David Banister: Bears Yelling Fire in Empty Theater

The lows at 1101 were a convergence of Fibonacci weeks, months, sentiment bottoms and VIX extremes along with major insider buying all at the same time.

We rallied up in 5 waves from 666 to 1370 Bin Laden highs.  At that level we had re-traced 78.6% of the entire 2007 highs to 2009 lows, a common turning point.  Since then, we have had a 3 wave decline, also common for correcting a 5 wave move to the upside.  The decline halted at 1101, an exact 38% fibonacci retracement of the 666 lows to 1370 highs.  This is what I call a “fibonacci intersection”. The same thing happened in July 2010 at 1010 on the SP 500, where a huge bottom formed.

The rally since 1101 was a 5 wave rally, this is an early BULL SIGN.

A correction of this 103 point 5 wave rally would be normal, but the lighter the correction the more Bullish.  So far the correction is only 23% of the 104 point rally with a gap fill at 1180.

 
Let’s review: 13 Fibonacci month’s from the July 2010 bottom to August 2011 bottoms 7 Times in history we had the SP 500 double in a short period of time, and in every case it retraced 27-40% of the price movement from lows to highs. We just retraced 40% of our SP 500 double, historically very high retracement.

At 1101 we had 38% fibonacci ABC correction of the Bull leg from 666 to 1370.

In 1974-77 we had the SAME pattern, which I outlined for everyone last week.

13 Fibonacci weeks correction from the Bin Laden 1370 highs to 1101 lows. 1370 was a 78% fib of the 07 highs and 09 lows. 1101 is a 38% fib of the 666 lows and 1370 highs. Thats what I call a Fibonacci intersection. The same thing happened in July 2010 at 1010 lows.

Insiders with massive buying, corporate buybacks announced.

VIX at extreme levels.

Fear gauges at extreme levels.

5 wave impulsive rally from 1101 to 1204 ensued… now a pullback is due. Same thing happened last summer 1010 to 1130, pullback to1040 in 3 waves, then another 5 waves up.

What am I telling everyone?

Stop yelling fire in an empty theater….

This is options expiration week, trading this week is notoriously difficult…

The Bear case is crowded, the Bull case is not.

I’m leaning bullish as long as I keep seeing this type of confirming price action.

I’m watching 1165 on SP 500 as a pivot low worst case, but as long as we see price action above that I like the set up for a while yet on the long side.

So you say "But Dave, the textbook for Elliott Waves doesn’t agree with you".… good, that’s why I use other indicators!

Consider subscribing to David Banisters 24/7 email access so that you will be consistently informed and also get Gold and Silver forecasts on a regular basis. Subscribe now with a 33% discount coupon ahead of our rate increase Market Trend Forecast.Com for details.

Dave Blais: History Suggests Gold is Topping Out Soon

Today The Crude Oil Trader would to introduce Dave Blais. David recently left a six-figure salary to trade the markets full time since his real passion is gold and silver stocks. We have great respect for Dave’s insights, and the fact he backs up his insights and philosophies with his own money. Here's what Dave is thinking this week........

Gold has been on an upward tear lately – no surprise given the uncertainty over how the western world will deal with its debt. What could be a surprise for investors (but mostly traders) is that history suggests the odds are high that gold will top for the year sometime in the next three weeks.

A feature of the current gold strength is it is happening in the heart of summer, a time when gold is usually weak. Though rare, this "out of season" strength in gold has happened before. When it does, something interesting occurs, gold makes a top that will not be bettered for the rest of the year, in August or early September.

In the last 30 years, gold has had only two summers with the type of outsized gains gold is making this summer (a rise of about 20 percent or more). In both cases, gold topped out for the year on either side of Labour Day.

In 1982, gold had a surprisingly strong summer – rising more than 50 percent – and gold topped for the year in early September. The news then driving the gold price was the threat of a Mexican debt default … sound familiar?

