulls and bears, will have their days but until we break out of the larger range there will be mounting frustration. Iron condors may be another way to play a market that is locked in a range. Long term players are just in a rut.

Catch Phil daily on the Fox Business Network. And for buy and sell points across the commodity spectrum, just pick up the phone and call Phil at 800-935-6487.


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Crude Oil Daily Technical Outlook For Thursday Morning

Intraday bias in crude oil remains neutral as consolidations from 83.16 continues. In case of another fall, we'd still expect strong support from 38.2% retracement of 69.50 to 83.16 at 77.94 and bring rally resumption. Break of 83.16 will target a retest of 83.95 high. However, note that sustained trading below 77.94 fibo level will argue that rise from 69.50 is completed and deeper fall would possibly be seen to retest this support.

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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Sure Looks Like A Top? VIX, NYSE, DOW & GOLD

I think many of you will find this article interesting as I show several different indicators which point to an imminent correction for stocks and precious metals.

Last Wednesday’s report I showed how the current price of the index was almost identical to the January peak from where prices dropped nearly 10%. The report was called “28 Day Sector Rotation, Commodity & Index”. We did get the first sign of toppy market last Friday with the sharp one day sell off as I expected.

Today, one week later we are now that much closer to a 3-8% drop which is shown in the charts below. It’s important to remember that bottoms tend to happen quickly while a market topping is more of a process which is why so many people take big losses trying tip a top.

The market will continue to move up even when it is way overbought. It’s only when extreme levels are reached that tops can try to be played.

The Volatility Index – Measures Fear & Complacency in the Market

While the VIX is not something I follow on a daily basis it is important to keep an eye on it. When extreme low levels are reached we know the market (John Dow traders) are feeling confident and buying up everything they can get their hands on.

I like to trade with the trend but when extreme levels are reached I start looking for a low risk setup to the short side (profit in a falling market) using leveraged ETFs.

As you can see from the chart of the VIX and SP500 below, each time the VIX tested the support level the market made a top. Again the VIX is not a great timing tool but it helps me decide which trading strategy I should focus on (swing or day trading) and if I should be looking to buy or selling the market.



NYSE New Highs-Lows Index

If a chart is worth a thousand words then this chart is worth 2000. It cannot get any simpler that the NYSE new high-low index.

The green line is the SP500 index which is straight forward. The Red line is the number of stocks on the NYSE which have reached a new high.

How strong is the market if is keeps going up while the underlying stocks are getting weaker? Something has got to give and it will most likely be to the down side.



Dow Jones Industrial Average – Daily Trend Chart

This chart adds another layer of clarity. You can see what happened last January when everyone was buying stocks thinking life is good, trading is easy. As my trading buddy David Banister from ActiveTradingPartners.com always says “Buy when the Cry, Sell when they Yell”and that’s what I am looking to do.

Today the Russell 2000 index (small cap stocks) sold down very hard. These stocks tend to lead the market both up and down. So the red flag is up and I am just waiting for the market to show me its hand so we can catch the next big move.

Coles Notes on Chart:
• Market is over bought and in dire need of a pullback
• The length of this steady rally is much longer than a normal rally
• The rate as which prices are rising is much to steep to be maintained
• The market is trading at the parallel trend line
• VIX is tell us people are buying and not worrying about any possible drop
• NYSE divergence is screaming Overbought....



GLD Gold Fund Trading

Gold is still in a major bull market but the recent price action from Dec up until now has been down as gold consolidates the large rally from 2009.

Looking at the chart below you can see the mini Head & Shoulders pattern. The neckline has now been broken and prices are falling. I almost had a buy signal for gold two days ago with the small move up and the candle closing above the previous days high. But because the price was still under the neckline (resistance) I decided to stand aside and live another day.



Mid-Week Gold Newsletter Conclusion:

In short, the market looks very strong but from a technical point of view it’s about to die of exhaustion in my opinion.

Gold, silver and oil I figure will move together which is sideways or down.

I am keeping a very close eye on things hoping prices unfold in a manor which will allow us to spot a low risk setup in the coming days as I would like to catch this drop if it happen. With any luck we could make 10-15% within a couple days using a leveraged ETF.

