Trade ideas, analysis and low risk set ups for commodities, Bitcoin, gold, silver, coffee, the indexes, options and your retirement. We'll help you keep your emotions out of your trading.
Just when you thought gas prices were going to go down. A pipeline leak and strong economic data out of China and relief that the Basel banking regulations did not go too far is conspiring to set a positive tone in the oil markets. Chicago gets the shaft. While according to Trilby Lundberg the national average gas price fell 0.8 cents a gallon to $268.99, Chicago and the Midwest prices soared. Enbridge Energy Partners LP shut a major oil pipeline in Romeoville right outside of Chicago that ships crude from Canada to refineries in the Midwest.
The impact was felt across the markets as refiners may be forced to reduce runs. This can also increase the demand for higher yielding crudes as well to maximize output. Thanks goodness there is plenty of supply in storage or this could have really been worse. The market seemed to like the Basel rule or maybe they just like the finality of it all. Global blinking regulators agreed on a new set of rules designed to increase banks capital buffers to better be able to withstand large market movements but at the same time gave them more than a few years to get up to those levels.....Read the entire article.
Crude oil was higher overnight as it extends the rally off August's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.
If October extends the rally off August's low, the 62% retracement level of the decline off August's high crossing at 78.58 is the next upside target. Closes below the 20 day moving average crossing at 74.43 would confirm that a short-term top has been posted.
First resistance is the overnight high crossing at 77.50
Second resistance is the 62% retracement level of August's high crossing at 78.58
First support is the 20 day moving average crossing at 74.43
Second support is the reaction low crossing at 72.63
Precious metals soar as investors flock to gold and silver. But are they looking deep enough to truly understand the current trends at hand?
When reviewing the metals sector I like to look at it from different angles to get a solid understanding of the patterns and trend forming. I follow multiple time frames along with monitoring the gold mining stocks. Gold stocks tend to lead the price of gold bullion and when its out performing the price of gold substantially by 10% or more you should be expecting a pause or pullback in both gold stocks and gold bullion prices temporarily.
Below are a few charts showing the long and short term trends for gold.
Gold Bullion Price – Weekly Trend Chart
Gold continues to be in a strong up trend. The occasional test of support at the major moving averages can provide great long term points for adding to a position. The 50 period average is one which is tested frequently.
Looking at the weekly chart does give me a red flag for the intermediate price of gold. While the trend is clearly up I can’t help but notice the rising wedge which is a bearish pattern. During an uptrend we want to see bull flags and pennants, not a grind higher forming a narrowing range. This grind higher could unfold much similar to the price action of 2005 and 2007 instead of a correction but I am leaning more towards a sharp correction because more people are bullish on gold now then they were during the June top.
For those looking at gold as a long term investment/currency can be patient and wait for a pullback to a major moving average before adding to your position then you would lower your overall risk for this position. You will understand after reviewing the following charts.
GLD – Gold Bullion ETF – Daily Chart
(This fund moves identical to spot gold price so even though I am showing you GLD fund, the spot gold chart is doing the exact same thing.) As you can see below the price of gold is trading at resistance and becoming choppy. Buying gold at resistance does not make much sense to me. There is a very good chance gold will move lower in the coming weeks providing a better price for long term investors to add to their positions. For example, if you waited for the weekly chart to pullback to the 50 period moving average that would be like buying this GLD fund at $113, which is an 8% discount.
Gold continues to hold up within its channel but this week we could see fireworks if the price breaks below the blue support channels.
Gold:Gold Stocks Comparison – Daily Chart
This chart shows the performance of gold vs gold stocks from the Feb 2010 lows. The blue line is the performance of gold stocks while the red line shows gold’s performance. It’s obvious that when everyone is bullish on gold they buy the highly leverages gold investments in order to take full advantage of the upcoming move. This is much like reading the put/call ratio for trading the SP500 and it measures the bullishness of the precious metals sector.
When gold equities are strongly out performing gold bullion you should be thinking about raising your stops, taking partial profits and or hedging your long term position until the sector stabilizes is not trading at a premium.
Precious Metals Sector Trading Conclusion:
In short, Gold is in a strong up trend and will remain inrecious Metals Sector Trading Conclusion: one for a long time. Commodities have higher percentage of going parabolic. That means there’s a small chance that gold continues to move up quicker and quicker surging hundreds of dollars in a very short period of time. That being said, it’s not very likely, and from a technical point of view those buying gold now are paying a premium in my opinion.
Being a patient trader is not easy, but waiting for low risk entry points is very rewarding on many different levels when done correctly.
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Crude oil rose for a second day in New York amid optimism demand for fuel will strengthen because of improved prospects for an economic recovery in the U.S., the world’s biggest crude consumer. Futures rose amid forecasts that retail sales probably gained in the U.S. during August for a second month, according to a Bloomberg News survey of economists before the Commerce Department’s Sept. 14 report. Prices increased the most in six weeks on Sept. 10 as China increased imports of crude and after a pipeline that carries Canadian oil to refineries in the U.S. Midwest was closed because of a leak.
“It’s that optimism in the market,” said Jonathan Barratt, managing director at Commodity Broking Services Pty in Sydney. “The data out of China was quite supportive. The whole world is looking for a means to create confidence. As result of that being created you’ll see more demand, or an expectation for more consumption of oil.” The October contract rose as much as 47 cents, or 0.6 percent, to $76.92 a barrel in electronic trading on the New York Mercantile Exchange, and was at $76.80 at 9:32 a.m. Sydney time. It gained $2.20, or 3 percent, to $76.45 on Sept. 10. Prices have fallen 3.2 percent this year.
