Bulls Face Challenge of Strong Resistance as Crude Oil Closes Higher

Crude oil closed higher on Wednesday and above the reaction high crossing at 89.19 confirming that a low has been posted. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are overbought and are turning bearish signaling that a short term top might be in or is near.

If October renews this summer's decline, the 75% retracement level of the 2009-2011 rally crossing at 71.72 is the next downside target. Closes above the May-July downtrend line crossing near 93.57 would confirm an end to this summer's downtrend.

First resistance is last Thursday's high crossing at 89.90. Second resistance is the May-July downtrend line crossing near 93.57. First support is Tuesday's low crossing at 83.20. Second support is the reaction low crossing at 79.38.

CME: Rollover Dates For Equity Index Products

The following provides some important information about the Rollover dates for the suite of Equity Index Products listed and traded at CME Group exchanges.


• The Rollover date is generally defined as eight calendar days before a contract expires for most our equity index futures. This date differs slightly for Nikkei 225 contracts, as the rollover date has historically been the Monday before expiration.

• From the Rollover date on, it is customary to identify the second nearest expiration month as the “lead month” for the index futures, as the nearest expiring contract will terminate soon and will have a less liquid market than the new “lead month” contract.

• For certain contracts traded in open outcry and then traded electronically on CME Globex during the overnight (ETH) sessions, the rollover date will dictate which contract is listed for trading on Globex.

Note: The following contracts have only one contract listed at a time for trading during the overnight CME Globex session (these contracts are not available on CME Globex during the RTH session):

ƒ S&P 500
ƒ NASDAQ-100
ƒ S&P MidCap 400
ƒ S&P SmallCap 600 futures.

Therefore, the rollover date will determine what contract month is listed for trading during the CME Globex session.

For example, if the rollover date is Thursday, June 9, 2011, for the S&P 500 futures contract, the CME Globex session beginning that evening (at 3:30 p.m. Chicago time /CT) will list the Sep 2011 contract for trading and the Jun 2011 contract would no longer be available to trade on CME Globex.

On the trading floor, the Sep 2011 contract will become the lead month beginning at 8:30 a.m. on Thursday, June 9, 2011.

Upcoming Rollover Dates, Quarterly Equity Index Futures Contracts

June 2011 Rollover Dates

• Nikkei 225 futures: Rollover Monday, June 6, 2011 - Expire Friday, June 10, 2011

• All other equity index futures contracts: Rollover Thursday, June 9, 2011 - Expire Friday, June 17, 2011

• Reminder: As previously announced in CME Group Special Executive Report S-5662 from March 16, 2011, CME will delist the E-mini MSCI Emerging Markets futures and E-mini MSCI EAFE Index futures on June 19, 2011, for trade date Monday, June 20, 2011. For more information, please visit www.cmegroup.com/equities.

Sept. 2011 Rollover Dates

• Nikkei 225 futures: Rollover Tuesday, September  6, 2011 Expire Friday, September 9, 2011

• All other equity index futures contracts: Rollover Thursday, September 8, 2011 Expire Friday, September 16, 2011

Questions?
Phone     1-800-331-3332
Email       equities@cmegroup.com

David Banister: Is This Bull Market In Gold Over With Double Top?

A few weeks ago I penned a public article and private forecast for my subscribers calling for a major correction in Gold being due. 72 hours after my forecast, Gold had dropped a stunning $208 per ounce in 3 days catching most by surprise. Why did I forecast a top in Gold then? Why did Gold rally back to new highs recently? Is the Gold Bull Market now over? Let’s see if I can answer those questions with some level of logic below.

I had forecasted a major correction because Gold has had a run of 34 Fibonacci months from October 2008 to August of 2011 from $681 to $1910 per ounce spot price in US dollars. That type of pattern was formed with a clear 5 wave move, with obvious corrections along the way. The reason I was confident of a major correction was due to the confluences of the 34 months of time, the price relations to prior rallies and corrections, and the Fibonacci sequences coupled with the sentiment and cover stories on Gold in major publications. Gold should have entered into a multi-month correction that will consolidate that 34 month move, and the first shot across the bow was the $208 drop in 3 days.

Interestingly, that $208 drop over 3 days corrected 50% of the 8 week move from $1480 to $1910. As we can see markets move very very fast these days and can whipsaw even the best of traders. I told my subscribers to cover their short bets at $1724 spot, and since then we rallied to $1920 this week before topping again.

