U.S. Dollar Continues to Control Gold, Crude Oil & Equities

Over the past few months it seems as though everything has been tied to the dollar. Simple inter-market analysis makes it obvious that almost everything in the financial market eventually has an affect on stocks and commodities in some way. But recently trading has really been all about the dollar. If you watch the SP500 and gold prices you will notice at times virtually every tick the dollar makes directly affects the price and direction of gold and the SP500 index.

Let’s take a look at some charts to see the underlying trends and what they are telling us…

Dollar Index – Daily Chart
As you can see the trend is clearly down. Currently the dollar is trying to find a bottom as it bounces and pierces the previous high. The question everyone wants to know is if the dollar is about to rally and reverse trends or was Friday’s pierce of the October high just a shake out before the next leg down?

Back in late August the dollar pierced the July high on an intraday basis (shake out) just before prices dropped sharply. I think this could very easily happen again but when you see what gold volume is doing, it’s a different story.

Those who follow me closely know I focus on trading with the underlying trend, but manage my risk by trading smaller position sizes when the market has more uncertainty than normal with is what we are currently experiencing.

GLD – Gold Fund – Daily Chart
Gold and the dollar are almost inverse charts when comparing the two. Gold happens to be testing a key support level and its going to be interesting to see how the price holds up going forward. The one thing that has me concerned is the amount of selling taking place. The chart shows heavy volume selling and could be warning us of a possible trend change in the dollar, gold, oil and equities in the coming weeks.

Again the trend for gold is still up, so I would not be trying to short it at this time, rather look to buy into dips until the market trend proves us wrong. That being said, with the selling volume giving off a negative vibe and the fact that gold has rallied for such a long time, any new positions should be very small....

Crude Oil – Daily Chart
Oil looks to be forming a possible cup and handle pattern. If the Dollar continues to consolidate for another 1-3 weeks and breaks down, then we should see the price of oil trade in the range shown on the chart and eventually breakout to the upside. I have a $95-100 price target on oil if the dollar continues to trend down. Until we see some type of handle form here I am not trading oil.

SPY – SP500 Fund – Daily Chart
The equities market looks to have had one of those days which spooked the herd. Friday the price dropped triggering protective stops with rising volume. I was watching the intraday chart as the SP500 broke below the weeks low, and this triggered protective stops which can be seen on the 1 minute charts. In an uptrend I prefer watching stops get triggered because it means traders are getting taking out of long positions and most likely looking to play the short side. When the masses become bearish on the market, that’s when I start looking to play the upside in a bull market (buy the dip).

The chart below clearly shows the days when the shake outs/running of the stops took place. Most traders were exiting their positions and/or going short because the chart looked bearish. One thing I find that helps my trading is that if the chart looks rally scary (bearish) then I start looking at a shorter term time frame for a possible entry point to go long using price and volume analysis.

Weekend Market Trend Trading Conclusion:
In short, I feel the market is at a critical point which will trigger a very strong movement in the coming days or weeks. Because the dollar, gold, oil and the equities market have had such big moves I think trading VERY DEFENSIVE is the only way to play right now. That means trading small position sizes. Right now I am trading 1/8 – 1/4 the amount of capital I generally use on a trade. Meaning if I typically put $40,000 to work, right now I am only taking positions valued at $10,000.

Remember not to anticipate trend reversals by taking a position early. Continue to trade with the underlying trend with small positions or skip a couple setups if you feel strongly of a possible reversal. Once the trend reverses and the volume confirms, only then should you be playing the new trend. Picking tops can be expensive and stressful.

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Three Ways to Profit From the Rebound in Natural Gas Prices

I love autumn. The leaves start to turn color, and the first hint of winter is invigorating. It is also a great time to peruse each of the financial markets for the shorter term, seasonal trades that are always lurking, if you know where to look, that is. One place that's worth looking at right now is the global currency markets, where a major war is currently being waged. As part of the so called "race to the bottom," the U.S. dollar is down 14% since June. This drop in the greenback has come at a time when a major bull market in commodities has broken out everywhere in the world.

