Crude Oil Market Commentary For Wednesday Evening

Crude oil closed lower on Wednesday and is poised to resume last week'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 June renews 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 82.08 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 80.09. Second resistance is the 20 day moving average crossing at 82.08. 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 Wednesday as it extended this week's rally above the 20 day moving average. 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 this week'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 4.292. Second resistance is the 25% retracement level of the October-April decline crossing at 4.438. First support is the 10 day moving average crossing at 4.042. Second support is last Thursday's low crossing at 3.855.

Gold posted another new all time high on Wednesday as it extends the rally off February's low. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If June extends this year's rally into uncharted territory, upside targets are hard to project. Closes below the 20 day moving average crossing at 1172.70 would confirm that a short term top has been posted. First resistance is today's high crossing at 1249.20. First support is the 10 day moving average crossing at 1194.90. Second support is the 20 day moving average crossing at 1172.70.

The U.S. Dollar closed higher on Wednesday as it extends the rebound off Monday's low. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 82.62 are needed to confirm that a short term top has been posted. If June extends this month's rally, weekly resistance crossing at 85.85 is the next upside target. First resistance is last Thursday's high crossing at 85.46. Second resistance is weekly resistance crossing at 85.85. First support is Monday's low crossing at 83.07. Second support is the 20 day moving average crossing at 82.62.



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Phil Flynn: The Great European Gold Rush

The global oil market is trying once again to find value in a global economy gone mad. The near trillion dollar effort to save the euro from a debt laden collapse has crude oil still trying to adjust to this latest chapter in the global economic crisis. Oh sure, earlier in this crisis it was much easier for oil to find its way. The United States having a fed funds target rate of near zero and was buying back toxic assets and so it was clearer. The Fed was printing money like it was going out of style and the EU was not supposed to do the same. So it was clear what to do, buy oil, sell the dollar and buy the Euro. Oil moved inverse to the dollar. The EU you see was not allowed to buy toxic assets. Oh sure, individual countries within the union could buy all the garbage that they may have wanted.

But now the EU, with the backing of the IMF, moved to buy toxic assets and so the purity of the currency is being called into question. Within the EU citizens of the member countries are nervous. They are knocking people over to buy gold. You might say it is a European gold rush not unlike the gold rush we saw in this country post TARP and supplies in Europe are tightening as the fear quotient rises. This movement to hard assets and the Euro confidence flight means crude oil's direct inverse relationship with the dollar is being re-calibrated as the crisis revolves.

As the depth of the Greece Crisis first started to become clear, we have seen Europeans move away from the Euro and buy into gold. The Wall Street Journal says that gold has been hitting records in euro terms since February. On Tuesday it reached €960.41 in London, a increase of more than 26% this year, more than twice the gains of gold in dollar terms. Last week with the Greece debt crisis threatening to bring down global stock markets, the gold buying became a European frenzy. Now in the aftermath of the bailout, gold has hit a record in dollar terms transcending even the US dollar as a safe haven play showing the growing concern that this bailout will save the paper backed global economy from eventual collapse.

Now oil traders are justifiably confused. When oil traders for over a year took their major cue from the movement in the dollar ignoring supply and demand statistics, this changing landscape led to more swings. One thing that the market now realizes is that oil in the high eighty area was and is unsustainable at this time. Now the question is how low can we go or will oil find happiness and comfort in the mid-seventy zone. We think that oil will eventually break lower as the dollar continues to gain and currency uncertainty keeps the market focus on over supply and the rate of improving demand. The truth is that even if demand improves dramatically it will take some time to work into our supply. The API said we added to that supply reporting that crude stocks increased by 362,000 barrels last week, they reported another big build in Cushing Oklahoma of 783,000 barrels. They also showed that distillate stocks increased by 94,000 barrels. Gas stocks fell by approximately 906,000 barrels perhaps reflecting better demand.