The reason Gold rallied back and touched the old highs and then some was due to the German Court pending decision regarding the constitutionality of backing the Eurozone countries with bailout funds. Today we had a positive decision by the court denying claims that the bailouts were unconstitutional. Had the German Court ruled the other way, we would have seen Gold spike to $2000 and the SP 500 and European Bourses tank hard. So if you were getting long Gold on this recent rally, you were taking on a lot of short term headline risk and I told my subscribers it was best to stand aside until we got the ruling.

Now that the ruling came out, Gold has topped at 1920 in what typically traders would call a “Double Top” pattern, but it’s more involved than that. 

In the work I do, we call it an “Irregular correction “ pattern, where the retracement of the $208 decline runs all the way back up and past where the decline began at $1910. These are very rare patterns and again, I believe exacerbated by the Eurozone issues as they hinged short term on the German decision. What we should see now is what I call a “C WAVE” to the downside, with targets typically at $1620 relative to the rally from $681 to $1910 over 34 months. A drop of $290 is only 15% from the highs and would fill in gaps in the Gold chart.

Will Gold drop that low? The fundamentals for Gold are screamingly bullish, but the entire world knows that and it may be priced in for a while. Gold should consolidate those topping highs for a while to let the fundamentals catch up the price action in Gold which ran ahead of them and then some. The Gold bull market should run for 13 Fibonacci years, and I have been bullish since November 2001. I understand the fundamentals are very strong for Gold, so please don’t miss-read my comments ore forecast. I use crowd behavior and psychology to help pinpoint major tops and bottoms, and right now we should have some more work to the downside to correct sentiment in Gold and then allow for the base building period before the next leg up towards the highs in 2014.

Over at my TMTF service, we called the top in Gold and shorted it and covered at $1724. We also recently forecasted the deep drop in the SP 500 from 1231 highs and warned our subscribers in advance. My methods use contrarian signals and behavioral patterns to warn of pivot highs and lows in advance. 

Consider checking out David Banisters site at Market Trend Forecast.Com and take advantage of a 33% discount or sign up for our occasional free updates.

Storms Put Pressure on Crude Oil Shorts, Bulls maintain The Advantage

Crude oil is trading higher as the effects of tropical storm Lee and threats of a new storm work through the gulf region. But traders see this as temporary short covering rebound as lack of confidence in the Europe financial crisis dominates commodity futures. Crude oil Stochastics and RSI are overbought and are turning bearish signaling that the corrective rally off August's low might be ending soon.

Closes below August's uptrend line crossing near 84.26 would confirm that the aforementioned correction has ended. If October renews the decline off May's high, the 75% retracement level of the 2009-2011 rally crossing at 71.73 is the next downside target. Closes above the reaction high crossing at 89.19 are needed to confirm that a short term low has been posted.

First resistance is last Thursday's high crossing at 89.90. Second resistance is the May-July downtrend line crossing near 93.51. First support is August's uptrend line crossing near 84.26. Second support is the reaction low crossing at 82.95. Crude oil pivot point for Wednesday morning is 85.27.

Crude Oil, Gold and Natural Gas Market Commentary For Tuesday Afternoon

Crude oil closed down $0.58 a barrel at $85.87 today. Prices closed nearer the session high today. The bulls have faded after last Friday's very weak U.S. jobs report. I would not be surprised to see choppy trading mostly between $80 and $90 a barrel for the next few weeks.

Gold futures closed down 8.00 an ounce at $1,868.70 today. Prices closed nearer the session low today after hitting a fresh all time record high of $1,923.70 in overnight trading. Profit taking pressure was featured as the day wore on. A stronger U.S. dollar index and lower crude oil prices were also bearish factors for gold today. The fact that U.S. stock indexes had moved well off their daily lows by the time gold closed was also negated for the precious yellow metal.

Natural gas closed up 5.6 cents at $3.928 today. Prices closed nearer the session high today and saw short covering in a bear market. Bears still have the solid near term technical advantage. The next upside price breakout objective for the bulls is closing prices above solid technical resistance at $4.159.

The U.S. stock indexes closed weaker today but well up form the session lows. Last Friday morning's very week U.S. jobs report has sunk the indexes. Key for the stock index bulls is to hold prices above the August lows. If they can do that, then those lows will likely mark major lows. If U.S. stock indexes drop below the August lows, then fresh, serious chart damage would be inflicted to suggest a fresh leg down in prices in the near term. Trading action in the stock indexes this week will be extra important.


