Natural Gas Weekly Technical Outlook

Natural gas's decline extended further last week as expected and the strong break of 3.81 support confirms that whole fall from 6.108 has resumed. Initial bias remains on the downside this week for 161.8% projection of 5.196 to 4.288 from 4.007 at 3.538 first. On the upside, above 3.86 minor resistance will turn intraday bias neutral and bring recovery. But upside should be limited below 4.288 resistance and bring another fall.

In the bigger picture, the strong break of 3.81 support last week confirms that whole decline from 6.108 has resumed. Further fall should be seen to 100% projection of 6.108 to 3.81 from 5.194 at 2.896 next. More importantly, the development revived the case that medium term rebound from 2.409 is completed at 6.108 already. Also, fall from 6.108 might indeed be resuming the long term down trend for a new low below 2.409. We'll pay attention to the structure of the current decline for more hints. On the upside, break of 4.288 resistance is needed to be the first signal of bottoming. Otherwise, outlook will remain bearish.

In the longer term picture, while the bounce from 2.409 was strong, it's been limited below 55 months EMA (now at 5.877) and reversed. The failure to sustain above 55 weeks EMA (now at 4.617) also argue that 2.409 might not be the bottom yet. We'll stay bearish as long as this year's high of 6.108 holds and favor a new low below 2.409 going forward.

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Crude Oil Analysts' Horrible Track Record Shows Why Prices Could Super Spike Thanks To China

Last week we highlighted a chart from the Council on Foreign Relations, which showed China's potential to become a truly monstrous oil consumer, should it approach the oil consumption-per-capita levels of Taiwan, Korea, or heaven forbid, the U.S.. Here's a quick refresher of the chart, for those who don't want to check the previous post:

China could rock oil. Basically, China has the potential to truly rock the oil market, just as it has already done for other commodities such as iron ore, given that even at its currently low level of oil consumption per capita, it is the second-largest oil consuming nation in the world.
If so, then why aren't more people talking about this? Is it just a scare story?

So far the consensus view is that China won't fulfill the scare story shown in the chart above, since the Chinese government is already working to restrain oil consumption growth in the future, via initiatives such as natural gas powered transportation and research into mass market electric cars. The consensus oil view is thus that China's oil demand will rise for the next few decades, but not by as much as the CFR shock chart above would suggest. We even received some push back from an experienced oil analyst for discussing the topic.

Many professionals believe it won't happen. Here's a slightly dated China oil forecast we pulled from the IEA, which shows a rather tame growth trend for Chinese oil consumption. While the chart below is from 2007, the latest China oil consumption forecast is about 9 million barrels per day by the end of 2010, which is similar to what's shown below.

Problem is... professional oil demand forecasts are horribly inaccurate. Thing is, the IEA has been hiking their Chinese demand forecasts for years as shown below. Even as recently as 2004, the IEA expected that China's 2015 oil consumption would be 9 million barrels per day... which is about what today, in 2010, China's consumption is expected to be by the end of this year. Oops. Forecasts just keep rising:

Moral of the story -- commodity price spikes happen because nobody expects them to. Just because many pros think China will diversify its fuel sources into electricity and natural gas, thus keeping oil consumption in check, doesn't mean it will happen. Many oil market pros could easily be wrong, as they've been in the past, and Chinese demand could continue to be revised upwards, just as the CFR chart we showed last week suggests is a possibility.
Sharp spikes in prices happen, after all, since few expect them to happen, and reality keeps bewildering expectations. Does this mean oil prices are guaranteed to super-spike? Of course not. But don't discount the simple historical analysis shown by the CFR chart above, China could easily fail in its quest to reduce its oil dependence, and send oil prices through the stratosphere as a result.


For more check out Vincent Fernando at Business Insider .Com


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Crude Oil Weekly Technical Outlook For Saturday August 28th

Crude oil dropped to as low as 70.76 last week but was supported by 71.09 support and rebounded. As short term bottom should be in place with bullish divergence condition in 4 hours MACD. More recovery would likely be seen in near term. But upside should be limited by 61.8% retracement at 78.31 and bring fall resumption. As discussed before, decisive break of 71.09 support will confirm our bearish view that whole rebound from 64.23 is finished at 82.97 already and target another low below 64.23.

In the bigger picture, choppy rebound from 64.23 is treated as a correction to fall from 87.15 only and has possibly finished at 82.97 already. Decisive break of 71.09 will confirm this case and also indicate that whole fall from 87.15 is resuming for 60 psychological level, (50% retracement of 33.2 to 87.15 at 60.18, 100% projection of 87.15 to 64.23 from 82.97 at 60.05). Decisive break there will indicate that fall from 87.15 is developing into a powerful impulsive wave and would target 33.2 low. On the upside, break of 82.97 resistance is needed to invalidate this view. Otherwise, we'll stay bearish in crude oil.

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.

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Sorry BP, No One Wants You Drilling In The Arctic

BP has been dissuaded not to join in on oil drilling operations in the Arctic region around Greenland, according to The Guardian. BP was persuaded not to join in the bidding process by the country of Greenland, which felt that the company's involvement in the project might make a bad PR situation worse.

A Greenpeace ship is already stationed off the coast of Greenland, protesting Cairn Energy's exploration activities there. Cairn announced on Tuesday that it had found natural gas in the area, but not any oil.

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New Video: Why Weekly Charts Work

Many traders get so involved with the market on a daily or even an intraday basis, that they somehow lose out on the bigger picture. Weekly charts are enormously helpful in giving clues to the future direction of the market.

In today's video we examine one of the biggest markets in the world, the S&P 500, using a weekly chart. The video runs about two minutes in length and we think you will find it both educational and informative.