Gold, silver, wheat and corn have all recently achieved multi year highs. Cotton just hit its highest price in 140 years. There has been an exception, however a headline commodity that's been left behind. Indeed, this particular commodity has been in decline for six months, dropping almost daily. But that's about to change. As we move deep into fall, the leaves on the trees will change color, die, and then fall to the ground. But the commodity in question will return to the land of the living, and will head for high ground, generating windfall profits for those with the courage to make their move right now. I'm talking about natural gas.

Natural Gas Numbers
I am a Contrarian investor by nature. So it's no surprise that some of my biggest gains as a professional trader came after I bought something that was so far out of favor that only a lunatic would've followed my lead. I love those trades. Right now, natural gas is out of favor. So out of favor, in fact, that people do not realize the true value of what it represents in the U.S. market. The spot price of a cargo of liquefied natural gas, or LNG, is around $14 per thousand cubic feet (MCF). In the United States, the same British Thermal Unit (BTU) of energy in the form of natural gas is priced around $3.50 per MCF.

The drop in natural gas prices in the U.S. market was so precipitous that, in August 2009, the weekly average price was $2.72 per MCF. I love price differentials like this, because I know that a capitalist will find a way to arbitrage the difference. Let's do some quick BTU conversions so that you can see what is happening here. If you take a barrel of crude oil, and divide it by natural gas equivalent BTUs, you would find that the ratio is 6-to-1.

What that tells us is that one barrel of oil is equal to 6,000 cubic feet (MCF) of natural gas. When you buy LNG on the spot market, it is priced as an equal with a plus or minus differential to crude oil. However, in the U.S. market, that same BTU value of natural gas is currently discounted......Read the entire article.


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Crude Oil Rises for First Time in Three Days on Optimism U.S. Demand May Gain

Crude oil climbed for the first time in three days after the Japanese economy grew faster than expected, stoking speculation Asia’s fuel demand will increase. Futures retraced some of last week’s 2.3 percent decline after Japan’s gross domestic product rose an annualized 3.9 percent in the third quarter, the Cabinet Office said in Tokyo today. The median forecast of 21 economists surveyed by Bloomberg News was for a 2.5 percent increase.

“It gives further evidence of that Asian recovery,” said Ben Westmore, a minerals and energy economist at National Australia Bank Ltd. in Melbourne. “You’ve seen the recovery in China and the positive spill over affects for those economies in the Asian region. Up until now, you haven’t really seen it as much in Japan.”

December crude futures added as much as 50 cents, or 0.6 percent, to $85.38 in electronic trading on the New York Mercantile Exchange, and was at $85.33 at 11:53 a.m. Sydney time. Crude fell $2.93 to $84.88 on Nov. 12, the lowest since Nov. 3. Prices are up 7.6 percent this year.
Chinese oil processing rose to a record last month after refiners increased production to ease a domestic fuel shortage. Plants refined 37 million metric tons, or about 8.8 million barrels a day, in October, up 12 percent from a year earlier, China Mainland Marketing Research Co. said Nov. 11......Read the entire article.


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I Just Watched This.....New Forex Leverage Video

The rules have changed recently in Forex, regarding a number of key issues, but none as important as the leverage change. I've read some decent articles detailing it, but nothing has covered it like the video I just watched from Scott Downing at BigTrends.

Click Here to watch "The Rules of Forex Have Recently Changed"

He explains the new leverage rules and how he's been able to pull consistent pips despite the leverage change. It's also a full KIT of Forex tools for you here too:

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Natural Gas Weekly Technical Outlook For Sunday Nov. 14th

Natural gas edged higher to 4.269 last week but failed to sustain gain and pulled back into prior range. Initial bias remains neutral this week and we'd probably see some sideway trading. But after all, rise from 3.255 is in favor to continue as long as 3.743 support holds. Break of 4.249 will target falling trend line resistance (now at 4.4). However, break of 3.743 support will indicate that rebound is finished and flip bias back to the downside for retesting this low.

In the bigger picture, current development raises the possibility that fall from 6.108 has indeed finished with three waves down to 3.255, and failed 100% projection of 6.108 to 3.81 from 5.194 at 2.896. That is, it's merely a correction to rebound from 2.409. There is no confirmation of reversal yet and key focus will be on mentioned trend line resistance from 6.108, now at around 4.4 level. Sustained break there will likely pave the way the another high above 6.108 in medium term. Though, a break below 3.255 will turn focus back to 2.409 low instead.

