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Crude oil surged above $81 a barrel for the first time since May as a rally in global equity markets increased speculation the economy is strengthening. Oil jumped as much as 3.6 percent after equities climbed on better than expected earnings and the Institute for Supply Management’s U.S. manufacturing gauge fell less than forecast. The dollar dropped against the euro, boosting the investment appeal of commodities.
“Oil is following the S&P 500,” said Adam Sieminski, chief energy economist at Deutsche Bank AG in Washington. “Fundamentals don’t seem to matter. You don’t need to be an oil analyst anymore. You just need to be a stock market analyst.” Crude for September delivery rose $2.44, or 3.1 percent, to $81.39 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Earlier, it touched $81.77, the highest price since May 5. Futures climbed 4.4 percent in July, the biggest monthly gain since March. Prices are up 17 percent from a year ago.
The Standard & Poor’s 500 Index increased 2 percent to 1,123.86 following positive earnings reports from companies such as Humana Inc. and Oshkosh Corp. It jumped 6.9 percent in July, the biggest monthly advance since July 2009. The Dow Jones Industrial Average strengthened 191.94, or 1.8 percent, to 10,657.88. The MSCI World Index, a gauge of equities in 24 developed nations, rose 2.3 percent to 1,150.79, the highest level since May 13. European stocks climbed to a three-month high on gains among banks and basic resource producers.
“Equities did well in July and profits are generally OK, so people are feeling bullish across the board,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts.....Read the entire article.
More soft economic data and more talk of quantitative easing have commodity markets on fire. Forget about that supply and demand stuff as that is going to be secondary to the financial hedge play that is starting to unfold. Commodities are rising even after it was reported that manufacturing in China contracted for the first time in 16 months. The HSBC China Manufacturing PMI fell to 49.4 in July showing contraction falling from 50.4 in June.
Yet despite that weakness, the dollar takes a drubbing and despite the potential for weaker demand, commodities just continue to rise. Why might that be happening? Now some think that may be because the Chinese will back off further tightening measures or it may be because they think the Chinese will again put their foot on the economic accelerator. Yet the real reason is that the global economy is again slowing, increasing the odds of dollar devaluation. We are seeing commodities move.....Read the entire article.
Crude oil was higher overnight and has renewed the rally off July's low. Stochastics and the RSI are turning bullish again signaling that sideways to higher prices are possible near term.
If September extends the aforementioned rally, June's high crossing at 80.82 is the next upside target. Closes below the 20 day moving average crossing at 77.17 would confirm that a short term top has been posted.
First resistance is the overnight high crossing at 79.90
Second resistance is June's high crossing at 80.82
Crude oil's pivot point for Monday morning is 78.28
First support is the 10 day moving average crossing at 78.28
Second support is the 20 day moving average crossing at 77.17
Natural gas was higher overnight as it extends the rally off July's low. Stochastics and the RSI are becoming overbought but remain bullish signaling that sideways to higher prices are possible near term.
If September extends the aforementioned rally, June's high crossing at 5.282 is the next upside target. Closes below the 20 day moving average crossing at 4.587 would confirm that a short term top has been posted.
First resistance is the overnight high crossing at 5.007
Second resistance is June's high crossing at 5.282
Natural gas pivot point for Monday morning 4.881
First support is the 10 day moving average crossing at 4.692
Second support is the 20 day moving average crossing at 4.587
As we all know there is an unlimited amount of ways to trade the financial markets. Each person sees the market in a different way, has different skill sets, trading experience and risk tolerance levels. While some individuals create and use complete systems to make money there are some very basic trading strategies which still work well and require nothing more than basic charting, patience and a little money management.
SPY – SP500 Index Trading Fund
You can clearly see the longer term trend which is down (blue trendine). But from simply drawing a couple trendlines and looking at the MACD (momentum) indicator you can see there is a possible trend reversal taking place. So far the SPY has broken out of its down trendline with a 4 day pop, and it’s now pulled back down to test support. A close below the trend line or the 50MA would be the exit points if the market did start to go south.
The SP500 is still stuck under major resistance, its 200 day moving average. But is trading above key support levels (20MA, 50MA and Trendline). I can feel the tension in the market between traders and we are about to see a big move once a breakout to the upside or down side is established. At this time its best to be in cash or have a small position with a protective stop in place. Once a trend starts there should be some low risk entry points along the way. If we see a strong reversal to the upside On Monday or Tuesday I would expect big buyers would step in to catch this new trend up.