In 1990, gold had another unusually strong run in the summer and was up almost 20 percent, which is closer in magnitude of the current rise (up about 22 percent when gold briefly topped $1800). That summer run in 1990 topped out in late August, and gold did not exceed that top during the rest of that year.

In 1990, gold had another unusually strong run in the summer and was up almost 20 percent, which is closer in magnitude of the current rise (up about 22 percent when gold briefly topped $1800). That summer run in 1990 topped out in late August, and gold did not exceed that top during the rest of that year.

There are other factors hinting gold will need to take a breather soon.


Of note, the gold mining shares are not confirming this rise in gold. Take the bellwether gold mining stock Newmont Mining for example. As of this writing, Newmont is still wellbelow the high of $65.50 it made last year, even as gold is hitting new record highs day after day. This is a potential warning called "divergence" that should not be ignored.

Overall, Canaccord Genuity research shows that the senior and intermediate gold stocks in their coverage universe are discounting a gold price of $1,409 per ounce.

Then there is the curious chart for gold that is making what looks like a “blow-off” top.

The current chart formation for gold is eerily similar to that of silver’s chart when it went into a terminal rise earlier this year. That steep rise in silver quickly gave way to a punishing decline that knocked some 30 percent off the silver price in a matter of days. In turn, the stocks of silver miners were pounded.



These types of blow-off tops are usually not sustainable – and they don’t tend to end well because of what causes them. The rapid rise we are seeing now appears to be fuelled in part by a “short squeeze."

Fundamentals like the debt crises in Europe or the recent downgrade of US debt can explain some of the factors behind the rise, but the news is not the sole cause of this fast, wild part of the current rise.

Wrong-footed traders who made a mistake by going short (betting on a decline in price) in a big way– are being forced to buy back gold to close (or “cover”) their short positions that have gone horribly wrong as gold relentlessly rises. Their urgent buying of gold to close their short positions (and cut their losses) causes the gold price to rise further, causing more shorts to cover in panic, creating a feedback loop, and a price spike, that may quickly exhaust itself.

That a short squeeze has been evident in the gold market lately, in particular, after gold recently broke above $1680, has been noted by some market watchers who monitor the trading of gold future contracts. Ed Steer, who publishes Ed Steer’s Gold and Silver Daily for Casey Research, commented in his August 13 bulletin: “the open interest numbers were indicating for the reporting week, the rally in gold was pretty much all caused by short covering.”

Short squeezes tend to end abruptly when the short covering finally exhausts itself.

If gold does turn tail soon, how far could it fall? A good target for a drop is the area that has held anytime gold has declined during the last two and a half years, its 150 day moving average. Currently gold’s 150 day moving average stands just below $1500/ounce.

History is a guide, not a bible.  But there are some recent and longer term charts that suggest the gold price could top out in the next few weeks. And of course, long time gold followers know it's just at times like these, when excitement is running high, and everybody thinks they know what to expect that gold turns tail, and breaks the hearts, and wallets,  of the unwary.

Barclays' Favorite Oil Companies

From Barclays Capital's "Global Energy Outlook" report published on Aug. 11, 2011, the following exploration, production, integrated oil and refining companies are ranked overweight with a positive sector outlook. Barclays' energy experts are bullish on oil long-term and that could help out the equities of the following 10 undervalued names.



Chevron (CVX) is one of Barclays' favorite big oil overweights. Price target: $135. Upside potential: 45%.

Hess Corporation (HES) is trading under 7 times forward earnings. Barclays price target: $108. Upside potential: 93%.

Murphy Oil Corp (MUR) is mainly U.S. dependent. But Barclays likes them. Price target: $77. Upside potential: 49%.

Canada's Imperial Oil (IMO) has a price target of $57 with a potential upside of 44%, according to Barclays' estimates.

Sunoco (SUN) is a household name in the U.S. And the bain of the average America's existence when gasoline prices hit $4 a gallon. Barclays price target: $54. Upside potential: $74.

Tesoro (TSO) is a national refiner headquartered in Texas. Barclays price target: $38. Upside potential: 95%.