In the longer term picture, question remains on whether 2.409 is the long term bottom already. Downside momentum since 6.108 is so far not too convincing and it looks like 2.409 won't be violated even in case of another fall. On the other hand, natural gas is still limited well below 55 weeks EMA and 55 months EMA and there is no confirmation of reversal yet. We'll stay neutral before a break of 5.194 resistance.

Nymex Natural Gas Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts


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Crude Oil Weekly Technical Outlook For Saturday Nov. 13th

Crude oil edged higher to 88.63 last week but formed a short term top there and pulled back. Initial bias remains mildly on the downside this week for deeper decline to correct whole rise from 70.76. Nevertheless, strong support should be seen at 38.2% retracement of 70.76 to 88.63 at 81.80 and bring another rise. Whole rally from 64.23 is still expected to continue to 90 psychological level and above.

In the bigger picture, rise whole medium term rebound from 33.2 is still in progress. Such rise is treated as the second wave of the consolidation pattern that started at 147.27. Further rise could still be be seen towards 50% retracement of 147.27 to 33.2 at 90.24 and possibly further to 61.8% retracement at 103.70. However, break of 70.76 support will be the first warning that crude oil has topped out. Further break of 64.23 support will confirm and turn outlook bearish to start another medium term decline.

In the long term picture, rebound from 33.2 is not finished yet. But overall view remains unchanged. Crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2, second wave from there unfolding. Current development suggests that a breach of 61.8% retracement at 103.70 is likely. But we'll then start to focus on reversal signal again above 103.70.

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




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Dian L. Chu: 131 = The Number of Years to Replace Oil

It seems the panic time for both green enthusiasts and peak oil pundits. According to a new paper by two researchers at the University of California–Davis, it would take 131 years for replacement of gasoline and diesel given the current pace of research and development; however, world's oil could run dry almost a century before that. The research was published on Nov. 8 at Environmental Science & Technology, which is based on the theory that market expectations are good predictors reflected in prices of publicly traded securities.

By incorporating market expectations into the model, the authors, Nataliya Malyshkina and Deb Niemeier, indicated that based on their calculation, the peak of oil production could occur between 2010 and 2030, before renewable replacement technologies become viable at around 2140.
The estimates not only delayed the alternative energy timeline, but also pushed up the peak oil deadline. The researchers suggest some previous estimates that pegged year 2040 as the time frame when alternatives would start to replace oil, could be “overly optimistic".

As I pointed out before, despite the excitement and hype surrounding a future of clean energy, a majority of the current technology simply does not make economic sense for regular consumers and lack the infrastructure for a mass deployment….even with government subsidies, tax breaks, and outright mandates. In addition, the supply chain of renewable technologies is not as green as people might think. Most alternative technologies rely on rare earths for efficiency. However, the......Read the entire article.


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Did George Soros Read This Book to Make a Cool Billion?

Adam Hewison, co-founder of MarketClub just returned from a fact finding mission fro China and returned more excited then ever about his time tested methods on trading these equity and currency markets and how he feels about how legendary investor George Soros made 1 billion dollars in the British pound shortly after his book on foreign exchange was published.

Coincidence? Maybe, but now you can decide and it won't cost you a dime.

20 years ago when his book "Right On The Money: The definitive guide to forecasting foreign exchange rates," was published, it was a huge hit with bank traders and the hedge fund crowd.

One legendary hedge fund trader, by the name of George Soros, may have read my book as he pulled a cool 1 billion dollars in profits from the British Pound in 1992. This huge profit attests to the fact that there are enormous profits to be made in the foreign exchange markets.

Now, for the first time he is publishing "Right on the Money" in electronic format.

In fact, many of the same principles that major hedge fund managers use today to make big profits you will learn about in his new e-book.

A KILLER PRODUCT

That's what Stocks and Commodities Magazine had to say about "Right on the Money" when they reviewed Adam's book. Now, 20 years later you will learn how "a killer product," with its many powerful trading secrets, will help keep you on the right track and ahead of the game no matter what happens to the economy.