Barbara Powell at Bloomberg reported the MasterCard Spending Pulse report showed U.S. gasoline demand at the pump rose 1.4 percent last week from near a 10-week low as fuel consumption increased in six of seven geographic regions. Motorists bought an average 9.34 million barrels of motor fuel a day in the week ended May 7. Daily fuel use over the past four weeks averaged 9.31 million barrels a day, down 0.5 percent from a year earlier. The four-week average was below the previous year for the second straight week. Year-to-date, demand is up 1.3 percent from 2009 which may be the first sign of the pickup in demand as we head toward the long Memorial Day weekend but we’re looking to see if there is a sustained pickup in demand which we have not seen the last two years. We are still long term bears but despite the big drop, crude oil could see anther rebound unless today's Energy Information Agency supply report breaks us again. Oil is a bit oversold and the bulls will try to make a stand. Still we feel the best way to trade it is by playing the wide daily ranges.


Phil can be reached at pflynn@pfgbest.com And make sure to watch him every day on the Fox Business Channel.



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Crude Oil Steady as Report Shows Higher Crude Supplies, Drop in Fuel Stockpiles

Crude oil futures were little changed after a U.S. government report showed an unexpected decline in supplies of gasoline as crude inventories rose. Gasoline inventories fell 2.81 million barrels to 222.1 million in the week ended May 7, the Energy Department said today in a weekly report. Stockpiles were forecast to increase by 400,000 barrels, according to the median of 18 analyst estimates in a Bloomberg News survey.

Inventories of crude oil rose 1.95 million barrels to 362.5 million, the department said. Supplies were forecast to increase by 1.6 million barrels. Crude oil for June delivery fell 12 cents, to $76.25 a barrel at 10:35 a.m. on the New York Mercantile Exchange. Oil traded at $76.53 a barrel before the release of the report at 10:30 a.m. in Washington.

Prices also moved lower as the International Energy Agency cut its estimate of world oil demand this year by 220,000 barrels to 86.4 million barrels a day in a monthly report. The Organization of Petroleum Exporting Countries bolstered oil output by 40,000 barrels a day in April, according to the IEA. Supplies from the 11 members bound by quotas rose to 26.79 million barrels a day, 70,000 barrels a day more than in March. That means the group’s compliance with the record output cuts slipped to 54 percent last month. Iraq has no output target.

OPEC members will need to pump 28.7 million barrels a day to balance global oil demand and supply this year, according to the IEA. That is 400,000 barrels fewer than the Paris based agency estimated last month. Iran, holder of the world’s second largest oil reserves, may be storing as much as 38 million barrels of crude at sea as demand declines for the heavier, sour grades the Persian Gulf country sells, according to the IEA.

Reporter Mark Shenk can be contacted at mshenk1@bloomberg.net.


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Crude Oil Daily Technical Outlook Wednesday Morning

Crude oil is still staying in tight range above 74.51 as consolidation continues. Intraday bias neutral and more sideway trading could still be seen. 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 79.35) 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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Where is Crude Oil & Gold on Wednesday?

CNBC's Sharon Epperson on gold's bull run to a new nominal record closing high, the reasons for the rally, and a look stronger gains for silver (a cheaper safe haven). Meanwhile, oil prices retreat on expectations for bearish inventory data.




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Crude Oil Bulls Fading Fast as Signals Remain Bearish

Crude oil closed lower on Tuesday and is poised to resume last week's decline. The mid-range close sets the stage for a steady to lower 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 June renews 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 82.64 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 80.86. Second resistance is the 20 day moving average crossing at 82.64. 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 lower on Tuesday as it consolidated some of Monday's rally but remains above the 20 day moving average crossing at 4.118. The mid-range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term. If June extends Monday'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 Monday'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 higher on Tuesday ending a two day correction off this month's high. The mid-range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI are overbought and are turning bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 82.39 are needed to confirm that a short term top has been posted. If June extends this month's rally, weekly resistance crossing at 85.85 is the next upside target. First resistance is last Thursday's high crossing at 85.46. Second resistance is weekly resistance crossing at 85.85. First support is Monday's low crossing at 83.07. Second support is the 20 day moving average crossing at 82.39.

Gold closed higher on Tuesday and posted a new all time high and at the same time renewing the rally off February's low. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If June extends this year's rally into uncharted territory, upside targets are hard to project. Closes below the 20 day moving average crossing at 1169.20 would confirm that a short term top has been posted. First resistance is today's high crossing at 1235.20. First support is the 10 day moving average crossing at 1189.20. Second support is the 20 day moving average crossing at 1169.20.


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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.


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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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