It's a Simple Theory.... Lower Equity Prices, Means Lower Consumption of Crude Oil

The massive move down in the crude oil market today is largely reflected in what we have been saying about this market for the past several weeks. It only underscores just how powerful our longer term Trade Triangle technology is. As you may recall we are tying the crude oil market with the equity markets. As the equity markets go, so does crude oil at the moment.

The theory is lower equity prices, means lower consumption of oil. It’s not important whether we agree or disagree with that statement. What is important is how the market is acting. Pay attention to the MACD that is beginning to lose momentum and could be rolling over to the downside if we have any more negative closes. Short, Intermediate and Long term traders should continue to be short the crude oil market.

November crude oil closed sharply lower on Thursday as it extended this week's breakout below August's uptrend line. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If November extends this week's decline, August's low crossing at 76.61 is the next downside target.

Closes above the 20 day moving average crossing at 87.49 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 87.49. Second support is last Tuesday's high crossing at 90.60. First support is today's low crossing at 79.66. Second support is August's low crossing at 76.61.

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

Recent articles.....

Gold Continues to Correct as Forecast in a 4th Wave Pattern

Recent Market Trends Remain in Place ..... Get Positioned!

David Banister: Gold Continues to Correct as Forecast in a 4th Wave Pattern

I got a bit of hate email over the last few weeks from the Gold Bugs who thought I didn’t know what I was talking about when I forecasted a multi-month consolidation and correction in Gold was imminent. I’ve written ad nauseum about crowd behavioral patterns as they related to both stock markets and precious metals. 

It should not come as a surprise that Gold is continuing to drop after a 34 Fibonacci month rally from $681 to $1910 per ounce. That rally came in five clear Elliott Waves and ended with a parabolic race to the top. I consistently warned my subscribers and readers of my articles about not being caught holding the bag and to take defensive measures.

My most recent update was to simply try to figure out whether the continuing correction in Gold would take the form of an ABC pattern or an ABCDE Triangle Pattern. It is becoming more clear that the official pattern is ABC. In English it means that the first leg down from 1910 to 1702 was the “A” Wave, the rally back up to 1920 was the “B” wave. 

The C wave is continuing underway and one of my longstanding targets is $1643, which is a Fibonacci fractal relationship to the prior lows and highs, and also conveniently fills in a “Gap” in the Gold chart in the 1650’s.

During these 4th wave consolidation periods, it reduces sentiment back down to normal levels and lets the economics of the move in Gold catch up with the price action that was extended. The first area to watch is the retest of $1702 spot pricing for a C wave low, but the evidence is for a further drop to $1643 before I would get too interested in trying to game Gold to the upside.

Here is the chart I sent out 9 days ago with Gold at $1837 forecasting a possible C wave continuing lower:

I’ve stayed away from either shorting Gold or going long gold while I watch and confirm the 4th wave pattern. It’s simply the smart way to go knowing that upside will be difficult to obtain and downside risks are high. It does now appear that I am eliminating the Triangle pattern and sticking with the ABC Correction with the C wave still working its way lower. If $1702 breaks, then you should expect to see 1620-1643 as next pivot low ranges.

If you’d like to stay ahead of the SP 500, Silver, and Gold trends, check out TMTF at Market Trend Forecast.Com and take advantage of our free occasional reports or a 33% 48 hour coupon to sign up for 5-7 updates a week.

Chris Vermeulen: Recent Market Trends Remain in Place ..... Get Positioned!

What a trading session Wednesday was with the FOMC meeting and the FED coming out leaving the Fed Funds Rate unchanged at 0.25% and saying the economy is looking weak and will not likely to get better any time soon. This wave of negative news triggered a selling spree across the board in stocks, metals, and oil. On the flip side all that money being pulled out of those investments was being dumped into bonds and the dollar currency.

So the question everyone is asking is why almost every asset class sold off after the Federal Reserve’s statement today? The next question is how do we position ourselves to profit?

Understanding how the market moves is not a simple task, if it was that easy everyone would be pulling money out of the market on a daily or monthly basis. With that being said, moves can be anticipated if enough indicators are pointing to the same outcome.

