Growing Natural Gas Storage Fails to Slow Drilling

Natural gas production continues to grow while demand remains stagnant. As a result, the amount of natural gas flowing into storage continues to grow and generally at a faster pace than most commodity experts and petroleum analysts have been expecting. The latest weekly storage injection of 83 billion cubic feet (Bcf) exceeded analyst estimates by 3 Bcf. For the week ending April 30th, total gas in storage was 1.995 trillion cubic feet (Tcf), which was 5.1% ahead of the volume in storage at this time last year and 18.8% above the five-year average.

The latest weekly storage injection of 83 billion cubic feet (Bcf) exceeded analyst estimates by 3 Bcf.....

As shown by the chart below, after falling back into the middle of the five year average range of storage volumes beginning in January, storage volumes are now at or above the top end of the five year range. April is the start of the shoulder season for natural gas demand. That means demand is low because winter is over and the air conditioning load from hot summer weather has yet to arrive. Industrial and commercial gas demand remains weak as the economic recovery is advancing at a slower than desired pace. But the bigger problem is the continued high level of gas related drilling, especially in the gas shale basins.

The bigger problem is the continued high level of gas related drilling, especially in the gas shale basins.....

There are many pressures on oil and gas companies to drill their gas shale leases even in the face of weak natural gas prices. The need to hold the leases for which many of the companies have spent large sums of money is one pressure. Another is to use the money raised on Wall Street or through joint ventures and/or creative financing ventures. Lastly, the companies have pledged to investors that they will grow their production volumes at above industry growth rates. As a result, when we examine the pattern of changes in rigs drilling.....



For natural gas and rigs drilling horizontal wells compared to the trend in natural gas futures prices, we see why the industry seems reluctant to slow down its drilling.....Read the entire article.


New Video: How to Take Money and Emotion Out of The Gold Market


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How to Take Money and Emotion Out of The Gold Market

From guest blogger Adam Hewison....

Perhaps no other market in the world elicits such emotion and passion than the world's gold market. One only has to mention gold, and theories just come out of the woodwork in regards to conspiracy, market manipulation, and a host of other less than savory subjects.

So what's a trader to do?

Regardless of how you feel about gold, this market presents some great trading opportunities that you can capitalize on using our "Trade Triangle" technology.

Now, hard core gold bugs will not subscribe to this method of trading as they prefer to buy physical gold and hold onto it or bury their bars in their backyard, and to be honest with you, there is nothing wrong with that belief.

I've been asked to update our outlook on gold, so I thought that today I would make a short video to share with you some of the points I see in the current market.

As always, our videos are free to watch and have no obligation. The only thing that we ask is that you share your views on our blog. The views can be bullish on gold or bearish on gold, the choice is yours to make.

Just click here to watch How to Take Money and Emotion Out of The Gold Market

Enjoy the video,
Adam Hewison
President, INO.com
Co-creator, MarketClub.com


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Crude Oil Technical Outlook For Tuesday Morning

Intraday bias in crude oil remains neutral for the moment as consolidations from 74.51 is still in progress. Some more sideway trading cannot be ruled out. But after all, even in case of another rise, upside should be limited by double top neck line (80.53) and 4 hours 55 EMA (now at 80.08) and bring fall resumption. On the downside, break of 74.51 will target 69.50 key support next.

In the bigger picture, as noted before, 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Such rise might have completed at 87.15 already, ahead of 50% retracement of 147.27 to 33.2 at 90.24. 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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Systemic Risk in the Market

From guest blogger Jonas Miller at
Ticker House.Com....

There will be no charts this week. There will be no picks or guidance on commodities. There will only be this. I have voiced my concerns over the interconnectivity of the global financial marketplace for quite some time. On Thursday, we were reminded again that a system so complex and interconnected is doomed to fail at times. Even worse when they are interconnected yet following different rules, guidelines and requirements for trading the same securities and/or vehicles.

My friend who knows nothing about stocks or commodities told me has shares of UCO and GLD because he hears that commodities are a good investment. This shouldn’t happen! With the invention of ETF’s and ETN’s the market has not only exponentially increased its complexity but has increased the danger of market crashes by allowing participants who have no business trading in certain markets access without the cost of risk associated with it. The risk is thereby transferred throughout the system for the simple purpose of transactions…

I was supposed to write some stories on the moves last week. But after reading Barron’s, The Financial Times and the Economist over the weekend and today, I’d be repeating what has already been said. A couple weeks back I posted a small blurb about the systemic risk in the market place caused by ETF’s. In what world does an ETF gain 230% intraday (Think SKF and SRS during the peak of crisis)? Levered ETF’s just exacerbate the problem further by using swaps and futures to gain the 200% move of the underlying holdings. I also warned that an un-orderly mass liquidation of global assets will freeze the financial system solid! And it will…Thursday my fears were confirmed!

