The Crude Oil Trader

Wednesday, October 6, 2010

Commodity Corner: Crude Oil Gets Boost from Gasoline Data

November crude oil futures benefited Wednesday from an unexpected decline in U.S. gasoline inventories last week, along with a weaker dollar. Oil settled at $83.23 a barrel, a 41 cent improvement from Tuesday, after the U.S. Department of Energy announced that total gasoline stocks declined to 219.9 million barrels as of October 1.

The latest figure represents a 1.2% decline from the previous week. The euro, meanwhile, gained 0.723% against the dollar to an exchange rate of US$1.3936 Wednesday. Since September 8, the euro has rallied nearly 9% against the greenback. A weaker dollar relative to the euro typically places upward pressure on oil prices.

The crude oil futures price peaked at $84.09 and bottomed out at $82.29. Given the Energy Department's report on the refined product, gasoline for November delivery also ended the day higher Wednesday. Gasoline rose three cents to settle at $2.16 a gallon after trading from $2.11 to $2.165. Colder temperatures are not expected to set in until later in the season, a prediction that natural gas traders have been quite aware of lately as prices have been low in recent weeks.

Nevertheless, gas futures settled at $3.865 per thousand cubic feet Wednesday, a 3.3% increase from the previous day. The bullish sentiment for gas stems from speculation that the Energy Information Administration would announce a decline in natural gas inventories in a weekly report Thursday. The front-month price for natural gas fluctuated from $3.75 to $3.88.

Courtesy Rigzone.Com

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Stock Market and Commodities Commentary For Wednesday Evening Oct. 6th

The U.S. stock indexes closed mixed today. A weak ADP U.S. jobs report did give the stock market bulls pause today. However, the index bulls still have the overall near term technical advantage. Traders are gearing up for Friday's U.S. employment report. Look for more subdued trading in the stock indexes until then, but then look for an active trading day on Friday, in the wake of the jobs data.

Crude oil closed up $0.41 at $83.23 a barrel today. Prices closed near mid-range today and hit a fresh nearly five month high. Bulls have the solid near term technical advantage in crude. Prices are in an accelerating six week old uptrend on the daily bar chart. The next near-term upside price objective for the bulls is producing a close above solid technical resistance at $86.00 a barrel.

Natural gas closed up 11.8 cents at $3.861 today. Prices closed nearer the session high today and saw more short covering in a bear market. The bears still have the solid overall near term technical advantage. The next upside price objective for the bulls is closing prices above solid technical resistance at $4.20.

Gold futures closed up $5.90 at $1,346.20 today. Prices today closed near mid-range and hit another fresh contract and all time record high. A weaker U.S. dollar index and strong investor demand continue to boost the gold market bulls. While gold bulls still have the solid overall near term technical advantage and there are still no significant early technical clues that a market top is close at hand, the market is now a bit over extended on a near term basis and due for a corrective pullback soon.

The U.S. dollar index closed down 33 points at 77.63 today. Prices closed nearer the session low again today and hit another fresh 8 1/2 month low. Bears have the solid overall near term technical advantage. There are still no early clues to suggest a market bottom is close at hand.

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The 5 year Massive Bull Run in Gold and Gold Stocks Continues

From Dave Banister at The Market Trend Forecast.com.....

Last August I penned an article predicting a massive five year bull run in gold and gold stocks. I outlined my reasoning and compared this 13 year period from 2001 to 2014 to the tech stock bull from 1986-1999. .

In February of this year, I again wrote an article for Kitco.com explaining the 13 year Gold Bull still had a lot more room to run. At the time Gold had pulled back to 1040-1070 windows and I mentioned that “smart money would be accumulating” and we should look for $1300-$1325 as the objective. That brings up forward to October of 2010, with Gold running to $1350 as recently as this morning.

We have a huge rally because we are in the 2nd year of this final 5 year run I predicted, and this is when the general investing public becomes “aware” of the bull market. They miss the first five years from 2001-2006, and then while we consolidate for three years from 2006-2009 they fall asleep. It is not until Gold breaks all time highs that people wake up and start buying. This is typical in a super bull cycle, the behavioral patterns are always the same with the herd. I based my forecast on herd mentality, whether bullish or bearish.

I am now looking for Gold to continue to run during this trampling into the asset from the herds of investors to about $1480-$1520 on this leg before we have a strong correction. That figure is not taken out of the thin air, it’s an Elliott Wave based pattern that I recognize and forecast in advance. Subscribers to my website are exposed to my outside the box forecasts on the SP 500 and Gold all the time. Usually it starts with them not believing, and later they wonder how I arrived at the predictions. To wit, on August 30th I predicted a huge breakout in Silver to $26-$29 per ounce when it was at $18.75 per ounce. This was purely based on the Elliott Wave pattern and the lack of awareness by the investing public at the time of the Silver bull. It is also “poor man’s Gold”, and as simple as that sounds, it is what drives the herd of investors to invest. Look for Silver to continue higher to those target zones before correcting.

Many investors who are briefly exposed to Elliott Wave Theory assume that a certain well known forecaster must be the only person in the world who uses it. Since he is wrong more often than he is right, people toss out Elliott Waves as mad science. That is a mistake and why I continually write articles for Kitco using my Elliott Wave methods to forecast SP 500 and Gold moves in advance. Look for Gold and Gold stocks to continue powering higher than people can imagine over the next four years, and pick up some darts and throw them at some juniors while you’re at it.

You can check out our forecast service at www Market Trend Forecast.com, consider subscribing ahead of our rate increase as well. Best to you and your trading!

Dave Banister- The Market Trend Forecast.com

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

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Alexander Smith: Crude Oil Is Spiking - Are You Positioned?