Gold, SP500 and Oil 10 Minute Charts Showing Todays 2:15 FED News
Over the past few weeks we have been seeing stocks, oil, and gold turn bearish with similar price and volume action. Having three major investment vehicles hinting towards a move in the same direction as each other increases the odds for that move to occur. With the Fed coming out with negative news and no quantitative easing on tap, a rally in the dollar was triggered because inflation (printing of money) is not in the picture for some time still.

Bonds and Dollar Index 10 Minute Charts Showing Today’s 2:15 FED News

Now if we look at the safe havens we can see the positive side to today’s news.

Bonds have been trading higher for some time and the key in trading is to trade with the trend. Though it’s easier said than done… In this morning’s pre-market analysis I talked about bond prices and how they are looking toppy but we need one more large surge higher before I will consider looking for a short trade setup. Today’s news sent bonds surging higher which I feel will happen for a few more days. Once the momentum stalls out of bonds, then I may be looking to short bonds using the TBT inverse bond fund.

The fact that there is no quantitative easing planned is bullish for the dollar. Stepping back a few weeks we have seen the dollar index rally very strongly. The move up was an impulse wave meaning a trend reversal from the multi-month down trend. Knowing that the dollar had shifted from a down trend to a strong uptrend prior to the Fed’s announcement today was our tip off to being long the dollar several days ago at a much lower price level.

Mid-Week Market Trend Conclusion:
In short, I feel the intermediate trend (5-20 days) remains firmly down for stocks and crude oil. Silver is more of a wild card because it is more of an industrial metal/speculative investment and it can move at times with gold or down with stocks.......

Looking at gold. I am bullish on gold long term but at this time I remain neutral until I see how the next couple trading sessions play out.

Bonds I remain neutral because they have moved a long way without any substantial pause or pullback and I feel one really positive headline news item could send bonds sharply lower.

The dollar index shifted from a strong down trend to a very strong up trend last month and I feel we could see another substantial rally unfold. I have an 80.00 – 81.00 price target on the dollar index at this time.

Consider joining me at The Gold and Oil Guy for ETF trade ideas on the SP500, crude oil, gold, and silver with great accuracy. Check it out at The Gold and Oil Guy.com

Commodities Collapse as Fed Operation Twist Sends Oil to 4 Week Low

No surprise to us, the Feds operation twist has failed to lift market sentiment and it's showing in any commodity that trades against the dollar. Crude oil was sharply lower in the overnight session as it extends this week's breakout below August's uptrend line. Stochastics and the RSI are bearish signaling that lower prices are likely near term.

So now we shift our focus to the Eurozone. Greece announced a new round of austerity measures. Pensions above 1200 euro will be cut by -20%, pensions paid to those younger than 55 will be trimmed by 40% for the amount exceeding 1000 euro and wages will be reduced for 30,000 state employees. While fiscal consolidation accelerates, protests also intensify. Public services will be suspended for 24 hours in Athens today. Flights to and from the Athens International Airport will also be disrupted as staff walk out for 3 hours proving that getting the Greek public to play along and play nice will prove near impossible.

If crude oil extends this week's decline, August's low crossing at 76.61 is the next downside target. Closes above the 20 day moving average crossing at 87.58 would confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 87.58. Second resistance is last Tuesday's high crossing at 90.60. First support is the reaction low crossing at 79.76. Second support is August's low crossing at 76.61. Crude oil pivot point for Thursday morning trading is 86.19.

Bloomberg: Crude Oil Drops a Second Day as Fed Sees Economic Risk

Crude oil fell for a second day in New York as investors speculated that fuel demand will falter after the U.S. Federal Reserve said there are “significant downside risks” to the economic outlook of the world’s biggest crude consuming nation.

Futures slipped as much as 2.1 percent after dropping 1.2 percent yesterday. The Fed said it will buy $400 billion of long term debt in an attempt to keep the economy from relapsing into a recession. U.S. gasoline stockpiles climbed more than forecast last week and the nation’s oil production rose to the highest in eight years, Energy Department reports showed.

“It’s quite clear at the moment there is a lot of bearishness,” said Michael McCarthy, a chief market strategist at CMC Markets Asia Pacific Pty Ltd. in Sydney. “The global growth scenario continues to be clouded, all the commodities were hit and oil clearly didn’t escape.”