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Where is Crude Oil Headed on Thursday?

CNBC's Brian Shactman 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 lower on Wednesday as prices fell to a seven session low Wednesday due to a sharp rise in U.S. crude inventories and on a stronger dollar. The U.S. Energy Information Administration reported a 7.25 million barrel increase in crude inventories for last week, which was significantly more than the 1.4 million barrel gain that analysts had been expecting. The mid range close sets the stage for a steady opening on Thursday. Stochastics and the RSI remain bearish signaling that a short term top is in or is near. Closes below last Monday's low crossing at 79.41 are needed to confirm that a short term top has been posted. If May renews the rally off February's low, January's high crossing at 85.43 is the next upside target. 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 Monday's low crossing at 78.86.

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Natural gas closed lower on Wednesday as it extends the trading range of the past four days. 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 4.035 is the next downside target. Closes above the 20 day moving average crossing at 4.511 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 4.308. Second resistance is the 20 day moving average crossing at 4.511. First support is Monday's low crossing at 4.093. Second support is weekly support crossing at 4.035.

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The U.S. Dollar closed sharply higher on Wednesday as worries over sovereign debt in Europe triggered today's rally. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If June extends last week's rally, the May 2009 high on the weekly continuation chart crossing at 83.34 is the next upside target. Closes below the 10 day moving average crossing at 80.65 would confirm that a short term top has been posted. First resistance is today's high crossing at 82.19. Second resistance is the May 2009 high on the weekly continuation chart crossing at 83.34. First support is the 20 day moving average crossing at 80.73. Second support is the 10 day moving average crossing at 80.65.

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Phil Flynn: Oil Bull Knockdown

Oil bulls got a shot to the solar plexus from the American Petroleum Institute but it may be a downgrade from Fitch rating services that delivers the knockout blow. The American Petroleum Institute blindsided the global oil markets last night by reporting a spectacular 7.5 million barrel weekly build in US crude oil supplies. The oil seemed to come out of nowhere and made the oil bulls get nervous but the bulls vowed to wait for what the Department of Energy might say today.

Will it really matter if another PIG goes down? Overnight the euro got hammered and the dollar soared on news that Fitch Ratings, as reported by Marketwatch, downgraded Portugal's long term foreign and local currency issuer default ratings to AA- from AA on Wednesday. Fitch said that the outlooks on the long term IDRs are negative and the downgrade reflects significant budgetary underperformance in 2009. Marketwatch quotes Douglas Renwick, associate director in Fitch's Sovereign team as saying, “A sizeable fiscal shock against a backdrop of relative macroeconomic and structural weaknesses has reduced Portugal's creditworthiness.

Talking about sizable shocks how about that crude drop! It seems that some of those import drops into the North East due top that freaky winter storm self corrected along with the stormy seas. Oil imports rebounded from surprise drops in California and the Northeast. The API said that crude Imports were up by 1.3 million barrels a day to a hefty 9.19 million barrels.

The API reported that gasoline supplies fell by 81,000 barrels with increased demand and refinery turnarounds helped supply fall. Distillates fell as refiners are focused on turnarounds and maxing out on more profitable gas. Mark Shenk of Bloomberg News points out those higher profits for making gasoline are prompting refiners to increase motor fuel production to a record for this time of year. Mr. Shenk points rose 2.3 percent to 8.96 million barrels of oil a day. That is the highest level since they began to keep records all the way back in 1983. Mr. Shenk says this was inspired by the fact that the crack spread has almost doubled to $13 this year. Demand is also rising! Barbara Powell of Bloomberg says that MasterCard Spending Pulse reported that U.S. gasoline consumption rose last week to the highest level since June, the fourth increase in five weeks.

Motorists bought an average 9.66 million barrels of gasoline a day in the week ended March 19, the second biggest credit card company said in its SpendingPulse report. Consumption was up 1.4 percent from the previous week and 1.8 percent above a year earlier. Demand for the past four weeks averaged 9.55 million barrels a day, the highest level since the week ended July 3 and 2.5 percent above the same period in 2009. Total fuel demand year to date is up 1.5 percent from the same period of 2009.

