Dan Dicker: Oil Down....Blame Goldman

Dan Dicker explains how Goldman Sachs fraud charges have sent oil speculators running for cover.




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Crude Oil Market Commentary For Monday Evening

Crude oil closed down $1.60 at $81.64 a barrel today. Prices closed near mid-range today and hit a fresh three week low. No serious chart damage has been inflicted in crude, but the bulls have faded and need to show fresh power soon to keep the uptrend on the daily bar chart in place. The Goldman Sachs fraud news and the volcanic ash that is shutting down air travel in Europe are bearish factors for crude. Crude oil bulls still have the overall near term technical advantage.

Natural gas closed down 8.4 cents at $3.955 today. Prices closed near mid-range today. Bears still have the solid near term technical advantage. The next upside price objective for the bulls is closing prices above solid technical resistance at the April high of $4.334.

The U.S. dollar index closed up 11 points at 81.06 today. Prices closed near the session low today. The bulls still have the overall near term technical advantage. Bulls' next upside price objective is to close prices above solid technical resistance at the April high of 82.06.

Gold futures closed down $1.30 at $1,135.60 today. Prices closed nearer the session high today after hitting a fresh two week low early on, following Friday's steep losses that produced a bearish weekly low close. The key "outside markets" were in a bearish posture for gold today, as the U.S. dollar index was higher, while crude oil prices were lower. Uncertainty regarding the Goldman Sachs fraud charges from the SEC also added to selling pressure in gold today.


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Crude Oil Daily Technical Outlook For Monday

Crude oil dives to as low as 80.53 today and further decline is still in favor. As discussed before, rise fro 69.50 should be over after hitting 61.8% projection of 69.50 to 83.16 from 78.56 at 87.00. Decisive break of 38.2% retracement of 69.50 to 87.09 at 80.37 will confirm this case and target 61.8% retracement at 76.22 and below. On the upside, above 83.35 will flip intraday bias back to the upside and put focus back to 87.09 high instead.

In the bigger picture, note again that medium term rise from 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Our preferred view is that rise from 33.2 is in form of a three wave structure (73.23, 65.05, ?) and should be near to completion. Strong resistance is expected around 90 psychological level, which coincide with 50% retracement of 147.27 to 33.2 at 90.24 and 61.8% projection of 33.2 to 73.23 from 65.05 at 89.79, and bring reversal. Hence, even though another rally cannot be ruled out, upside potential should be limited. On the downside, break of 69.50 support will break the series of higher low pattern from 33.2 and will be an important indication that the trend has reversed. In such case, we'll turn bearish on crude oil and expect the then down trend to target a new low below 33.2.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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ExxonMobil CEO: Recovery Requires Stable Policies

The best way for government to kick start the economy is to provide a level playing field for competition and create stable policies that will enable long term investments, Rex Tillerson, chairman and chief executive officer of Exxon Mobil Corporation, said today. "Leaders in government and in business agree that we face an urgent need to revitalize our economy and spur job creation," Tillerson said in a speech to the Houston World Affairs Council, where he accepted the Jesse H. and Mary Gibbs Jones International Citizen of the Year Award.

"To achieve these goals, we must unleash the extraordinary power of private citizens to seize new opportunities in free markets. Industry can achieve this by taking risks, investing in the future, hiring new workers, expanding operations and making our economy more competitive. But we can only achieve this when government creates a level playing field for competition and upholds a stable policy framework conducive to long term investments."

Tillerson said America's businesses, both small and large, need to be able to plan for the future in order to make investments that will create badly needed jobs for the nearly one in 10 Americans who are unemployed and millions more who are underemployed or no longer seeking work. "Every business leader faces challenges in assessing the future, but in tough economic times government can help by keeping a steady hand on the rudder. If the private sector knows that government will stay the course and resist the temptation to over-regulate, it can invest with confidence." According to recent studies, the oil and natural gas industry contributes more than $1 trillion a year to the U.S. economy and directly and indirectly supports more than 9 million jobs.

