Stock Market and Commodities Commentary For Thursday Evening Oct. 7th

The U.S. stock indexes closed mixed again today in subdued, pre-report trading. The stock index bulls still have the overall near term technical advantage as uptrends are in place on the daily bar charts. Traders are gearing up for Friday's U.S. employment report. Look for more active trading in the wake of Friday morning's jobs data.

Crude oil closed down $1.76 at $81.48 a barrel today. Prices closed nearer the session low today after hitting a fresh nearly five month high early on. Price action today also scored a bearish "outside day" down on the daily bar chart. Bulls faded today and if there is good follow through selling pressure on Friday, it will suggest a near term market top is in place. At present, prices are still in a six week old uptrend on the daily bar chart.

Natural gas closed down 24.2 cents at $3.623 today. Prices closed near the session low today and scored a fresh contract low. The bears still have the solid overall near term technical advantage and gained fresh downside momentum today.

Gold futures closed down $13.30 at $1,334.30 today. Prices today closed nearer the session low in a big trading range day, after hitting another fresh contract and all time record high early on. A firming U.S. dollar index as the session progressed did help to pressure the gold market today. Profit taking pressure was featured Thursday, following recent price gains that did put the gold market into a technically overbought posture, on a near term basis. Thursday's price action did produce a bearish "outside day" down on the daily bar chart, whereby the high is higher and the low is lower than the previous session's trading range, with a lower close.

The U.S. dollar index closed up 7 points at 77.69 today. Prices closed near mid range today and hit another fresh 8 1/2 month low. Tepid short covering in a bear market was featured. Bears still 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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Crude Oil Slip From a 5 Month High as Stocks Take a Breather

Crude oil tumbled from a five month high after the dollar rebounded versus the euro and U.S. equities declined, wiping out an early advance. Oil headed for the biggest drop in three weeks as the greenback climbed against the common currency for the first time in three days, reducing the appeal of commodities as an alternative investment. The Standard & Poor’s 500 Index decreased for a second day as raw-material prices fell, sending producer shares lower.

“The dollar and equities are the main drivers,” said Kyle Cooper, director of research for IAF Advisors in Houston. “What happens with inventories and demand isn’t that important.” Crude oil for November delivery fell $1.56, or 1.9 percent, to $81.67 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Oil dipped as much as $2.23 to $81, and reached $84.43 earlier today, the highest level since May 4.

Brent crude oil for November settlement declined $1.68, or 2 percent, to $83.38 a barrel on the ICE Futures Europe exchange in London. It reached $86.02, the highest level since May 4. The U.S. currency rose after applications for U.S. unemployment benefits unexpectedly fell. Jobless claims dropped by 11,000 to 445,000 in the week ended Oct. 2, the fewest since July 10, Labor Department figures showed today in Washington. The dollar climbed 0.1 percent against the euro to $1.391 after reaching an eight month low of $1.4029 in New York.....Read the entire article.


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Commodity Trading Range Charts

An interesting way to look at relative strength, courtesy of Bespoke Investment Group.....

Below we highlight our trading range charts of ten major commodities. Most but not all have been on strong runs higher lately.

In the charts below, the green shading represents between two standard deviations above and below the 50 day moving average. Moves above or below the green zone are considered overbought or oversold. As shown, the two most widely followed commodities, oil and gold, are both trading outside of their trading ranges into extreme overbought territory. Silver, platinum, and copper are all at overbought levels as well. Wheat has pulled back to the bottom of its trading range recently, while coffee and orange juice have been heading lower as well. Corn pulled back from overbought territory a couple weeks ago, but it has bounced back some. Finally, natural gas remains in an epic downtrend.

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Natural Gas Prices Too Low to Sustain Production

For U.S. energy producers, high priced $11 natural gas is "kind of like a Saturday night drunk," Devon Energy Executive Chairman Larry Nichols said at the opening session of the Unconventional Gas International Conference and Exhibition on Tuesday afternoon. "It may feel good at the time," he said, but it isn't a sustainable high.

Just as an $11 price is too high to persist, today's current market prices of about $3.75 are too low for the industry to thrive and maintain strong natural gas production in the long term, said Nichols, who stepped down this year from his longtime position as CEO of Oklahoma City based Devon, the leading producer in North Texas' gas rich Barnett Shale.

Even in the face of low gas prices, domestic energy producers have continued to do substantial drilling, particularly in major unconventional gas plays such as the Barnett, the Eagle Ford Shale in South and Central Texas, the Haynesville Shale in Louisiana and East Texas, and the Marcellus Shale in the Appalachian region. By continuing to drill despite weak prices.....Read the entire article.


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Phil Flynn: It’s A Barrel Buster!

Crude oil rises after a barrel busting report. US total petroleum supplies hit the highest level in 29 years. Crude stocks are the highest since 1980. Gasoline supplies, the highest levels since 1990. The forward demand covers for supply, the highest since 1995. Demand for petroleum products dropped a whopping 6.4% and prices rise! So I guess this quantitative easing thing is a way to help oil companies and their bottom line. The Fed wants inflation and the Fed gets what it wants and is even thinking about going beyond their informal target rate. The Fed fear deflation and believe that the best weapon against it is inflation real or not.