Last week’s hellish moves shouldn’t have happened! There is no reason for One Trillion dollars of market value be “taken” from the system for any reason let alone a computer glitch, human error or the combination of them both. One has to wonder if this is what occurred on late 2008. It felt the same at the open, it felt the same right before the crash and it occurred almost the same way. I was short via calls on the VIX and the VIX rallied over 90% last-week. I also voiced my concerns about the complacency in the marketplace and that for the VIX to trade under $20 is simply a mispricing of risk in the system that will correct….and it did!

I am a bit concerned about the state of the global markets right now. That goes for all of them. Equities, currencies, commodities and everything else because they are ALL connected somehow. It wasn’t until the point was raised that Greece might have as much systemic risk (in terms of the complexity not size) as the Lehman failure in 2008 that the EU finally gave in to bailing out Greece and any other Euro zone member who may need funding to avoid default and ponied up a cool Trill to do it! Fact is the bailout will not work…the math isn’t there and regardless of what they may think it will be much harder to shake the wolves and speculators from shorting the EUR and buying CDS against their debt. The market is up 400 points today and I have no conviction whatsoever that it will hold…

Time will tell…I would like to go more into detail on the subject but unfortunately I haven’t the time, Volatility is back in the market and nimble is the word. Sell it when it is high and buy it when its low (relatively speaking).

My next few articles will be on the practice of bidding on options using the Black-Sholes model. Legging into trades. Trading the Greeks (again not those Greeks) and trading the Greeks....YES THOSE GREEKS!


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Crude Oil Declines on Concern European Debt Bailout Is Insufficient

Crude oil fell to near $76 a barrel on concern that Europe’s almost $1 trillion bailout may not be sufficient to end the region’s sovereign debt crisis. Oil pared an increase of as much as 0.8 percent earlier today after the euro dropped against the dollar and investors questioned whether the European plan will reduce deficits accumulated by Greece, Spain and Portugal. U.S. crude supplies probably rose for the 14th time in 15 weeks, reinforcing concern that demand in the world’s biggest consumer is lagging.

“The package will just buy Europe some time,” said Clarence Chu, a trader at options dealers Hudson Capital Energy in Singapore. “Portugal and Spain now have a safety net so there is less incentive for them to cut their budget deficits.” Crude oil for June delivery fell as much as 62 cents, or 0.8 percent, to $76.18 a barrel in electronic trading on the New York Mercantile Exchange. It was at $76.20 at 2:22 p.m. Singapore time. The contract earlier rose as much as 59 cents to $77.39. Yesterday, it gained 2.3 percent to settle at $76.80.

Leaders of the 16 European nations using the single currency agreed yesterday to lend as much as 750 billion euros ($957 billion) to the most-indebted member countries. The euro declined to $1.2727 as of 6:46 a.m. in London from $1.2787 in New York yesterday, when it reached $1.3094, the highest level since May 4.....Read the entire article.


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Where is Crude Oil Headed on Tuesday?

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 Rallies on Crisis Relief.....Bears Still Hold The Advantage

Crude oil closed higher due to short covering on Monday as it consolidated some of last week's decline. The mid-range close sets the stage for a steady opening on Tuesday. Stochastics and the RSI remain neutral to bearish signaling that sideways to lower prices are possible near term. If June extends last week's decline, the 87% retracement level of the February-April rally crossing at 72.86 is the next downside target. Closes above the 20 day moving average crossing at 83.10 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 81.52. Second resistance is the 20 day moving average crossing at 83.10. First support is last Friday's low crossing at 74.51. Second support is the 87% retracement level of the February-April rally crossing at 72.86.

Natural gas closed higher on Monday and above the 20 day moving average crossing at 4.123. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. If June extends today's rally, the 25% retracement level of the October-April decline crossing at 4.438 is the next upside target. If June renews this winter's decline, weekly support crossing at 3.502 is the next downside target. First resistance is today's high crossing at 4.235. Second resistance is the 25% retracement level of the October-April decline crossing at 4.438. First support is last Thursday's low crossing at 3.855. Second support is weekly support crossing at 3.502.

The U.S. Dollar closed lower due to profit taking on Monday as it consolidated some of this month's rally. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If June extends this month's rally, weekly resistance crossing at 85.85 is the next upside target. Closes below the 20 day moving average crossing at 82.19 are needed to confirm that a short term top has been posted. First resistance is last Thursday's high crossing at 85.46. Second resistance is weekly resistance crossing at 85.85. First support is today's low crossing at 83.07. Second support is the 20 day moving average crossing at 82.19.

Gold closed lower due to profit taking on Monday as it consolidated some of the rally off February's low. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If June extends this year's rally, December's high crossing at 1230.00 is the next upside target. Closes below the 20 day moving average crossing at 1165.30 would confirm that a short term top has been posted. First resistance is last Friday's high crossing at 1214.90. Second resistance is December's high crossing at 1230.00. First support is the 10 day moving average crossing at 1182.10. Second support is the 20 day moving average crossing at 1165.30.


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Crude Oil Daily Technical Outlook For Monday

Crude oil's strong recovery today suggests that a temporary low is formed at 74.51 and turns bias neutral. Some consolidations would probably be seen. However, strong resistance should be seen at double top neck line (80.53) and 4 hours 55 EMA (now at 80.84) to limit upside and bring fall resumption. On the downside, break of 74.51 will target 69.50 key support next.