"These economic contributions are even more important in light of the global economic downturn and the slow job creation of the nascent recovery," said Tillerson. "I believe our industry can, and must, be part of our national efforts to achieve more robust economic growth." Tillerson said much focus has been placed on the role small businesses play in job creation, but studies show that large corporations are also critical engines of job creation and employment. "As big businesses flourish, small businesses are created as the direct suppliers, contractors and providers of other services essential to the success of the larger businesses. With the right public policies, the energy industry and companies like ExxonMobil can lead the way back with our disciplined investments in new projects, new technologies, and new jobs."

Tillerson said that when government creates an environment where businesses can be creative, take risks, and grow, the private sector will repay that trust by creating millions of new jobs but also through unequaled acts of private charity and corporate citizenship. ExxonMobil's 80,000 employees are proud of their contributions in providing for social development, environmental protection and the company's most visible contribution, supporting economic growth and development by providing reliable energy, well paying jobs, tax revenues, technological innovation, and shareholder value. ExxonMobil's corporate citizenship efforts help communities achieve long term economic and social development, through programs focused on battling malaria, increasing economic opportunities for women and supporting improvements in science, technology, engineering and math education.

"We have a long record of going beyond our primary responsibility of delivering the energy that benefits our consumers, shareholders and business partners," said Tillerson. "As a company and as individuals, the men and women of ExxonMobil are dedicated to being good corporate citizens wherever we operate. We believe this ideal is so integral to our long term success that we have built it into our business model and our corporate governance. In other words, we believe our commitment to citizenship is fundamental to our year to year success as a company."

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Oil N Gold: Commodities Extend Weakness as Investors Avoid Risks

Crude Oil prices extend weakness for a third consecutive day as global risk aversion jumps amid Goldman's case. WTI crude oil price slides to 80.8 in European session, after plummeting -2.69% to 83.24 last Friday. Declines in heating oil and gasoline also accelerate with losses of -3% and -2% respectively.

After disclosing production of 29.26M bpd in March (+5.6% y/y), OPEC will probably increase shipment, by +0.9%, in the 4 weeks ending on May 1. This further increases oil supply which is already in a surplus in the market. Member countries are boosting production regardless insufficient demand.

In an interview over the weekend, Qatar's oil minister Abdullah bin Hamad al-Attiyah said there's no need for a special meeting before its October meeting but he mentioned that recent rally in oil price was is 'not related at all to there being a shortage...We see that inventories are at their highest'.

Natural gas has fallen in consolidative phase since April. However, resumption of inventory builds indicates risk of price is to the downside. Gas supply will likely remain ample in coming years as large producers are not going to cut output despite slump in prices.

Although Algeria's energy minister Chakib Khelil plans to seek commitments from 11 gas exporting nations to reduce output, both Russia and Qatar, respectively the biggest and the third biggest holders of the world's reserves, will probably refuse to collaborate.

Gold price slides due to broad based decline in commodities and weakness in the Euro. Currently trading at 1130, the benchmark contract fell to as low as 1124 earlier today. Despite the fall, gold's performance is relatively resilient when compared with oil prices. Some investors buy gold as they lose confidence on currencies on Greece's issue.

Talks on Greece involving the European Commission, the IMF and the European Central Bank have been delayed until April 21 as a volcanic ash cloud disrupted air travel. The market expects the EU and the IMF will impose tough conditions for the rescue package for Greece. The spread between Greek and German 10 year government debt widened +32 bps to 462 bps, the highest level since October 1998.

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Crude Oil Extends Decline on Speculation Recovery in Demand Is Trailing Supply

Crude oil fell for a third day on speculation the commodity’s climb to an 18 month high have outpaced a recovery in global demand. Oil extended losses after tumbling 2.7 percent on April 16, the most in 10 weeks. Prices are being driven by speculation and currency movements and there’s no need for OPEC to review output before its October meeting, Qatar’s oil minister Abdullah bin Hamad al-Attiyah said yesterday. The dollar strengthened against the euro, reducing the appeal of commodities.