The Wall Street Journal says that, “the rationale is that getting inflation up even temporarily would push "real" interest rates nominal rates minus inflation down, encouraging consumers and businesses to save less and to spend or invest more” Let’s see how that works for you. At the same time the US and China are getting testy about the currency rate as the Chinese are saying that forcing them to revalue or devalue their currency would lead to a disaster for the world. The set up is so bullish and commodities continue to......Read the entire article.


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Crude Oil Trades Near Five Month High as Dollar Drops, U.S. Fuel Supplies Fall

Crude oil rose for a third day in New York as the dollar extended its decline against the yen and the euro, enhancing the investment appeal of commodities, and after a U.S. government report showed a drop in gasoline stockpiles. Futures climbed as the U.S. currency fell to a 15 year low against the yen and an eight month low against the euro amid speculation the U.S. Federal Reserve will expand credit easing to sustain the economic recovery. The U.S. Energy Department said yesterday supplies of motor fuel slipped more than forecast by a Bloomberg News survey.

“We’re seeing tremendous dollar weakening,” said Hannes Loacker, an analyst at Raiffeisen Zentralbank Oesterreich AG in Vienna. “That’s what we saw throughout 2009, which made oil rise from below $40 to $70. This correlation disappeared all year until now, so all commodities are rising.” Oil for November delivery rose as much as 72 cents, or 0.9 percent, to $83.95 a barrel in electronic trading on the New York Mercantile Exchange. It was at $83.73 at 12:56 p.m. London time. Brent crude for November settlement rose 46 cents, or 0.5 percent, to $85.52 a barrel on the ICE Futures Europe exchange in London.

Futures reached their highest price since May 4 yesterday after the Energy Department reported gasoline supplies fell 2.65 million barrels to 219.9 million. They were forecast to decline 250,000 barrels, according to a Bloomberg News survey. Stockpiles of distillate fuel, a category that includes heating oil and diesel, dropped 1.12 million barrels.......Read the entire article.

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Crude Oil Bulls Maintain The Advantage, Trading Signals Clearly Overbought

Crude oil was higher overnight as it extends 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, the 62% retracement level of May's decline crossing at 84.65 is the next upside target. Closes below the 20 day moving average crossing at 78.09 would confirm that a short term top has been posted.

First resistance is Wednesday's high crossing at 84.09
Second resistance is the 62% retracement level of May's decline crossing at 84.65

Crude oil pivot point for Thursday morning is 83.20

First support is the 10 day moving average crossing at 79.97
Second support is the 20 day moving average crossing at 78.09

Stock Market Leaders Are Now Lagging?

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Stock Market Leaders Are Now Lagging?

Wednesday’s session closed mixed on the day. The DOW posted a third of a percent gain while the tech sector closed down almost nine tenths of a percent. While technology stocks have been leading the market higher in the recent months, today they took the back seat while the DOW took control. Take a look at the intraday chart of the SPY price action compared to the tech sector. It’s clear the tech stocks where not in favor today. Some tech stocks that really took a beating today were FFIV, NTAP, APKT and AKAM. On another note, we are entering earning season and I am wondering if we are going to see a “Sell the New” type of thing again.

The broad market is experiencing a 36 day down cycle which has played a very dominant roll in the market this year. It topped out 9 days ago so we should expect sideways chop or some selling over the next 9 trading session. Because the market is trending up, pullbacks should be shallow.

The market continues to grind its way higher on relatively light volume. I have been waiting several weeks now for the volume to come back into the market but its just not happening. The majority of shares being traded are from banks, funds and day traders as the average investor’s not taking part because of the uncertainty looming. The lack of volume (commitment) to the market from the masses is making the market internals swing from one extreme to another on virtually weekly basis making it more difficult to take advantage of short term extreme sentiment levels.

The current market environment has traders shifting gears to more of a momentum trading strategy to take advantage of trends and this is what I am going to start implementing again as the market expands.

Market Conclusion:
In short, the equities market is in an up trend but looks to be overbought. Also with the downward cycle I don’t think the market will expand here and take off. Rather it will most likely chop around and burn off time until some earnings are released and the cycle bottoms. Unless we get a really sharp reversal down which we have yet to see on the SP500 or DOW, nibbling on small long positions or staying in cash is what I am doing right now.

As for gold, silver, the dollar and oil… Well the dollar continues to lose value on a daily basis which in turn is boosting metals along with crude oil. All four of those investments are over extended but they are trending and not really looking like they want to reverse just yet.

Chris Vermeulen
The Gold And Oil Guy.com

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Phil Flynn: The Race for the Bottom

The gloves are coming off as around the globe the currency tensions are heating up and the printing presses are coming out because when it comes to currencies, everyone wants to be on the bottom. In fact things are getting so heated that the International Monetary Fund is warning that governments are risking a currency war if they try to use exchange rates to solve domestic problems which they say if translated into action would represent a very serious risk to the global economy.

 I said yesterday, in a currency war the country with the most ink wins as countries try to print themselves to prosperity in a global race for the bottom. Japan raised the stakes yesterday by hitting critics of their intervention policy by showing the world that there is more than one way to try to intervene in your currency.

The Bank of Japan, by cutting their interest rate to 0%-0.1% and buying 60 billion dollars in assets, was sendng a message of hypocrisy to the critics of their intervention. Now if the Japanese are going to print more money what choice does the Untied State have? The markets believe that.....Read the entire article.

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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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