Renewed USD Selling Boosts Commodities

G20's pledge to avoid competitive devaluation failed to halt the slide in USD. Indeed, the market realized the agreement may only calm fears of currency tensions temporary while, in the long term, global economic imbalances persist. The focus has turned to the upcoming FOMC meeting which will be held on November 2-3. Announcement of some sort of easing measures has been priced in. The unknown is how aggressive the Fed will restart QE2. As the dollar weakens, commodities advance with gold rising to 1339 after plunging to as low as 1315.6 last Friday. Crude oil strengthened for a second day to 82.5 as strikes in France continue and tropical storm threatens.

There are few catalysts stopping the market from selling USD even after the G-20 meeting. While member countries agreed to 'refrain from competitive devaluation of currencies' and to move towards 'more market determined exchange rate systems that reflect underlying economic fundamentals', there's no proposal on how to reduce international trade imbalance between countries. It's only stated in the communiqué that 'persistently large imbalances, assessed against indicative guidelines to be agreed, would warrant an assessment of their nature and the root causes of impediments to adjustment as part of the Mutual Assessment Process'.

The US has also made no commitment to refrain from further quantitative easing in the fact of criticisms by other member countries. German Economy Minister Rainer Bruederle said 'it's the wrong way to try to prevent or solve problems by adding more liquidity…Excessive, permanent money creation in my opinion is an indirect manipulation of an exchange rate'. Canadian Finance Minister Jim Flaherty also agreed with the notion that 'aggressive quantitative easing in the US would create devaluation pressure on the U.S. currency'......Read the entire article.


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Phil Flynn: Currency Détente

All we are saying is give peace a chance. Global leaders on a collision course towards an all out currency war pulled back from the brink of conflict by vowing not devalue their respective currencies to try and help their export markets. Forget the fact that the US is on the precipice of a major announcement involving the printing of a bunch of greenbacks and China is looking around saying “who us?”.

The perception by the market place that the G20 will do nothing to stop a drubbing of the dollar is sending the yen soaring to a 15 year high and the oil and other commodities soaring in early trade. In fact you might wonder why the oil market is not even stronger than it is considering the fact that not only is the dollar giving us support, but also the impact on the strikes in France that are going to take a toll on US supply. The AP reports that, “French Finance Minister Christine Lagarde says the country's massive strikes are costing the economy up to euro400 million ($562 million) each day.

Protests over President Nicolas Sarkozy's plan to raise the retirement age from 60 to 62 have left France struggling with fuel shortages, travel chaos and uncollected garbage. Lagarde told Europe-1 radio Monday that the daily economic cost is between euro 200 million and euro 400 million. The minister also says the strikes are damaging France's image abroad......Read the entire article.




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Crude Oil Technical Outlook For Monday Morning Oct. 25th

Crude oil was higher overnight and trading above the 10 day moving average crossing at 82.27. However, stochastics and the RSI remain bearish signaling that sideways to lower prices are still possible near term.

If December extends last week's decline, trendline support drawn off the August-September lows crossing near 78.13 is the next downside target. Closes above the reaction high crossing at 84.80 are needed to confirm that a short term low has been posted.

First resistance is the overnight high crossing at 82.99
Second resistance is the reaction high crossing at 84.80

Crude oil pivot point for Monday morning is 81.39

First support is last Wednesday's low crossing at 79.90
Second support is the uptrend line drawn off the August-September lows crossing near 78.13


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SPX, U.S. Dollar, Crude Oil and Gold Analysis

Last week was volatile thanks to China raising their interest rates a quarter basis point. This rate hike caused the Dollar to spike in value which in turn forced equities and metals to sell off sharply. This one day event caused equities to break below a short term support level causing a large number of protective stops to be triggered. This added more selling pressure causing the market to be down nearly 2.5% at one point but a late day bounce recouped a good chunk of the drop.

Wednesday & Thursday the market had a nice rally making back all of losses and then some. But Thursday afternoon we saw the market slip below a key short term support level and triggered another wave of stops. The market continues to resilience because it recovered into the close saving the day.

After Thursday’s end of day rally, we had expected a typical light volume session which typically chops around in a sideways or slow grind higher.