“We’ve still got higher than average stockpiles in various markets, including the U.S.,” said Toby Hassall, a commodity analyst at CWA Global Markets Pty in Sydney. OPEC “will want to see those stockpiles drawn down further before they consider increasing supply.” Crude oil for May delivery fell as much as $1.58, or 1.9 percent, to $81.66 a barrel in electronic trading on the New York Mercantile Exchange. It was at $81.73 at 11:14 a.m. Singapore time. Prices have declined in eight of the nine trading days after touching $87.09 on April 6, the highest since October 2008.

The May contract, which expires tomorrow, lost $2.27 on April 16 to $83.24 a barrel, the biggest drop since Feb. 5. Prices slumped after the U.S. Securities and Exchange Commission accused Goldman Sachs Group Inc. of fraud, triggering a selloff in commodity and equity markets. The more widely held June future was down $1.30, or 1.5 percent, at $83.37 today.

Greece Bailout
The euro fell to a one week low against the dollar after European Union finance ministers told Greece to brace itself for the International Monetary Fund’s conditions on a bailout package. The U.S. currency was at $1.3460 per euro at 10:40 a.m. in Singapore, from $1.3503 April 16 in New York. “There will be fits and starts to do with the recovery story and I think this Goldman news is another event that seems to have exposed the fragility of market confidence,” said CWA’s Hassall. “Longer term, the global recovery story is going to continue to drive the oil market.”

Oil at $90 a barrel would be harmful and may “jeopardize the market,” according to Angola’s oil minister, Jose Maria Botelho de Vasconcelos. A “good level” is between $70 and $80, he said yesterday at a gas conference in Oran, Algeria. Angola and Qatar are members of the Organization of Petroleum Exporting Countries, which pumps 40 percent of the world’s oil. The group slashed output by a record 4.2 million barrels a day beginning January 2009 to prevent a supply glut as the global economy sank into recession. Ministers voted to maintain official output targets at a March 17 meeting in Vienna.

Speculators
Hedge fund managers and other large speculators trimmed bets on rising oil prices for the first time in three weeks, U.S. Commodity Futures Trading Commission data showed.
Speculative net long positions, or the difference between orders to buy and sell the commodity on the New York Mercantile Exchange, decreased 12 percent to 113,364 contracts on April 13, the commission said last week. Brent crude oil for June settlement fell as much as $1.36, or 1.6 percent, to $84.63 a barrel on the London based ICE Futures Europe exchange. The contract was at $84.77 at 11:10 a.m. Singapore time.

Reporters Gavin Evans can be reached at gavinevans@bloomberg.net and Yee Kai Pin at kyee13@bloomberg.net


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


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Precious Metals & Oil ETF Trend Trading

Last week was exciting with broad market and gold forming an intraday reversal pattern after a long overbought rally, then broke down though short term key support levels. While this move lower was tough on the pocket book for those who chased the market up the past few days and/or were not moving their protective stops up, this move is good for the health of the market.

This pullback is actually a good thing for us active traders who wait for low risk setups and don’t chase prices higher, but rather buy on the dips in a bull market when most of the risk has been flushed out already. Trading with low risk setups is not the most exciting type of trading because there are not a ton of setups but if one can be patient and wait for these plays it is a very profitable strategy in the long run.

Those traders who live and breathe the market focusing on trading intraday price action most likely made a small fortune last week with Fridays sell off in stocks and precious metals. You can see how some of us took advantage of this sharp pullback last week with my before and after videos.

Below are the charts showing what I am currently thinking is going to happen for gold, silver, gold stocks and oil. I will be tracking the market with intraday charts to help pin point a low risk entry point for a possible short or long position as the market unfolds this week.

GLD – Gold Trading ETF

The chart below is an updated chart which I have showed several times. It shows how gold corrected, bottomed and is now trending back up. This week I will be watched closely to be sure we take a position which has the highest probability of working in our favor if and when a low risk setup occurs.



