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It may not be cold yet but the first real blast of winter is coming. How do I know that? I am looking at natural gas prices. Despite record supplies, natural gas has been keeping up as Middle America scrambles through our closets to find gloves and ear muffs. Natural gas prices are rebounding from its sharp selloff now testing the high for the month in anticipations of frosty future. Does this signal that the bottom in natural gas has arrived or is this just a great selling opportunity?
In a normal year in gas you might assume that prices would go higher but since the onslaught of new unconventional gas production from shale, now you cannot be too sure. You see according to the Energy Information Agency natural gas proven reserves (those volumes of oil and natural gas that geological and engineering data demonstrate with reasonable certainty to be recoverable in future years from known reservoirs under existing economic and operating conditions) rose enough not only to replace production, but also to grow by almost 3 percent over 2007.
In contrast, the EIA says that even though discoveries of crude oil rose for the third year in a row, proved reserves of crude oil fell by more than 10 percent. Under Securities and Exchange Commission (SEC) rules for determining reserves that have been in effect since 1982, operators assessed their 2008 reserves based on what they could produce with reasonable certainty at the market price on the last day of the year......Read the entire article.
Oil prices are higher this morning after European and global financial authorities agreed to save debt latent Ireland and protect Europe's wider financial stability. This short covering overnight consolidated some of this month's decline.
Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term. If January extends the aforementioned decline, the 62% retracement level of the August-November rally crossing at 79.24 is the next downside target. Closes above the 20 day moving average crossing at 84.60 would confirm that a short term low has been posted.
First resistance is the 20 day moving average crossing at 84.60
Second resistance is this month's high crossing at 89.10
Crude oil pivot point for Monday morning is 82.13
First support is last Wednesday's low crossing at 80.65
Second support is the 62% retracement level of the August-November rally crossing at 78.56
Crude oil rose, rebounding from its biggest weekly loss in three months, amid optimism that an agreement to rescue Ireland’s banks may reduce European sovereign debt concerns. Futures retraced some of last week’s 4 percent slump after Ireland yesterday applied for a bailout from the European Union and the International Monetary Fund to save its banks. The decision pushed the euro to a one week high versus the dollar, boosting the appeal of commodities to investors.
“The euro debt concerns are easing as Ireland has decided to accept the bailout and that will lead to a weaker dollar,” said Serene Lim, a commodity strategist at Australia & New Zealand Banking Group Ltd. in Singapore. “It’s more of the dollar weakening that’s helping to drive oil higher.” The January contract gained as much as 64 cents, or 0.8 percent, to $82.62 a barrel in electronic trading on the New York Mercantile Exchange, and was at $82.50 at 12:25 p.m. Singapore time. It slipped 44 cents, or 0.5 percent, to $81.98 on Nov. 19. Futures are up 3.7 percent this year.
The December contract expired on Nov. 19, down 34 cents, or 0.4 percent, at $81.51 a barrel. Crude fell at the end of last week after China ordered banks to raise reserves in a move that may slow growth and crimp fuel demand in the world’s largest energy consuming country. “The Irish debt situation has been contained for the moment,” said David Taylor, a market analyst at CMC Markets Ltd. in Sydney......Read the entire article.
The past few months it seems the gold and silver play has been getting a little crowed with everyone wanting to own gold. While I am a firm believer that these precious metals are a great hedge/investment long term, I can’t help but notice the price action and volume for both metals which looks to me like they are getting exhausted.
Silver – Daily Chart
The silver chart below shows an extremely high volume reversal candle in early November which typically leads to lower prices and some times a major change in the trend. That being said silver remains in an uptrend with the possibility of a bullish pennant forming. On the other hand there is a possible head and shoulders pattern forming. I will be looking for light volume sideways chop keeping a close eye for a possible neckline breakdown or a momentum thrust to the upside for a possible trade.
Gold – Daily Chart
Gold is forming a bullish and bearish pattern also giving us a mixed signal. I am currently neutral on gold and not really looking to take part until we get some type of clear price action.
US Dollar – 60 Minute Chart
The dollar has shown some strength recently. The US dollar play has been to take the short side, and a couple weeks ago we saw the dollar breakdown from yet another consolidation. It seems like everyone shorted the dollar yet again. That could have been a key pivot low for the dollar. On the weekly chart that bounce was off a major support trend line helping add some fuel to the rally I would think.
The chart below shows the recent rally and breakout to the upside. Currently the dollar is pulling back to test the breakout level (support). It will be interesting to see how this week unfolds. If the dollar bounces then we just may see metals break below their necklines to make another heavy volume drop.
Weekly Precious Metals Update:
In short, I have mixed feelings for gold and silver. Yes I think they are good long term plays, but after the run they have had it is also very possible a much deeper correction is about to take place and we may not see new highs for another year. That is a long time to have money sitting in an investment when it can be put to work in other investments. I know the herd (general public) is all head over heals in love with gold and silver which is one of the reasons why I think we are nearing a top if we didn’t already see it a couple weeks ago.