Get Today’s Market Club Trading Triangles

Adam Hewison: It Never Seems to go Away, Does it?

It never seems to go away, does it?

What I’m referring to is the problems with the economy and the sovereign debt problems in Europe. It would appear as though no politician wants to touch these major economic problems with a ten foot pole. Of course like everyone else on the planet they are concerned about protecting their own jobs and getting reelected.

The market action in the equity markets today can only be described as negative. Gold may be having a major reversal, and the dollar is soaring to its best levels in quite some time. Like I have said before, the markets are never boring.

The pullback in crude oil from the top of the Donchian Trading Channel that we have mentioned in previous publications has now taken place. The October crude oil contract has also managed to ignite an intermediate term sell signal when it moved below the parabolic SAR indicator. This should indicate that we will see more sideways to lower price action. With a score of -65 we expect we will see a broader trading range with support coming in around the $80 a barrel level.

At the present time our long term monthly Trade Triangle indicator is negative while the weekly Trade Triangles is positive which is creating a mixed picture at the moment for crude oil. However, the longer term monthly Trade Triangle must be given more weight than either the daily or weekly Trade Triangles.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Positive
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 65

Just click here for your FREE trend analysis of crude oil ETF USO

Crude Oil Market Commentary For Tuesday Morning Sept. 6th

As the world wakes up Tuesday to a fresh round of currency wars [the Swiss getting a shot in this morning] oil traders remain focused on 82.95 as their next support target. Crude oil was lower due to profit taking in overnight trading. Stochastics and the RSI are overbought and are turning bearish signaling that the a-b-c correction off August's low might be coming to an end.

Closes below August's uptrend line crossing near 83.81 would confirm that the aforementioned correction has ended. If October renews the decline off May's high, the 75% retracement level of the 2009-2011 rally crossing at 71.73 is the next downside target. Closes above the reaction high crossing at 89.19 are needed to confirm that a short term low has been posted.

First resistance is last Thursday's high crossing at 89.90. Second resistance is the May-July downtrend line crossing near 93.88. First support is August's uptrend line crossing near 83.81. Second support is the reaction low crossing at 82.95. Crude oil pivot point for Tuesday morning is 84.53.

Chris Vermeulen: The Black Monday the Public Doesn’t Know About

Tonight I jumped on the computer so see what the futures market was up to. The good news was that our short trade on the equities market was up 10% from our entry point last week. The bad news was that the stock market overseas was selling off big and so were US stocks. It was a black Monday in both the sky and on the screen…

I’m not really sure how many people watch the futures market but I do know the majority of people do not. So Tuesday morning there will be a lot of people in a panic when they see stocks gap down sharply.

Taking a look at the 4 hour charts you can see the recent price action which unfolded today. We have been anticipating this from early last week. So none of this should be a surprise.

Dollar Index 4 Hour Chart:
The dollar index broke out of it falling pattern and has made a run up to the first resistance level of 75.40. I feel we could see it go a little higher on Tuesday but overall it looks ready for a pause or pullback here.

SP500 Futures 4 Hour Chart:
The equities market has fallen sharply in the past week and the green circle is where we shorted the market using the SDS etf. We did take partial profits last week to lock in 7.4% profit in a couple days, but we still hold the balance of the position which is currently up over 10% using today’s futures price.

The SP500 looks to be getting oversold here and is now entering the previous low set a few weeks back. I will be looking to tighten stops and or exit the position early this week before a sharp rebound takes place.

Bond Futures 4 Hour Chart:
Bonds are a safe haven for investors when fear is running high. The past couple trading session’s the price of bonds have shot up. This tells me panic selling in the stocks market has starting and that generally means we are nearing and tradable bottom for stocks…..

Gold Futures 4 Hour Chart:
Gold is the other safe haven. Here again we see money flow into gold at a very quick pace….We will need to see some resolutions in Euro land before gold will trade lower or sideways, but until then I think scared money is going to keep rolling into gold.

Crude Oil Futures 4 Hour Chart:
Oil has drifted its way up into a resistance level as of late last week only to find overhead supply. Once the selling started oil slid lower at a steady rate all the way back down to a short term support zone. Now we are waiting to see if it will make a double bottom at $79 or bounce here

Weekend Trading Conclusion:

In short, Tuesday will be a volatile session judging from today’s sharp price action. Fear is driving prices at the moment and until everyone panics out of stock positions and dumps their money into the save havens we will not see a bottom form. Generally this takes 2-5 days to play out but time will tell.