SLV – Silver Trading ETF

Silver really took a hit on Friday. It is now trading near support but there is not much we can do until we see what happens on Monday. There could be a bounce or more down side, tough to call right now…. And it’s not something you want to be on the wrong side of.



Gold Stocks – Gold Stock Trading

Gold stocks did not drop as much as I thought they would which indicates the market is still very bullish on gold. There is still potential for more downside… so I am letting the market unfold before doing anything.



USO – Oil Trading Fund

You can see oil moved down sharply on Friday and is now testing both a price support level and trendline support. Although this looks like a perfect setup, the market is designed to shake people out of positions before continuing the move. So it is likely for oil to dip which would break both these support levels triggering stop orders. Then the price should drop to the key support level where support should be found for at least a bounce or a new bottom.



Precious Metal & Oil ETF Trading Conclusion:

In short, the market had a nice correction on Friday and the heavy selling volume indicates that we are getting close to a larger correction which should provide two swing trades, a shorting opportunity and a new buying opportunity in the coming days, weeks or months depending how long the market takes with this pullback/correction.

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Where is Crude Oil Headed Next Week?

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





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Crude Oil Weekly Technical Outlook

Crude oil had a rebound attempt last week but failed at 86.39, below near term high of 87.09, and reversed sharply. The close below near term rising trend line argues that rise from 69.50 is over after hitting 61.8% projection of 69.50 to 83.16 from 78.56 at 87.00. But we'll need more evidence to confirm. Hence, we'll stay neutral first. On the upside, above resistance will suggest that recent rally is still in progress for 90 psychological level before making a top. On the downside, however, firm break of 38.2% retracement of 69.50 to 87.09 at 80.37 will confirm that rise from 69.50 is over and will bring deeper fall to 61.8% retracement at 76.22 and below.

In the bigger picture, note again that medium term rise from 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Our preferred view is that rise from 33.2 is in form of a three wave structure (73.23, 65.05, ?) and should be near to completion. Strong resistance is expected around 90 psychological level, which coincide with 50% retracement of 147.27 to 33.2 at 90.24 and 61.8% projection of 33.2 to 73.23 from 65.05 at 89.79, and bring reversal. Hence, even though another rally cannot be ruled out, upside potential should be limited. On the downside, break of 69.50 support will break the series of higher low pattern from 33.2 and will be an important indication that the trend has reversed. In such case, we'll turn bearish on crude oil and expect the then down trend to target a new low below 33.2.

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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Bulls Lose Their Momentum.....Crude Oil Closes Below 20 Day Moving Average

Crude oil closed lower on Friday and below the 20 day moving average crossing at 83.56 confirming that a short term top has been posted. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near term. If May extends today's decline, the 38% retracement level of the February-April rally crossing at 80.66 is the next downside target. Closes above Wednesday's high crossing at 86.39 would temper the near term bearish outlook. First resistance is today's high crossing at 85.44. Second resistance is this month's high crossing at 87.09. First support is today's low crossing at 82.52. Second support is the 38% retracement level of the February-April rally crossing at 80.66.

Natural gas closed higher due to short covering on Friday and the high range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near term. Multiple closes above the reaction high crossing at 4.334 are needed to confirm that a low has been posted. If May renews this winter's decline, weekly support crossing at 3.502 is the next downside target. First resistance is the reaction high crossing at 4.334. Second resistance is the 25% retracement level of the October-April decline crossing at 4.405. First support is the reaction low crossing at 3.857. Second support is the early April low crossing at 3.810.

The U.S. Dollar closed higher due to short covering on Friday as it consolidates some of the decline off March's high. The mid range close sets the stage for a steady opening on Monday. Stochastics and the RSI remain neutral to bearish signaling that sideways to lower prices are possible near term. If June extends this week's decline, March's low crossing at 79.73 is the next downside target. Closes above the 20 day moving average crossing at 81.30 are needed to confirm that a short term low has been posted. First resistance is today's high crossing at 81.04. Second resistance is the 20 day moving average crossing at 81.30. First support is Wednesday's low crossing at 80.14. Second support is March's low crossing at 79.73.

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