Trading Fund
Looking at the price of gold we can see the trend is still down along with the momentum. A breakout would be the first step towards a possible entry point but I prefer to wait for a pullback after the breakout has taken place. Once we get a test of support I look to enter a position once there is a strong reversal candle to the upside. From there I draw a new support trend line from the previous low and connect it to the new pivot low (bottom of reversal candle). That becomes my new protective stop.
Gold still has some work to do before I would even be interested in taking a long position for a swing trade. But on a short term time frame (intraday charts) gold looks to be forming a low risk setup which I hope unfolds for my subscribers this week.
USO – Crude Oil Trading Fund
Oil has been trading in a large bearish pennant for the past 2 months and it is nearing the apex of this pattern. The longer term picture of oil is bearish but the most recent dotted trend line and the 20/50MA crossover is signaling some strength. Also the momentum for oil is positive and that helps support the price also. Again if this was to breakout to the upside I would wait for a low volume pullback to test the breakout level, then enter on a reversal back up.
Oil is one of the more challenging commodities to trade because it is affected by the US Dollar, Political Events, and Weather. In short, even if you had the analysis and timing correct there are other factors which move the price of oil on a regular basis that could quickly turn the trade against you. That being said, keep trades small when trading oil.
Trading Setups:
In short, trading can be complex, simple or somewhere in between. You can spend 14 hours or 20 minutes a day analyzing it depending on what investments you trade, whether you’re trading full time or just checking up on longer term investments.
This analysis and basic strategy shown above can be profitable if followed correctly and works for stocks, commodities and indexes. It’s just to show how simple one can swing trade the market using very basic analysis. Personally I use a much more complex strategy incorporating 15+ other data points which allows for precise entry and exit points.
Crude oil edged higher to 79.69 initially last week but retreated sharply. Nevertheless, the retreat was contained at 75.90 and rebounded. Near term outlook is mixed and we'll stay neutral first. on the upside, break of 79.69 will indicate that whole rebound from 64.23 is still in progress for 61.8% projection of 64.23 to 79.38 from 71.09 at 80.45 next. On the downside, break of 75.90 will revive the case that crude oil has topped out at 79.69 already and will flip bias back to the downside for 71.09 support for confirmation.
In the bigger picture, there is no change in the view that rise from 64.23 is a correction to fall from 87.15 only. Hence, even in case of further rally, we'd expect strong resistance below 87.15 high and bring reversal. On the downside, break of 71.09 will be the first signal that whole fall from 87.15 is resuming for another low below 64.23 towards 50% retracement of 33.2 to 87.15 at 60.18
In the long term picture, current development suggests that rebound from 33.2 is finished at 87.15, inside 76.77/90.24 fibo resistance zone as expected. Our view is that fall from 87.15 would develop into the third falling leg of the whole correction from 147.27 and hence, we'd anticipate an eventual break of 33.2 low in the long term as such correction extends.....Nymex Crude Oil Continuous Contract 4 Hours, Daily, Weekly and Monthly Charts.
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Crude oil was lower overnight as it consolidates some of Thursday's rally. Stochastics and the RSI remain bearish signaling that a short term top might be in or is near. Closes below the 20 day moving average crossing at 76.76 would confirm that a short term top has been posted.
If September renews this month's rally, the reaction high crossing at 79.97 is the next upside target.
First resistance is Tuesday's high crossing at 79.69
Second resistance is the reaction high crossing at 79.97
Crude oil's pivot point for Friday morning is 77.90
First support is Wednesday's low crossing at 75.90
Second support is the reaction low crossing at 74.70
Natural gas was higher overnight as it extends this month's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.
If September extends this month's rally, the reaction high crossing at 4.945 is the next upside target. Closes below the 20 day moving average crossing at 4.571 would temper the near term friendly outlook.