THE ULTIMATE MARKET

Money is the ultimate market and I'm betting my reputation that his new e-book on foreign exchange can help make you money. The good news is, it won't cost you a dime.

Something for nothing? You're kidding me right?

No, I am not kidding, in fact I am very serious about wanting to make this book available to everyone who is concerned about their money in what appears to be some very unsettling times that lay ahead of us.

20 years ago my book sold for $125 to major banks and hedge funds everywhere. In today's dollars Adam tells me it would sell for double that amount, which would put it out of reach for most ordinary folks.

So why, you maybe asking yourself, is this e-book on forex available for free?

Here's the reason, Adam has been pretty lucky in the markets and have reached a stage in my life where I am very comfortable and the opportunity to make another six or seven figures is not going to change my life. His reward is going to be your feedback after you download my new e-book. We want you to see and fully understand how the foreign exchange market really works, not just for the last three to six months, but the last several decades.

AN OLD HUNGARIAN PROVERB

There is an old Hungarian proverb that I believe in, and Adam uses it in his book, "The past is the teacher of the future". Only by learning how the markets have worked in the past can you possibly be successful in the future. Nothing really changes in the world, if it did we would all be living in utopia and that is, as we all know, not the case.

THIS MAN CREATED FINANCIAL FUTURES

Leo Melamed, Chairman Emeritus of the Chicago Mercantile Exchange, now the CME Group is largely credited with creating financial futures in the United States, here is what Mr. Melamed had to say in the forword to Adam's book, "Hewison's exhaustive compilation and explanation of chart data, covering 17 years of currency market movements, is a meaningful contribution to the understanding of foreign exchange and excellent educational reference for every serious trader."

Take it from the man who helped create financial futures as we know them today and receive this new e-book while it's still available with Adam's complements.

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You don't have to take any financial risk to receive this new e-book. All you have to do is enroll in MarketClub for 30 days. RISK FREE. That's right you have zero risk.

If you are not 100% satisfied within the first 30 days, MarketClub will refund every dime you've paid...no questions asked. On this simple business philosophy, MarketClub has grown into one of the most respected financial websites in the world. It has everything to do with performance and integrity.

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Here are some of my favorite candlestick chart setups that we would like to share with you. (VALUE $35.00)

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Our special offer and $320 in valuable bonuses today makes it easy, convenient and risk-free for you to get started.

Here's to your future "George Soros" success, and if you've read this far and are still undecided about enrolling in MarketClub, remember this, these big Soros-like returns will continue whether you join MarketClub or not. Could huge annual returns make a difference in your financial future like it did for Kevin?

"I would like to take this opportunity, to thank MarketClub's Trade Triangle and alert system, which alerted me to the recent Cable (British Pound) and Dollar trade netting me 10,000 pounds within two months, Thanks again MarketClub."
Kevin, W., Great Britain

There are thousands of other members who, like Kevin, are benefiting everyday from the MarketClub service. Best of all now you don't have to worry as you have zero financial risk.

You have our 30 day risk-free trial which will allow you to explore for yourself firsthand how MarketClub can protect your money and keep you on the right financial track in the future - no matter what this or any future government does.

Again.....if we are right, and the returns we discussed continue which as we expect, then it will be the best decision you'll make in 2010. If we are wrong, you can cancel at any time and get your money back and keep all the bonuses with my complements. What could be any fairer than that.

So make the move today to the winners circle and remember you have complete 100% control of your money at all times.

"It won't work for me" (That little voice inside your head is a killer that you must defeat to become successful. If that's what's holding you back. Give yourself a break and the benefit of the doubt, because remember I'm taking all of the risk here. You might just surprise yourself.)

Start today, and be one step closer to achieving your financial goals. You have no valid reason not to try MarketClub. Wouldn't it be nice to see a program that actually does what it says its going to do for a change.

Enroll in MarketClub today and watch several member's only videos and see how you too can bust the bank like Soros did. It is one of the secrets you'll find in "Right on the Money". Do it now while it is still fresh in you mind.