Headquarterted in the UK, Afren PLC (LON: AFR) drills for oil off the coast of Africa. Barclays price target: $200. Upside potential: 111%.

BowLeven (LON: BLVN) is another UK based oil and gas exploration and production company with most of its assets off coastal Africa. Barclays price target: $515. Upside potential: 312%.

Max Petroleum (LON: MXP) explores and produces oil in Kazakhstan. Is nice! Barclays price target: $45. Upside potential: 275%.

Premier Oil (LON: PMO) maintains oil and gas exploration and production ops in the North Sea and on land in Pakistan and the Middle East. Barclays price target: $631. Upside potential: 86%.

Posted courtesy of Forbes.Com

The Future of Crude Oil and the End of Globalization

"Jeff Rubins should be mandatory reading for all corporate executives." The National Post.....


This book is a great read, and one that should be required for anyone with a long term interest in energy, transportation, manufacturing or agriculture."

An internationally renowned energy expert has written a book essential for every American, a galvanizing account of how the rising price and diminishing availability of oil are going to radically change our lives. Why Your World Is About to Get a Whole Lot Smaller is a powerful and provocative book that explores what the new global economy will look like and what it will mean for all of us.

In a compelling and accessible style, Jeff Rubin reveals that despite the recent recessionary dip, oil prices will skyrocket again once the economy recovers. The fact is, worldwide oil reserves are disappearing for good. Consequently, the amount of food and other goods we get from abroad will be curtailed; long distance driving will become a luxury and international travel rare. Globalization as we know it will reverse. The near future will be a time that, in its physical limits, may resemble the distant past.

But Why Your World Is About to Get a Whole Lot Smaller is a hopeful work about how we can benefit personally, politically, and economically from this new reality. American industries such as steel and agriculture, for instance, will be revitalized. As well, Rubin prescribes priorities for President Obama and other leaders, from imposing carbon tariffs that will increase competition and productivity, to investing in mass transit instead of car clogged highways, to forging “green” alliances between labor and management that will be good for both business and the air we breathe.

Most passionately, Rubin recommends ways every citizen can secure this better life for himself, actions that will end our enslavement to chain store taste and strengthen our communities and timeless human values.

Usually ships in 24 hours, Ships from and sold by Amazon.Com 

90 new or used available from $3.65

It Looks Like Gold’s Cyclical 34 Month Run is About to Run Out

David Banister of  The Market Trend Forecast just updated his previous gold forecast which was spot on (no pun intended).....Now he has a new forecast for what to expect next which I'm sure all of our readers will find interesting......

Gold hit $1805 tonight in trading, a Fibonacci Fractal figure I gave out a few weeks ago as a possible top. We are close to a near term high in Gold and Investors should be trimming back positions on this run. Back as recently as $1600 an ounce I forecasted a run to $1805 for Gold using fractal and wave analysis and behavioral patterns, now that we hit that figure it’s time to update the cycle and where we are.

Here is the Chart I did at 1599 gold on July 22nd:

I have been a Gold Bull since November 2001, having conducted seminars for public employees on investing back then and advising gold mutual funds and gold stocks very early. I have talked in the past about a 13 fibonacci year Gold Bull cycle that will end around 2014, so there are still three years left in my opinion. However, gold does have peaks and valleys and has moved in very clear Wave and Fibonacci fractal patterns for years.

Given the history of how I have forecasted Gold, I am going to share my short term and moderately long term views on where we are in the up cycle which I expect to last 13 fibonacci years to 2014. Right now it is my opinion that we are completing a MAJOR WAVE 3 up in Gold from the 2001 lows from $300 an ounce. We have had a 34 fibonacci month rally since the October 2008 lows of $681 per ounce. Every Taxi driver, CNBC guest or analyst, and 200 Radio and TV commercials a day are blaring to buy Gold. This is how intermediate tops form.