First resistance is the overnight high crossing at 4.876
Second resistance is the reaction high crossing at 4.945
Natural gas pivot point for Friday morning is 4.792
First support is the 10 day moving average crossing at 4.639
Second support is the 20 day moving average crossing at 4.571
Commodities were generally firm after strong European confidence data and bigger than expected decline in initial jobless claims in the US. WTI crude oil price rebounded strongly and pared most of the losses made over the past 2 days amid USD's weakness. The front month contract surged to as high as 78.89 before closing at 78.36, up +1.78%. Natural gas rallied as gas storage rose less than expected in the US while gold price also climbed higher and settled at 1168.4, up +0.69%.
The US Energy Department reported gas inventory added +28 bcf to 2919 bcf in the week ended July 23. Stocks dropped -94 bcf from the same period last year but remained +239 bcf (+8.9%) above the 5 year average of 2680 bcf. Gas price extended the rally for a 4th day and settled at 4.827, up +2.31%.
The dollar plunged to a 12 week low against the euro as economic data in the US has been mixed but biased to the downside while that in the Eurozone has shown improvement after enduring a tough period. At the same time, concerns over sovereign crisis in peripheral European countries continue to diminish as debt-ridden economies have been actively implementing fiscal consolidations measures and economic indicators have been better-than-expected.
Initial jobless claims slipped -11K to 457K (consensus: 460K) in the week ended July 24. The drop also brought the 4 week moving average down to 452.5K, the lowest since the beginning of May, from 457K. While the reading was better than expected, the sluggish decline signals that the job market is improving very slowly.
Stock markets failed to be stimulated by the jobless claims report as corporate earnings in the consumer sector were uninspiring. Kellogg reported a -15% decline in net income to $302M in the quarter ended July 3. The management also revised down its profit forecast for the year due to cereal recall last month. Black & Decker, a diversified worldwide supplier of tools and solutions with sales mainly in the US, revised down its sale guidance for 2010. DJIA and S&P 500 fell -0.3% and -0.4% respectively.
Focus of the day is US' GDP report. The economy probably grew by an annualized +2.5% q/q in 2Q10, an ease from +2.7% in 1Q10 and +5.6% in 4Q09.
Everywhere from around the world, the crudes coming to America, every time that flag’s unfurled
crude is coming to America, got a dream to take it there, it’s coming to America. It’s coming to America and coming to America! Give me your poor, your huddles masses but most of all give me your crude. Crude Imports surged hitting the highest level since August of 2006 leading to a whopper 7.3 million barrel build in US Crude supply. This was a far cry from most analysts’ expectations that were looking for a big drop in supply by thinking that Tropical Storm Bonnie would impact imports in a negative fashion.
I on the other hand did predict a build because as I believed that the storm might have the opposite reaction on Imports and it looks like I was right. In fact according to one report we saw from “Gas Oil and Liquids Daily” supplies in Gulf States jumped a whopping 8.18 million barrels, or 4.6%, to 184.6 million. Regional imports gained 1.73 million bpd, or 32%, to a record 7.21 million. The gain was the largest since Gulf traffic resumed after being slowed by hurricanes Gustav and Ike in 2008. The reason that we saw that big jump in the Gulf Coast may have more to do with the aftermath.....Read the entire article.
Crude oil rose for the first time in a week as the dollar weakened against the euro, boosting the appeal of commodities as an alternative investment. Oil gained as much as 2.5 percent as the dollar fell to a 12 week low against the euro. Unemployment also dropped in Germany, and confidence in Europe’s economy improved. Futures gave up some of the gain as U.S. equities declined. “The oil market is being set by the financial markets,” said Tim Evans, an energy analyst at Citi Futures Perspective in New York. “We’re back to that kind of correlation trade and not paying so much attention to niggly details like rising inventories and rising OPEC production.”
Crude oil for September delivery gained $1.39, or 1.8 percent, to $78.38 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices have risen 24 percent in the past year and are up 3.9 percent this month. The dollar fell against a majority of its most traded counterparts. The euro increased 0.7 percent to $1.3088 in New York. Earlier, it climbed to $1.3107 amid the increased European confidence. The Reuters/Jefferies CRB Index of 19 commodities advanced 1.6 percent to 270.27, the strongest level since May 4. All of the commodities increased. Investment funds appear to be doing “pretty strong buying” of energy commodities, said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. Gasoline rose 1.6 percent and natural gas 2.4 percent as floor trading closed at 2:30 p.m. in New York.....Read the entire article.