As always our videos are free to watch and there are no registration requirements. Enjoy the video and be sure to share your thoughts.

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Crude Oil Technical Outlook For Friday Morning

Crude oil was higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are turning bullish hinting that a short term low might be in or is near.

Closes above the 20 day moving average crossing at 77.23 are needed to confirm that a short term low has been posted. If October extends this month's decline, May's low crossing at 70.35 is the next downside target.

First resistance is the 10 day moving average crossing at 74.03
Second resistance is the 20 day moving average crossing at 77.23

Crude oil pivot point for Friday morning is 73.29

First support is Wednesday's low crossing at 70.76
Second support is May's low crossing at 70.35

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Crude Oil Falls on Concerns About Economic Recovery, Spain's Deficit

Crude oil declined for the first day in three after equities fell as a slowdown in U.S. manufacturing added to concern that economic growth is faltering, curbing fuel demand. Oil is dropping for the third week, the longest losing streak since May, as Asian stocks slipped on expectations of revisions to U.S. economic growth figures later today. A Federal Reserve Bank of Kansas City report yesterday showed manufacturing slowed in August. U.S. crude inventories climbed more than expected last week, an Aug. 25 report from the Energy Department showed.

“The oil market is very bearish,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “The fundamental picture is just not positive at all. If oil breaks $70, it will come under pressure and then you’ll see it substantially lower.” Crude oil for October delivery dropped as much as 49 cents, or 0.7 percent, to $72.87 a barrel in electronic trading on the New York Mercantile Exchange and was at $73.03 at 11:27 a.m. Singapore time. Yesterday, the contract rose 84 cents, or 1.2 percent, to $73.36. Prices have dropped 0.6 percent this week and 8 percent since the start of the year.

Economists who projected the U.S. recovery would gain speed in the second half of the year are now scaling back those forecasts as the outlook for jobs and business investment dims. Second quarter gross domestic product growth may be revised down to 1.4 percent from 2.4 percent earlier , according to a Bloomberg News survey of economists.....Read the entire article.

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Where is Crude Oil and Gold Headed on Friday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets and looks ahead to where oil and gas are likely headed tomorrow.





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Weak U.S. Dollar Gives Crude Oil Bulls Much Needed Momentum

The S&P 500 index closed lower on Thursday as it consolidates some of Thursday's rally. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that additional weakness is possible near term. If September extends this month's decline, July's low crossing at 1003.10 is the next downside target. Closes above the 20 day moving average crossing at 1090.13 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 1068.71. Second resistance is the 20 day moving average crossing at 1090.13. First support is Wednesday's low crossing at 1037.50. Second support is July's low crossing at 1003.10.

Crude oil closed higher due to short covering on Thursday despite record high US oil stockpiles. The mid-range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are oversold and are turning neutral to bullish hinting that a short term low might be in or is near. Closes above the 20 day moving average crossing at 77.53 are needed to confirm that a short term low has been posted. If October extends this month's decline, May's low crossing at 70.35 is the next downside target. First resistance is the 10 day moving average crossing at 74.27. Second resistance is the 20 day moving average crossing at 77.53. First support is Wednesday's low crossing at 70.76. Second support is May's low crossing at 70.35.

Natural gas closed lower on Thursday as it extends this month's decline. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If October extends this month's decline, weekly support crossing at 3.810 is the next downside target. Closes above the 20 day moving average crossing at 4.343 would confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 4.138. Second resistance is the 20 day moving average crossing at 4.343. First support is Today's low crossing at 3.825. Second support is weekly support crossing at 3.810.

The U.S. Dollar closed lower due to profit taking on Thursday as it consolidates some of this month's rally. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If September extends this month's rally, the reaction high crossing at 84.73 is the next upside target. Closes below the 20 day moving average crossing at 82.07 would temper the near term friendly outlook. First resistance is Tuesday's high crossing at 83.64. Second resistance is the reaction high crossing at 84.73. First support is the 20 day moving average crossing at 82.07. Second support is the reaction low crossing at 81.99.

Gold closed lower due to a decline in jobless data on Thursday as it consolidates around the 75% retracement level of the June-July decline crossing at 1239.60. Stochastics and the RSI are overbought, diverging but are turning bullish signaling that sideways to higher prices are possible near term. If August extends the rally off July's low, the 87% retracement level of the June-July decline crossing at 1253.30 is the next upside target. Closes below the 20 day moving average crossing at 1212.80 would temper the friendly outlook. First resistance is today's high crossing at 1244.50. Second resistance is the 87% retracement level of the June-July decline crossing at 1253.30. First support is the 10 day moving average crossing at 1229.70. Second support is the 20 day moving average crossing at 1212.80.

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Phil Flynn: When Bad News Becomes Good News

Oh sure the economic data did not get any better. New homes sales were a disaster and the Energy Information Agency report was very bearish yet the good news is that a lot of the bad news was already priced in. Now doesn’t that make you feel better? Yes things are lousy but as bad as they are at this point in time we actually priced in that things were even worse! Yippee!! Time to celebrate! Forget that doom and gloom of Tuesday. Now its doom and zoom as the market tries to tell itself hey nothing can be that bad! Can it?

Well I hate to be a bummer but it can. The oil inventory report shows that the economy has slipped back into recession. It is a portrait of everything that is wrong about the economy. Oil and product supplies are surging reflecting the same things we have seen in other markets. It shows that the economy, somewhere in the middle of summer, hit a brick wall and went back into recession. Oh sure some may say that the builds are seasonal and that this is to be expected yet the magnitude of oil supply and the direction demand is going is sending out clear signals that.....Read the entire article.


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

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