SPY – SP500 ETF 10 Minute Intraday Chart

Chris Vermeulen
The Gold And Oil Guy.Com – ETF Swing Trading Signals



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Crude Oil Rises a Second Day as Faster U.S. Economic Growth May Boost Fuel Use

Crude oil gained a second day in New York after forecasts that the U.S. economy probably grew at a faster pace in the third quarter, signaling a recovery in fuel demand in the world’s biggest crude consuming nation. Futures rose 1.4 percent on Oct. 22 amid speculation that a French strike may increase demand for imported fuels. U.S. gross domestic product climbed at a 2 percent annual pace, up from 1.7 percent in the previous three months, a Bloomberg News survey of economists showed before an Oct. 29 Commerce Department report.

The December contract advanced as much as 47 cents, or 0.6 percent, to $82.16 a barrel in electronic trading on the New York Mercantile Exchange, and was at $82.10 at 9:15 a.m. Sydney time. It rose $1.13 to $81.69 on Oct. 22. Prices gained 0.5 percent last week and are up 3.4 percent this year. Tropical Storm Richard strengthened to a hurricane, with maximum sustained winds of 90 miles per hour, as it moves to the west-northwest at 13 mph toward the coast of Belize, the U.S. National Hurricane Center said in an advisory yesterday.

Brent crude for December settlement added 30 cents, or 0.4 percent, to $83.26 a barrel on the London based ICE Futures Europe exchange. The contract gained $1.13, or 1.4 percent, to $82.96 on Oct. 22.


Courtesy of Bloomberg News


Reporter Ben Sharples can be reached at bsharples@bloomberg.net

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Getting Started in Commodities

Getting Started in Commodities shows you how to successfully invest in the commodities market in futures, stocks, stock indices, and options. The book explains how the commodities market works as well as how investors can identify and track commodity opportunities, using fundamental factors such as supply and demand and technical analysis tools. Fontanills, a seasoned trader and educator, also explains the basis of money management, teaches you how to find the best broker, and how to read seasonal chart patterns. Finally, he explores how to build a winning system and test and adjust it for success. Helpful appendices of contract specifications and additional readings are also included.

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Kent Moors: How to Play an Explosive Oil Field Services Sector

The rise in crude oil prices is already ushering in another round of increasing drilling. Before the revenues from the oil itself start to flow, however, matters are improving dramatically for the oil field services (OFS) sector. OFS includes all aspects of field preparation, drilling, and well completion leading up to the actual flow. And actually, this applies to drilling for both oil and natural gas. On the gas side, prices are languishing, now down to less than $3.40 per 1,000 cubic feet for a standard NYMEX contract. Yet the huge prospects for unconventional flows from shale gas, tight gas, and coal bed methane production, combined with a likely push for additional gas as fuel in the production of electricity, are pushing drilling higher. And you can be among the first to profit.

The Best OFS Indicator: The Number of Drilling Rigs in Use
During the depths of the financial crisis, drilling experienced a collapse in rig usage, with the decline in both demand and pricing. At its low point, we had barely one third of the rigs being used in any capacity, many of them in injection or workover usages, that is, not drilling new wells for new volume. That is now in full reversal. As of Monday (October 18th), the overall total of drilling rigs in use stands near five year highs.

Even more significant are the field units involved in horizontal drilling. These operations are essential to shale gas and oil development, as well as a range of applications where lateral, rather than vertical, drilling angles are warranted, either for enhanced production or environmental reasons. I’ll give you one of the main indicators I always apply in looking at the overall rig figures. Since November 2005 (when I first started calculating these figures, roughly with the beginning of major shale gas plays), having at least 500 rigs in North American field development applied only to horizontal drilling and hydrofracking operations is taken to mean a significant rise in the OFS market.

As that figure moves beyond 500, we tend to experience an OFS sector heating up, with expanding prices and equipment shortages. That puts OFS providers and their field availability at a premium, thereby increasing service charges… and profitability. A total above 600 indicates an accelerating inflationary pressure in those charges. And as of Monday, the horizontal rig usage stood at 641. What is occurring in rigs is also taking place up and down the OFS provision chain, from seismic and geological survey services to well completions and logging (the generation of readings to determine a range of wellhead and pipe casing conditions). And the results are intensifying.