I hope this quick Labor Day update helps get you back on track for trading this week.
Consider joining me at The Gold and Oil Guy for ETF trade ideas on the SP500, Oil, Gold, and Silver with great accuracy. Check it out at The Gold and Oil Guy.Com

Do You Really Know How To Trade Ticker USO?

Markets are closed so let's talk shop. Here is a great article from our friends at Wolf Option Trading. Let's see how they trade the USO contango and how to partially offset it.......

The United States Oil ETF, LP (USO) is a twin of The United States Natural Gas ETF, LP (UNG), a futures based ETF that encounters issues with contango. If you are investing in futures based ETFs you should already be familiar with the issue and know how it impacts the funds. Thereby, I am not going to go into great detail about the pitfalls, but simply talk about it briefly.

USO owns crude at $85 and by this time next year the futures are pricing crude at $90 or roughly 6%. If all remains the same, this means that anyone buying USO today will not make money and instead lose money, if oil stays below $90. A year of losing money unless prices go up by more than 6% is never fun.

The bright side of this dark oily substance has many folds. Since oil is denominated in US dollars, you have traders that use it as a dollar hedge trade, bad for oil prices going up when a flight to safety is occuring. However, the world will not always live in fear and when it stops, then the trades get reversed and oil and USO then will go up. Oil has many more types of traders (aside from actual fundamental supply/demand folks) such as inflation hedgers, gold/oil ratio folks, oil/natural gas ratio folks, brent/wti ratio folks and a good amount more I am probably neglecting to mention. Fundamentally, the case for higher oil prices is strong and only further economic weakness would cause prices to go substantially lower.

It is likely oil prices will be much higher in the future than $85, but for folks buying USO they have to factor in the amount of contango they will face in order to see if it is a wise time to buy and hold currently. My take is that is probably early to buy crude at $85 and speculate that it will be above $90 by this time next year. There could be a better entry for a buy and hold investor.

However, everyone always has that itch to be more aggressive or look for more bullish things than may exist. I am not immune and it takes a lot of self discipline to be more strategic and wait for better opportunities.

The only easy way to partially offset contango is by being a net seller of options. Many options strategies are available that allow you to be a net seller of options while being bullish on the underlying instrument. Probably the most attractive strategy in my opinion is selling puts greater than 5% OTM and buying an ATM call spread.

For USO, January 2013 options are the only ones available to express a view past April 2012. January 2013 $25 put options are roughly 32% OTM but fetch a net credit of $2.45. The $34-45 January 2013 call spreads would cost $3.49. A net debit of $1.04.

The trade essentially would get you bullish on oil at $57 without factoring in contango. However, if one assumes that contango would be 15% (random) then one would be long oil at $70. The call spread gives one upside in oil prices up to $115 before getting called away from the trade if there was no contango. If one were to factor in a 15% contango rate, then oil prices would have to be $132 to get called away.

Total profits on the trade would be very high if one were to get called away at $45. The returns against total cash involved in the trade would be $9.96 net profits against a $1.04 net debit. However, that can be deceiving as margin requirements would be higher than the net debit but those vary across brokerage firms. The MVAR would be the better calculation and that would be the cost average one would be assigned USO at. $26.05 is the cost average of the total trade ($1.04 net debit added onto the $25 short puts) and a $9.96 net profit / $26.05 would still get one a 38.24%.

Overall, the trade is a good one for people speculating on much higher oil prices than $85 in a year's time, yet doesn't force one to take on shares at current prices.

Posted courtesy of Wolf Option Trading

Disclosure: The author does not have positions in any stocks mentioned, but may initiate a long position in USO over the next 72 hours.

J.W. Jones: Labor Day Special

If you are a regular reader here and have followed the amazing trades made in 2011 by our affiliate J.W. Jones, then it might be time to take him up on this Labor Special. Sign up now and get 3 months for the price of 1 with JW's options trading newsletter. And see for yourself how you can profit from his service!

JW's Options Trading Signals service provides Directional Based Trades, Time Decay Trades, and Earnings Based Trade alerts on ETFs and leading component stocks. He begins each session with a pre-market look at macroeconomic trends & indicators, plus overnight/pre-market chart analysis of the S&P 500, Bonds, Precious Metals and Oil using futures contracts.

For the ETF & stock trades, JW drills down to identify sectors and leading sector components likely to react most to a given trend, news event due out and or volatility levels. He then enlists a combination of pattern recognition and momentum indicators to pick winning option combinations.

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