OPEC put off their September OPEC meeting till October because of Ramadan. That means another 30 days of cheating on production! Yippe!. Once again the market will focus on the dollar and the euro. The market's worst fear is that the crisis in Greece will spread to other PIIG nations (Portugal, Italy Ireland and of course Greece). That has put the market out of its comfort zone of being short the dollar and long the euro and of course being long crude oil. If more PIIGS start to fall then so too will oil. Forget about China demand for the moment and focus on what is really moving the market.

Phil Flynn can be reached at pflynn@pfgbest.com And don't forget to watch Phil every day on the Fox Business Network.

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Crude Oil Drops as Report Shows U.S. Supplies Gained More Than Predicted

Crude oil fell after a government report showed a bigger than forecast increase in U.S. supplies and as the dollar surged to a 10 month high against the euro. Stockpiles rose 7.25 million barrels to 351.3 million last week, the Energy Department said. Inventories were forecast to climb 1.65 million barrels, according to a Bloomberg News survey. The greenback increased after Fitch Ratings cut Portugal’s credit grade. A stronger dollar reduces the appeal of commodities as an alternative investment.

“The crude number was a lot bigger than what was expected,” said Tom Bentz, a broker at BNP Paribas Commodity Futures Inc. in New York. “There hasn’t been much attention paid to the fundamentals lately. The market has been more focused on what happens to the dollar and equities.” Crude oil for May delivery dropped $1.04, or 1.3 percent, to $80.87 a barrel at 11:01 a.m. on the New York Mercantile Exchange. Futures have increased 1.9 percent in 2010 and 50 percent from a year earlier.

Imports of crude oil gained 12 percent to 9.4 million barrels a day last week, the highest level since September and the biggest change since August, the report showed. Gasoline stockpiles fell 2.72 million barrels to 224.6 million in the week ended March 19. A 1.5-million-barrel drop was forecast, according to the median of 16 analyst responses in the Bloomberg News survey. Inventories of distillate fuel, a category that includes heating oil and diesel, declined 2.42 million barrels to 145.7 million, according to the department. A decrease of 985,000 barrels was forecast.....Read the entire article.

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Crude Oil Daily Technical Outlook Wednesday Morning

Crude oil's rebound failed below 83.16 and the sharp retreat dragged 4 hours MACD back below signal line. Consolidations from 83.16 might extend further and intraday bias is turned neutral. Nevertheless, in case of deeper fall, we'd still expect strong support from 38.2% retracement of 69.50 to 83.16 at 77.94 and bring rally resumption. Break of 83.16 will target a retest of 83.95 high. However, note that sustained trading below 77.94 fibo level will argue that rise from 69.50 is completed and deeper fall would possibly be seen to retest this support.

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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Where is Crude Oil Headed on Wednesday?

CNBC's Bertha Coombs 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 Tuesday Evening

Crude oil closed higher due to a late day short covering rally on Tuesday. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are bearish signaling that a short term top is in or is near. Closes below last Monday's low crossing at 79.41 are needed to confirm that a short term top has been posted. If May renews the rally off February's low, January's high crossing at 85.43 is the next upside target. 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 Monday's low crossing at 78.86.

Natural gas closed higher due to short covering on Tuesday as it consolidates some of this winter's decline. The high range close sets the stage for a steady to higher opening on Wednesday. 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 4.550 are needed to confirm that a low has been posted. First resistance is the 10 day moving average crossing at 4.357. Second resistance is the 20 day moving average crossing at 4.550. First support is Monday's low crossing at 4.093. Second support is weekly support crossing at 4.035.

The U.S. Dollar closed higher on Tuesday as it extends last week's breakout above the 20 day moving average crossing at 80.69. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If June extends last week's rally, February's high crossing at 81.70 is the next upside target. If June renews this month's decline, the 38% retracement level of the November-February rally crossing at 79.17 is the next downside target. First resistance is Monday's high crossing at 81.35. Second resistance is February's high crossing at 81.70. First support is the 20 day moving average crossing at 80.69. Second support is the 10 day moving average crossing at 80.51.

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