Read the entire article to learn How to Profit on the Explosive Oil Field Services Sector



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Oil N'Gold: Crude Oil Weekly Technical Outlook For Saturday Oct. 23rd

Crude oil continued to engage in choppy sideway trading last week and spiraled lower. But after all, downside is still contained above 78.04 resistance and there is no confirmation of reversal yet. Recent rally might still extend one more time. But after all, even in case of another rise, we'll continue to focus on reversal signal inside resistance zone of 82.97/87.15. On the downside, break of 78.04 support will indicate that rise from 70.76 is over and deeper decline should be seen to retest this support level first.

In the bigger picture, after all, we're still favoring the case that medium term rally from 33.2 is already completed at 87.15. Recovery from 64.23 is treated as a correction and should be near to completion, if not finished. Even in case of another rise, strong resistance should be seen as crude oil enters into resistance zone of 82.97/87.15 and bring reversal. We're still expecting another fall to 60 psychological level (50% retracement of 33.2 to 87.15 at 60.18). However, decisive break of 87.15 will put focus on long term fibo level at 50% retracement of 147.27 to 33.2 at 90.24.

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. Price actions from 147.27 are treated as consolidation in the larger up trend and with 90.24 fibo resistance intact, a test of 33.2 eventually is in favor. Though, decisive break of 90.24 will argue that crude oil will bring stronger rally to above 100 psychological level as a relatively powerful second wave of the consolidation continues.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts


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Lind-Waldock: Crude Oil Poised to Reach $90 a Barrel

Crude oil is poised to reach $90 a barrel by the middle of December, according to technical analysis by Lind-Waldock in Chicago. The December contract, which became the front month contract yesterday, has been trading in an uptrend, a pattern of higher peaks and higher valleys, since touching a low of $75.10 on Sept. 23, Blake Robben, a strategist at Lind-Waldock, a division of MF Global Ltd., said in an interview.

“Since then, the market has made higher highs and higher lows,” Robben said. A line drawn from the Sept. 23 low to the Oct. 20 low of $79.90 projects to $90 by the middle of December, he said. The initial target for the rising price is $86.52, the high on May 13, which may be reached by the middle of November, Robben said.

“If we close below $79.90, the uptrend is over and we’re back in a trading range of $75 to $85,” he said. Crude oil for December delivery settled at $80.56 a barrel yesterday on the New York Mercantile Exchange.

Bloomberg reporter Barbara Powell can be reached at Bpowell4@bloomberg.net.


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China's Oil Demand Rises on Year On Year Basis

China's apparent oil demand in September rose 5.1% year on year to 35.53 million metric tons (mt) or an average of 8.68 million b/d, according to Platts' analysis of data from the People's Republic of China. However, September demand is almost unchanged from August's 35.54-million-mt level. Meanwhile, China's apparent oil demand in the first nine months of the year totaled 317.7 million mt or an average of 8.52 million b/d, up 10.25% from the same period of 2009, according to Platts' data.

Chinese refiners processed a total 34.91 million mt or an average 8.53 million b/d of crude in September. This is up 6.35% from a year ago, but just 0.52% higher than August, according to data released by the country's National Bureau of Statistics on Oct. 21. The refiners' collective crude throughput from January to September was 310.74 million mt, 13.48% higher from a year ago. Chinese crude imports in September hit a new historic high of 23.29 million mt, or around 5.7 million b/d.

"The crude available to China in September, including domestic production and net imports, was 40.09 million mt, but the throughput was only 34.91 million mt. So a little over 5 million mt of crude presumably went into storage, the highest in a month so far this year," said Vandana Hari, Asia editorial director at Platts. "At the same time, China's monthly refined product imports continued to come off June's high of 3.64 million mt, while the country stepped up product exports last month. The flattening of implied oil demand in September could be a precursor to an easing of the country's runaway oil demand growth rate for the remainder of 2010."

Courtesy of Rigzone.Com



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