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Musings: Energy Stocks Have Mostly Trailed the Market This Year

The results of the November 2nd election and the recent Federal Reserve Bank’s announcement that it was embarking on another attempt to stimulate the economy by encouraging bank lending through a program to provide more liquidity to the banking system, known as the second quantitative easing, or QE2, have driven the stock market to levels that existed immediately before the collapse of Lehman Brothers. Accompanying the QE2 announcement, the worth of the United States dollar among world currencies fell in value helping to boost the price of commodities including crude oil. Natural gas prices in the U.S. have not benefited from the weakening dollar as the product is truly a local one.

When we look at the performance so far in 2010 for the overall stock market, as measured by the Standard & Poor’s 500 Stock Price Index, it has been solid. The S&P 500 index is up nearly 10% through the end of last week, and is at a level exceeding that achieved in late spring this year. But when we look at the performance of energy stocks, they have tended to lag the performance of the overall stock market despite the strong impetuous from commodity prices.

If we look at what has happened this year in energy markets, there have been two primary events that have shaped the business, the Gulf of Mexico oil spill disaster and the recovery in economy activity following the 2008-2009 recession. While energy demand has recovered from the drastic drop experienced last year due to the recession, the combination of rising supply and continued subpar economic growth and energy demand in the industrialized economies of the world has muted the magnitude of the oil price rise. Crude oil is denominated in U.S. dollars globally, and its price is impacted by the fluctuating value of the U.S. dollar. At various points in time during the year oil prices rose or fell sharply in response to movements in the value of the dollar, however, there was no sustained move in......Read the entire article.



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Stock Market and Commodities Commentary For Friday Evening Nov. 12th

The S&P 500 index closed lower on Friday as it consolidates some of this year's rally. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are turning bearish hinting that a short term top might be in or is near. Closes below the 20 day moving average crossing at 1192.06 are needed to confirm that a short term top has been posted. If December renews the rally off August's low, the 62% retracement level of the 2007-2009 decline crossing at 1234.75 is the next upside target. First resistance is Tuesday's high crossing at 1224.50. Second resistance is the 62% retracement level of the 2007-2009 decline crossing at 1234.75. First support is the 20 day moving average crossing at 1192.09. Second support is the 25% retracement level of the July-November rally crossing at 1169.37.

Crude oil closed sharply lower due to profit taking on Friday as it consolidated some of the rally off August's low. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are overbought and are turning bearish signaling that sideways to lower prices are possible near term. Closes below the 20 day moving average crossing at 83.93 would confirm that a short term top has been posted. If December extends the aforementioned rally, the 87% retracement level of May's decline crossing at 90.82 is the next upside target. First resistance is Thursday's high crossing at 88.63. Second resistance is the 87% retracement level of May's decline crossing at 90.82. First support is today's low crossing at 84.52. Second support is the 20 day moving average crossing at 83.93.

Natural gas closed lower on Friday as it consolidates some of the rally off October's low. Stochastics and the RSI are turning bearish signaling that sideways to lower prices are possible near term. Closes below last Thursday's low crossing at 3.743 would confirm that a short term top has been posted. If December extends the rally off October's low, the 38% retracement level of the June-October decline crossing at 4.362 is the next upside target. First resistance is Wednesday's high crossing at 4.249. Second resistance is the 38% retracement level of the June-October decline crossing at 4.362. First support is last Thursday's low crossing at 3.743. Second support is the reaction low crossing at 3.500.

Gold sharply lower due to profit taking on Friday as it consolidated some of this year's rally. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI are turning bearish signaling that sideways to lower prices is possible near term. Closes below the 20 day moving average crossing at 1360.70 would confirm that an important top has been posted. If December renews this year's rally into uncharted territory, upside targets will now be hard to project. First resistance is Tuesday's high crossing at 1424.30. First support is the 20 day moving average crossing at 1360.70. Second support is the reaction low crossing at 1315.60.

The U.S. Dollar closed lower on Friday as it consolidates some of this week's rally but remains above the 20 day moving average crossing at 77.48. The mid range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. Closes above the reaction high crossing at 78.61 are needed to confirm that a short term low has been posted. If December renews the decline off August's high, the November 2009 low on the weekly continuation chart crossing at 74.21 is the next downside target. First resistance is the reaction high crossing at 78.51. Second resistance is the reaction high crossing at 78.61. First support is last Wednesday's low crossing at 75.24. Second support is the November 2009 low on the weekly continuation chart crossing at 74.21.




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