The rough wave count is below:
Wave 1- 300 to 1030
Wave 2- 1030 to 681 (October 2008 lows)
Wave 3- 618- 1805 currently, 34 Fibonacci month cycle. *Likely high is 1862-1900*
Wave 4- Due up next… a multi month consolidation.

It is my opinion that at the top of a Major wave 3 in Gold, that everyone should be univerally bullish, that gold radio and TV commercials would be all over the place, and that everyone on CNBC would be talking about and recommending Gold.

Sound familiar?

So the likely conclusion to this massive parabolic blow off top of Wave 3 is nigh. Most recently I upped my estimates to as high as $1900 per ounce with $1805 already here as of tonight, which was one of my figures by the way many weeks ago. Gold should under normal circumstances top between 1862 and 1900 per ounce fairly soon should the 1805 level not hold as a high. At that level we will be dramatically overbought. 

We are already running 15.7% above the 20 week moving average line which historically is about as high as Gold will get before correcting hard and consolidating. A final lift to the 1862-1900 ranges should lead to a fairly good sized correction to the downside designed to kick all the late comer Taxi Cab driving buyers off the bull’s back. With that said, at $1805 I would be trimming my position and or hedging my long positions aggressively.

Watch for a Maximum Gold top at 1862 -1900 per ounce and keep in mind 1805 is being hit tonight and that is a qualifying fibonacci fractal top as well. Investors should be trimming back positions and looking to re-deploy back into Gold at better prices. We could get a huge blow off top over 1900, but it would be very very rare if it happens.

If you’d like to stay ahead of the peaks and valleys in Gold, Silver, and the SP 500 (Recently called a tradable bottom at 1101), then check out Market Trend Forecast for a 33% 48 hour coupon or sign up for the occasional but infrequent free updates.

Ken Salazar in Alaska....President Obama Backs Additional Oil Drilling in Alaska

Interior Secretary Ken Salazar came to Anchorage on Monday and said the Obama administration supports more oil drilling in Alaska, potentially including offshore Arctic development.

Salazar joined Alaska Sen. Mark Begich and Rhode Island Sen. Jack Reed, both Democrats, for a meeting with Alaska businesspeople and said the president's feeling toward Arctic offshore drilling is "Let's take a look at what's up there and see what it is we can develop." But any Arctic oil development must be done carefully, he said. Salazar said the Arctic lacks needed infrastructure for responding to potential offshore oil spills and cited painful lessons from the Deepwater Horizon spill in the Gulf of Mexico last year.

"Not the mightiest companies with multibillion dollar pockets were able to do what needed to be done in a timely basis, and the representations of preparation simply turned out not to be true from the oil companies that had a legal obligation to shut down that kind of an oil spill. ...

When you look at the Arctic itself, we recognize that there are different realities - the ocean is a much shallower ocean, conditions are very different than we had in the Gulf of Mexico. (But) there are challenges that are unique to the Arctic," Salazar told Alaska reporters......Read the entire article.

Adam Hewison: An Extraordinary Admission Of Failure!

Yesterday, the chairman of the Federal Reserve, Ben Bernanke, acknowledged in what was perhaps the most stunning statement ever by a sitting chairman of the Fed…. That the economy was not doing as well as they had predicted.

Duh Ben, welcome to the real world!

In our comments yesterday before the chairman spoke, we hoped that the Fed wouldn’t do anything stupid like announce QE3 or that they will be dropping money from helicopters. Instead, the United States has just played its cards out to the world, saying that we are not going to be raising interest rates until………let me guess 2013, after the elections.

What the chairman’s statement really meant to many traders, myself included, is that the U.S. economy is not even halfway good. It is in the toilet! The Fed also stated in a very subtle way, that there is not going to be another huge bailout for the economy. That can only mean one thing in my mind, and that is the equity markets are going to continue to erode for the balance of 2011 and for most of 2012.

I suspect that we have seen a minor bottom in the equity markets as they have churned back and forth trying to stabilize after there disastrous losses in the past 12 days.