In the bigger picture, as noted before, 33.20 is viewed as a correction to the whole correction that started at 2008 at 147.27. Such rise might have completed at 87.15 already, ahead of 50% retracement of 147.27 to 33.2 at 90.24. 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.


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


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Oil Rises First Time in Five Days as Europe Leaders Agree on Fund Package

Crude oil surged more than 4.5 percent in New York, its biggest jump in seven months, on speculation an emergency fund by European policy makers will contain sovereign debt risks and maintain economic growth. Oil climbed from a 12 week low on May 7 after the European Union and the International Monetary Fund agreed to a lending mechanism of about 720 billion euros ($928 billion). Prices may return to $80 to $85 a barrel once the debt crisis is resolved, Algerian Energy Minister Chakib Khelil said today.

“Europe has clearly swung the pendulum back to optimism,” said Michael Fitzpatrick, vice president of energy at MF Global in New York. Crude oil for June delivery rose $1.64, or 2.2 percent, to $76.75 a barrel at 9:03 a.m. on the New York Mercantile Exchange. Futures rose as much as $3.40 to $78.51, the biggest gain since Sept. 30. Crude has increased 31 percent in the past year.

U.S. stock index futures rallied, with the contract on the Standard & Poor’s 500 Index touching its daily limit. June contracts on the S&P 500 Index increased 4.1 percent to 1,152.10 at 9:05 a.m. in New York after earlier reaching the limit of 1,162. The euro is heading for its biggest two day gain in more than a year, rising to $1.2913 from $1.2755 May 7 and restoring the appeal of dollar price assets as an alternative investment.

Reporter Margot Habiby can be reached at mhabiby@bloomberg.net.


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This Week's Commodity & Index ETF Trading Strategy

As we all know, last weeks stock market blip/mini crash was very emotional for those of you watching or trading it live. A lot of money changed hands last week and you either lost a bundle or made a bundle…

I did send out some charts and a video on Thursday night about the market crash/recovery if you have not seen it. It’s called “Stock Market Micro Intraday Crash Shows Us Where The Safe Havens Are”.

Below are my ETF charts for the commodities and index I actively follow and trade.

GLD – Gold Bullion ETF – Daily Chart
GLD is a great ETF to trade as it generates 10-20 quality low risk setups each year for subscribers. The chart clearly shows the large rally in late 2009 and the correction as it formed patterns moving from a down trend – base – and back to an uptrend.



$USD – US Dollar Index – Monthly Chart
This weekly chart I think shows some serious potential for gold and silver prices. The US Dollar is now trading at a key resistance level which I think it will have a tough time moving higher. The dollar has been moving up for several months and looks ready for a pullback or at least a pause. If the dollar starts to roll over in the next few months then we should see gold and silver move substantially higher.



SLV – Silver Bullion ETF – Daily Chart
Silver like gold bounced off a key support level last week as investors started to buy silver as a safe haven. Gold moved up sharply on the day of the intraday market crash while silver traded sideways for a day before joining the party. The following day investors starting buying up silver because it was lagging its big sister “yellow Gold”.



USO – Oil Fund – Daily Chart
Several weeks back I posted this chart showing how volume was drying up as oil tested resistance on declining volume. This indicated to us that once/if the price started to roll over it would trigger a sharp sell off as short term traders who bought in anticipation of a breakout to the up side sold out of their positions once support was broken. This is what caused the heavy volume and sharp price drop.



SPY – SP500 INDEX Trading ETF – Daily Chart
It’s tougher now to read the index charts as last weeks heavy volume market crash could be seen in two very different ways…

One – We are starting a correction and had a jump start with the human error of selling billions of dollars worth of investments instead of millions prematurely pushing pulling the market down to a level where I think it should/will test again before moving up.

OR
Two – This extremely heavy sell off is just the start of what is to come....

Since the government owns the largest banks and the banks are unloading/selling massive amounts of shares calling it an error how do we know it’s not a scam for them to completely short the market in anticipation for a collapse which would make them unheard of amounts of money as the market drops… It is tough to trust anyone sitting up there in those power positions after everything they have been caught for already…

I personally think we could see lower prices in the coming month then the market will bottom and we will see new highs for 2010.



Weekend Commodity & Index ETF Trading Strategy Conclusion:
Stepping back and looking at the above charts it looks as thought we could see stocks and commodities digest the recent moves. In short, gold and silver have rallied strong and now trading near resistance. Oil dropped last week and is now trading near a key support level. I feel it the market will trade sideways and stabilize before for a while as the SP500 had that crazy drop last week and now the market is in shock. I figured it would see 3-4 weeks to reach those prices yet it happened in 1 day so now the market could do very little for 3-4 weeks…

The US dollar is something we will be watching more closely because it’s trading at key resistance level. In the past it has taken a month or two for a rally to roll over and head back down. This could play out very nicely if the dollar tops and the rest of the market trends sideways to digest the recent moves. Once the dollar starts to fall it will provide fuel for the next rally in both stocks and commodities.

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