The domestic oil and gas sector has been under intense pressure to discover new resources and increase supply. A renewed emphasis on domestic, on-shore drilling has revitalized the industry from coast to coast in North America. To add to the pressure, demand from developing nations will soon exceed even the wildest predictions of only a few years ago. China, India and Brazil will be three of the largest emerging economies set to impact the global supply of oil.

China has overtaken the United States as the largest automaker in the world. There are millions of Chinese buying their first car every year and this trend will only increase. China has emerged as the world's third largest net importer of oil. Just 15 years ago it was a net exporter. It is currently the second largest consumer of oil behind the United States.

In August, China consumed an estimated 35.54 million metric tons of oil, or an average of 8.40 million barrels per day. This pales in comparison to the United States which consumes over 20 million barrels per day, but a dangerous trend is emerging. See the chart below which documents a net increase of 3,328% of oil consumption in China over the past 40 years. With China's middle class emerging at a faster rate than ever before, the next decade could be unforgettable for the oil markets. Are you positioned?

Although renewable energy sources have been making up some ground recently, there are thousands of applications oil is used for and many of them have no substitute. We are many years away from renewable energies taking hold of even a small percentage of the market share (from primary sources of fossil fuel demand).......Read the entire article.

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Crude Oil Market Summary For Wednesday Morning Oct. 6th

Crude oil was lower due to profit taking overnight as it consolidates some of the rally off August's low. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.

If November extends the rally off last week's low, August's high crossing at 83.91 is the next upside target. Closes below the 20 day moving average crossing at 77.66 would confirm that a short term top has been posted.

First resistance is the overnight high crossing at 83.33
Second resistance is August's high crossing at 83.91

Crude oil pivot point for Wednesday morning is 81.65

First support is the 10 day moving average crossing at 79.07
Second support is the 20 day moving average crossing at 77.66

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Crude Oil Declines From Five Month High Before U.S. Government Supply Report

Crude oil fell from a five month high before a government report that may show U.S. crude supplies rose last week while traders bet that crude’s rally made the commodity too expensive. Crude earlier reached its highest price since May 4 after a report yesterday showed U.S. gasoline inventories dropped last week by the most since May 2009. The Energy Department may say today crude supplies rose by 413,000 barrels, a Bloomberg News survey shows. Oil’s 14 day relative strength index rose above 70, a sign that prices may drop after rising too far, too fast.

“There is some optimism in the market that inventories are decreasing and the oversupply is shrinking,” said Sintje Diek, an HSH Nordbank analyst in Hamburg. “This is an overreaction by the oil market. The higher prices are not sustainable.” Crude for November delivery traded at $82.71 a barrel, down 11 cents, or 0.1 percent, on the New York Mercantile Exchange at 1:08 p.m. London time. It earlier climbed as much as 51 cents to $83.33 a barrel. Brent crude for November settlement traded at $84.71 a barrel, down 13 cents, on the ICE Futures Europe exchange in London.

New York futures rose 1.7 percent yesterday after the Institute for Supply Management’s index of non manufacturing businesses, which covers about 90 percent of the U.S. economy, climbed to 53.2 from 51.5 in August. Economists surveyed by Bloomberg News projected the index would advance to 52. Crude’s 14 day relative strength index, a measure of how fast prices have risen or fallen in that period, was at 70.1 today. A reading of 70 or more can be taken as a sign that a market is “overbought” and prices may drop......Read the entire inventory report.

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Tuesday, October 5, 2010

New Video: The Ultimate Price Target For Gold

Recently we posted a video that projected some amazing levels for gold. Given the strong upward trend in gold and the price action on Tuesday the 5th of October, it is worthwhile looking at this video again. Today's new short video will certainly give you some more interesting price targets for gold that are based on sound trading principles. We hope you enjoy the video, and as always we would love to have your feedback so please leave a comment. The video is free to watch and there are no registration requirements.

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New Video: This Reliable S&P Formation Could Make You Money

In this new video we explain in detail a particular chart formation that has proven to be very reliable in the past. If we are right, we could see a further move and run in the S&P500 to the upside. The video is free to watch and there are no registration requirements.

Want to trade like Adam? Click here for FREE lessons.

Light, sweet crude for November delivery ended the day on a five month high Tuesday after the dollar weakened and equities markets surged. Crude futures settled at $82.82 a barrel Tuesday on the New York Mercantile Exchange, a $1.35 increase from the previous day. Oil prices tend to correlate with the dollar's relationship to the euro nowadays. On Tuesday the dollar lost ground against euro, supporting oil prices.

The dollar also plummeted against the yen Tuesday. Japan's Central Bank reported that it would cut benchmark interest rates to almost zero in an effort to boost that country's economy. By expanding its liquidity measures, growth oriented assets such as stocks and commodities become cheaper for investors to buy.

The Dow Jones Industrial Average increased more than 200 points in afternoon trading while both NASDAQ and S&P 500 rose more than two percent. Additionally, the disruption in crude shipments in the Houston Ship Channel and the strike at French terminals have also contributed to the increase in oil prices.

November crude oil fluctuated within a range from $81.15 to $82.99.

Henry Hub natural gas futures continued to weaken Tuesday as stockpiles remain abundant and mild weather lingers. Traders anxiously await the upcoming heating season, when cooler temperatures will increase demand for gas heating and hence natural gas fired electricity. Natural gas ended Tuesday's trading session at $3.74 per thousand cubic feet, up a penny from Monday. Natural gas traded from $3.69 to $3.78.

The reformulated gasoline blendstock futures price for November rose to $2.13 a gallon, a 4 cent improvement from Monday and its highest level since Aug. 5. Gasoline prices peaked at $2.13 and bottomed out at $2.08.

Courtesy of The Commodity Corner, Rigzone.Com

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