Enbridge Energy Partners LP on Sept. 9 shut its Line 6A, part of a system that can transport 670,000 barrels a day from Canada. The country is the largest source of U.S. imports, sending 2.2 million barrels a day in June, according to the Energy Department. Brent crude oil for October settlement added as much as 31 cents, or 0.4 percent, to $78.47 a barrel on the London-based ICE Futures Europe exchange. The contract rose 69 cents, or 0.9 percent, to $78.16 on Sept. 10.
Bloomberg reporter Ben Sharples can be reached at bsharples@bloomberg.net
Korea National Oil Corp. plans to sell as much as $1 billion of debt to fund takeovers, Yonhap News Agency reported yesterday, the latest sign Asia’s biggest economies are competing to secure global energy resources. State owned Korea National, engaged in a $2.6 billion hostile takeover battle for Dana Petroleum Plc, plans to raise between $500 million and $1 billion selling bonds, Yonhap said. Calls to the company’s media department yesterday twice went unanswered.
China, second to the U.S. as a global energy consumer, and South Korea, the world’s biggest importer of liquefied natural gas, are being joined by Japan and India in seeking to buy stakes in the resources needed to boost their economies. State and private companies in the four nations have bid for more than $56 billion worth of energy resources worldwide this year, according to data compiled by Bloomberg.
China Petrochemical Corp. in April paid $4.65 billion, about 20 percent more than analysts expected, for a 9 percent stake in oil sands producer Syncrude Canada Ltd. Together with Cnooc Ltd., the Chinese oil company may offer at least $7 billion for Brazil oil assets and a stake in OGX Petroleo & Gas Participacoes SA, two people with knowledge of the matter said on Sept. 10.....Read the entire article.
While market sentiment was dominated by renewed concerns over the stability of the European banking system earlier in the week, better than expected bond auctions in Portugal and Poland eased the worries. Confidence was further boosted by the weekly drop in US jobless claims and China's trade data which suggested the country's demand for foreign goods remained strong.
Oil started the week moving within a narrow range with a soft tone but strength in stock markets drove price higher. Prices were further lifted after reports of shutdowns of production facilities. Gold jumped earlier in the week as sovereign risks in the Eurozone spurred demand for safe havens. However, failure to breach the record high triggered selloff.
Crude Oil
Oil price jumped on Friday as better-than-expected data from the US and China boosted optimism of the demand outlook. The front-month WTI contract jumped to a 4-week high of 76.73 before settling at 76.45, up +2.48% on weekly basis. Fuel prices also soared with heating oil and gasoline futures gaining more than +2%. Brent crude also rose but the increase was milder than WTI crude.
Movement of WTI-Brent spread was dramatic last week. The front-month WTI contract had widened to a $3.65 discount to ICE Brent on Tuesday (Sep 7) before narrowing to $1.71 on Friday. The change was mainly driven by shutdown of the largest pipeline operated by Enbridge Energy Partners due to a leak. According to the company, the pipeline can carry 670K bpd of oil from Canada to refineries in the US Midwest. The direction of the WTI-Brent spread in the near-term depends on when the pipeline can resume operations. Indeed, Enbridge closed another line, which transports oil from Indiana to Ontario, 6 weeks ago after a spill in Michigan. Repair of the line has been finished but US regulators has not yet permitted it to resume operations.
We do not expect WTI crude oil to return parity or even at premium to Brent crude in the short term as total crude oil inventory remains at record high and Cushing stock is abundant......Read the entire Oil N' Gold Focus Report
India may raise as much as 190 billion rupees ($4.1 billion) selling shares in Oil & Natural Gas Corp., the country’s biggest energy explorer, and Indian Oil Corp., to help cut its budget deficit. Indian Oil, the nation’s second biggest refiner, may raise a further 100 billion rupees by selling fresh equity to help it fund a new crude oil processing plant it is building, Oil Secretary S. Sundareshan told reporters in Mumbai today.
“The plan is to complete the disinvestments before the end of the fiscal year,” Sundareshan said. “It will be Indian Oil followed by ONGC. In the last quarter, hopefully.”
Prime Minister Manmohan Singh wants to raise 400 billion rupees from asset sales in the year ending March 31 to help fund the construction of roads, ports, hospitals and schools. The government said in January it can sell shares in as many as 68 companies as it seeks to shrink its budget deficit to 5.5 percent of gross domestic product this fiscal year from an estimated 6.9 percent last year.
Indian Oil is building a refinery in Orissa state with an annual processing capacity of 15 million tons. The refiner plans to spend 145 billion rupees in the financial year ending March compared with 135 billion rupees last year to increase capacity, Serangulam V. Narasimhan, finance director, said Jan. 6.
ONGC will complete the valuation on BP Plc’s assets in Vietnam in a few weeks as it seeks to buy them in partnership with Vietnam Oil & Gas Group, Sundareshan also said.
State owned ONGC is considering all options for buying partner BP’s stake in a Vietnam gas field, Chairman R.S. Sharma said July 22. The London based company, which is raising funds to pay for the Gulf of Mexico oil spill, agreed July 20 to sell fields in the U.S., Canada and Egypt to Houston based Apache Corp. for $7 billion and plans to dispose of assets in Pakistan and Vietnam.
Bloomberg reporter Natalie Obiko Pearson can be reached at npearson7@bloomberg.net.