Everyone is euphoric about the price of crude oil coming down, but I suspect this is just going to be a correction in what will be a bull market when inflation kicks in. Other commodity markets are, in my opinion, getting closer and closer to making a bottom. I would pay particular attention to the Reuters/Jefferies CRB commodity index that we talk about every day on this blog.

Here’s what I think is going to happen in the next few days: I think we will see more choppy, irrational and erratic market behavior that will rule the day. I think that investors who haven’t been using a structured approach, like our “Trade Triangle” technology, are going to be scared to death at what is happening to their investment and will find them selves without a rudder in these tumultuous financial seas. Only by having a game plan in place, can you survive what I believe is going to happen in the future.

In a nutshell, the balance of 2011 and 2012, will be more about capital preservation and less about growth. The good news is, with our “Trade Triangle” technology we will continue to find winning trades and you will come out ahead of the game.

So let’s go to the 6 major markets we track every day and see how we can create and maintain your wealth in 2011.

S&P 500

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 90

Chances are we reached an interim low point yesterday. The Fibonacci retracement zone has been satisfied and this market is in a heavily oversold condition. Continue to see choppy action overall for this index.

SILVER 

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 60

Intermediate term traders should be on the sidelines and out of silver at the present time. Our -60 Chart Analysis Score indicates more two way market and a trading range.

GOLD 

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Positive
Combined Strength of Trend Score = + 100

Short term, intermediate-term, and long-term traders should all remain long gold. We would use our Trade Triangles for exit points should they give signals. Is $1800 the next stop for gold.

CRUDE OIL 

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 100

Yesterday the crude oil market looked like we have put in the bottom in this market for the time being. We would not be surprised to see further two way action and a further reflex rally.

DOLLAR INDEX

Monthly Trade Triangles for Long Term Trends = Positive
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = + 60

The dollar index continues to remain in a broad trading range. The index remains below its 200 day moving average while our longer term Trade Triangle remains positive.

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Ray Carbone: Oil Correction Will Be Severe, But Short Lived

This weeks move in crude oil was severe, but Ray Carbone, President of Paramount Options believes the rally will eventually resume.




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Rigzone: Crude Oil Slips Below $80

Crude oil futures extended losses Tuesday after the Federal Reserve said risks to the economic outlook have increased. Light, sweet crude continued to retreat on the New York Mercantile Exchange Tuesday settling at $79.30 a barrel, down $2.01. For the first time in nearly 10 months, crude prices settled below $80 a barrel.


The Fed failed to ease fears as Chairman Ben S. Bernanke and his colleagues promised to extend the benchmark interest rate for another two years but stopped short of initiating an additional round of economic stimulus.


In separate monthly reports, the U.S. Energy Information Administration (EIA) and OPEC cut demand forecasts for 2011. The EIA cut its 2011 world demand growth forecast by 60,000 barrels per day (bpd). It raised its 2012 projections to 1.64 MMbpd. Meanwhile, OPEC cut oil demand growth for this year by 150,000 bpd and 20,000 bpd for next year. The intraday range for crude was $75.71 to $83.05 a barrel.


At its lowest close since Feb. 18, Brent futures lost $1.17 to end Tuesday's trading session at $102.57 a barrel. Prices traded as low as $99.06 and as high as $105.81 Tuesday. Gasoline for September delivery settled 2.4 cents lower at $2.67 a gallon Tuesday. The EIA reported a 2 percent decline in gasoline demand over the summer driving season, pushing prices as low as $2.59. The intraday high for gasoline was $2.76.


Conversely, natural gas futures gained 5.9 cents, or 1.5 percent, settling at $3.99 per thousand cubic feet. Natural gas futures pushed past the $4 mark Tuesday, peaking at $4.04 and bottoming out just below $3.89. High temperatures continue to support gains.


Posted Courtesy of Rigzone.Com




Today’s Trading Triangles

What is Next For The SP 500?