Don’t get me wrong I’m not saying to sell and go short metals....not yet anyways. They are both still in an up trend but some interesting things are unfolding which could cause big action in the coming weeks.
Sunday, a quiet day away from the markets. What better way to spend Sunday then to learn how to use Fibonacci retracements in our trading. We have had a number of requests to do a video on Fibonacci retracements and how they can be used in trading.
We put together this five minute lesson on Fibonacci trading and how we use this important tool to determine turning points in the market. Like all tools, it has its flaws and should be used with other complementary tools like our "Trade Triangle" technology.
As always, our videos are free to watch and there are no registration requirements. We hope you have the time to comment and share if this video helped you understand this important trading tool, or how you're already using it.
We hope you enjoy this brief lesson and it helps you understand how to use this important tool.
Natural gas's strong rebound form 3.71 retained the bullish case. That is, it should have bottomed at 3.255 already. Break of 4.249 resistance will indicate that such rebound has resumed and should target falling trend line resistance (now at 4.4 level). On downside, however, break of 3.71 will now confirm that rebound from 3.255 has completed and will turn bias back to the downside for retesting 3.255 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. 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.
Nigeria's military spokesman says soldiers have arrested a militant leader who authorities believe is responsible for a recent rash of kidnappings of oil workers in the oil rich southern delta.
Lt. Col. Timothy Antigha said Saturday the leader was taken with 62 suspected members of the Movement for the Emancipation of the Niger Delta. Antigha says the leader is known by his nickname, "Obese."
Antigha says the military believes the group kidnapped two Americans, two Frenchmen, two Indonesians, one Canadian and 12 Nigerians in recent weeks from Exxon Mobil Corp. and Afren PLC facilities.
On Wednesday night, a military operation freed 19 hostages in the oil rich region held by MEND _ including seven expatriate workers.
Crude oil dropped to as low as 80.06 last week before forming a temporary low there and turned sideway. Initial bias remains neutral this week and some consolidations would be seen first. However, note that another fall remains in favor as long as 84.52 minor resistance holds. Below 80.06 will target 61.8% retracement of 70.76 to 88.63 at 77.59 and below. Though, above 84.52 will flip intraday bias back to the upside for retesting 88.63 high.
In the bigger picture, the steeper than expected fall from 88.63 is mixing up the outlook and argue that rise from 64.23 is possibly finished with three waves up to 88.63. In other words, it could be the second wave of consolidation from 87.17 and the third wave might have just started. We'll now slightly favor more decline as long as 88.63 resistance holds. Nevertheless, medium term rise from 33.2 is treated as the second wave of the consolidation pattern that started at 147.27. As long as 64.23 support holds, medium term rise from 33.2 is still in favor to extend to 50% retracement of 147.27 to 33.2 at 90.24 and possibly higher before completion.
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.
Crude Oil fell, posting its biggest weekly loss in three months, after China ordered banks to raise reserves in a move that may slow growth in the world’s largest energy consuming country. Futures dropped 0.4 percent after China told lenders for the fifth time this year to set aside more funds to drain cash from the financial system and limit asset bubbles. Economic growth will spur a 9.5 percent jump in 2010 Chinese oil use, according to a Nov. 12 International Energy Agency report.
“These further moves by the Chinese to rein in their economy and the real concern they’re expressing about inflation is weighing on this crude market,” said John Kilduff, a partner at Again Capital LLC, a New York based hedge fund focusing on energy. Crude for December delivery fell 34 cents to settle at $81.51 a barrel on the New York Mercantile Exchange. Prices have dropped 4 percent since Nov. 12, the most since the week ended Aug. 13. The December contract expired today. The more active January contract slipped 44 cents, or 0.5 percent, to $81.98.
The People’s Bank of China said it will raise the reserve ratio requirement for the nation’s banks by 50 basis points starting Nov. 29. Speculation of an imminent increase in interest rates to counter inflation helped to drive the biggest selloff in China’s benchmark stock index since May over the past two weeks......Read the entire Bloomberg article.
Thursday was another example of Mr. Market playing games with traders and investors as equities and precious metals took part in a strong rally. Some market prognosticators noted short term oversold conditions across the board while others discussed the potential for a strong reversal that could potentially take out recent highs. In addition to the regular banter, to the average retail investor the market sure looks rigged when the government decides to sell a large stake in a massive IPO offering and a shaky tape suddenly becomes stronger than garlic.
There is a lot going on in the news as of late, and the expiration of the Bush tax cuts looms large on the minds of many, particularly small business owners. So the real question becomes, what should traders be watching or paying attention to before the light volume Thanksgiving week? The answer is simple, watch the tape! The market will provide plenty of clues and it will eventually tip its hand, experienced traders will wait for this process to unfold.
At this point in time, it is a bit early to begin making predictions as to which direction the equities market will go. What we do know is that the market was oversold in the short-term, so this could be a pause before prices turn lower. In contrast, this could be the beginning of another bullish move breaking recent highs on its way to a “Santa Claus” rally. My stance is neutral at this point in time; S&P 1200 should offer significant overhead resistance while S&P 1170 / 50 period moving average is near term support.