Three weeks ago he began urging members of his service to reduce risk and raise cash. He pounded the table incessantly for the past two weeks to continue to raise cash and reduce risk. He has not issued a trade alert to members in over 3 weeks, but by acknowledging risk ahead of the debt ceiling debate he was able to sidestep one of the worst weeks in U.S. financial markets since 2008.

Here's what else J.W. Jones saying about the potential bottom in these markets........

Armed with cash and my emotional capital intact, I am going to be able to take advantage of price action in coming days and weeks. I am expecting a bounce in the near term, but the downgrade of U.S. debt on Friday by the S&P rating agency could have a dramatic impact at the open on Monday morning. I intend to remain in cash until the news is digested by the marketplace.

My first public warnings about a potential top came back on July 8 when I posited an article which illustrated the bullish and bearish position of the market at that time ahead of the debt ceiling debate in Washington. The following excerpt and chart was taken directly from that article:

“In addition to the short term overbought nature of the S&P 500, the daily and weekly charts clearly illustrate a head and shoulders pattern. The head and shoulders pattern is a typical characteristic of a topping formation that is often found at several major historical tops. The daily chart below illustrates the head and shoulders pattern: 




This particular head and shoulders pattern is not getting a lot of recognition in the media which lends it a bit more credence. If we start hearing about this pattern on CNBC or FOX Business I will expect the pattern to fail. Call me a contrarian, but in the past when major television personalities are constantly talking about chart patterns they almost always fail.


Besides just technical data points, continued worries stemming from the European sovereign debt crisis helps the bear’s case further. In the event of a major default in the Eurozone, the implications to the financial sector of the U.S. economy will come into focus. It is widely expected that a banking crisis in Europe could spread to some degree to the large money center banks in the United States. Clearly this would have negative implications on price action in domestic equity markets.

In addition to the European debt crisis, the United States government has a looming credit crisis of its own. With politicians currently arguing over whether to raise the debt ceiling, bears point out that if the United States defaulted on its debt (unlikely) the implications would be severe. However, many traders and economists point out that the end of QE II may have dramatic implications on price action as well. The current uncertainty around the world lends itself in favor of the bears.”


Clearly the head and shoulders pattern has played out and barring a breakout over the 2011 highs on the S&P 500, an intermediate to long term top has been carved out. In fact, I believe we are likely entering the next phase of the ongoing bear market that started back in 2000.

Panic level selling pressure has been registered and the S&P 500 is in an extremely oversold condition as is evident by the charts below:
Stocks Above 50 Period Moving Average



Stocks Above 200 Period Moving Average

The charts above illustrate that we are extremely oversold in the intermediate term time frame and that we are nearing extreme oversold conditions in the longer term time frame as well. I am expecting a bottom to form in the next few weeks which should offer outstanding risk / reward long entries for short to intermediate term trades.

Another indicator that is showing some extreme fear in the marketplace is the Volatility Index (VIX). The VIX has traded in a choppy pattern for quite some time before finally pushing higher the past few weeks.

The daily chart of the VIX below demonstrates the fear in the marketplace:



Almost every indicator that I monitor is screaming that the current market is extremely oversold and fear levels are running at or near 2011 highs. When the masses are fearful and the S&P 500 is this oversold, I want to be looking for opportunities to get long risk assets.
While consistently picking bottoms is nearly impossible, there are a few key levels on the S&P 500 that I’m going to be monitoring.

The weekly chart below illustrates the key support levels which could hold up prices and also future targets for the likely reflex rally:



Once a bottom has been carved out, the use of Fibonacci Retracement and/or Extension analysis will help me determine more precise resistance levels. We could see further selling pressure this week before we see a pronounced bottom carved out. With volatility at these levels price action will be pretty wild. I intend to use smaller position sizes with wider stops to start layering into exposure as opportunities present themselves.

By sitting on the sidelines during this downside move, members of my service are ready to take advantage of lower prices to get long. Now the interesting part will be how Mr. Market handles the downgrade of U.S. debt on Monday ........


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