Crude for November delivery dropped as much as $1.77 to $84.15 a barrel in electronic trading on the New York Mercantile Exchange and was at $84.51 at 12:29 p.m. Sydney time. The contract yesterday fell $1 to $85.92. Prices are 13 percent higher the past year......Read the entire article.

Adam Hewison: Lloyds of London Pulls Deposits From Banks on Debt Crisis

As traders, we are bombarded with news. Some of it is useful, but a lot of it is just fluff to fill up airspace time. One piece that caught my eye this morning, which I haven’t seen reported in the main media, concerns the venerable Lloyds of London insurance company. This company was founded in 1688 in a London coffeehouse and has gone through wars, boom and bust cycles, every money mania known to man and has always managed to survive. The article claimed that Lloyds of London is taking their cash out of the European banks this morning. From Businessweek Magazine "Lloyds of London Pulls Deposits From Banks on Debt Crisis"

Quite frankly this is shocking, but not surprising given Lloyds’ survival instincts. Lloyds of London is one of the most conservative companies, run by some of the smartest people on the planet. Perhaps it’s an early warning sign about what could potentially happen in Europe.
It is something to think about.

Crude Oil Market Commentary
There is not much going on in the crude oil market, as it continues to remain in a fairly broad trading range with resistance very evident at the $90 a barrel level. Support comes into this market between $84 and 84.50 a barrel. The crude oil market is presenting a mixed picture at the moment with our longer term monthly Trade Triangle negative and our intermediate term weekly Trade Triangle positive. This has created a trading range at the moment. The crude oil market remains in a sort of sideways motion, but with a bias to testing the lower range of the Donchian trading channel.

The Williams % R indicator is stuck in the middle giving no real clue as to direction. Also pay attention to the MACD since it is beginning to lose momentum and could be rolling over to the downside if we have any more negative closes. We do not think that the crude oil market is ready to go higher, based on our long term monthly Trade Triangle which remains negative. The $90 a barrel resistance continues to stop this market on the upside. Look for crude oil to continue to move in a sideways to lower manner.

November crude oil closed lower on Wednesday as it consolidates below August's uptrend line crossing near 87.60. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. Closes below last Monday's low crossing at 85.17 would confirm an end to the corrective rally off August's low while opening the door for a larger degree decline into the end of September. Closes above the May-July downtrend line crossing near 91.34 would confirm an end to this summer's decline.

First resistance is last Tuesday's high crossing at 90.60. Second resistance is the May-July downtrend line crossing near 91.34. First support is last Monday's low crossing at 85.17. Second support is the reaction low crossing at 83.47.

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 = – 75

Oil N' Gold: Crude Oil, Natural Gas, Gold and Silver Market Commentary

Crude Oil posted an inside day with a higher close on Tuesday as it consolidated some of Monday's decline but remains below August's uptrend line crossing. The high range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI have turned bearish signalling that sideways to lower prices are possible near term.

Natural Gas closed lower on Tuesday as it extends the decline off last week's high. The low range close sets the stage for a steady to lower opening when Wednesday's night session begins trading. Stochastics and the RSI remain bearish signalling that sideways to lower prices are possible near term. If it extends this summer's decline, monthly support crossing is the next downside target. Closes above the 20 day moving average crossing would signal that a short term low has been posted.

Gold posted an inside day with a higher close on Tuesday as it consolidates some of this month's decline but remains below the 20 day moving average. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain neutral to bearish signalling that sideways to lower prices are possible near term. If it extends this month's decline, the reaction low crossing is the next downside target. If it renews this year's rally into uncharted territory, upside target are hard to project.

Silver posted an inside day with a higher close on Tuesday as it consolidates some of this month's decline but remains below the July-August uptrend line crossing. The high-range close set the stage for a steady opening on Wednesday. Stochastics and the RSI remain neutral to bearish signalling that sideways to lower prices are possible near term. If it extends this month's decline, the reaction low crossing is the next downside target. Closes above the 20 day moving average crossing would temper the near term bearish outlook.

U.S. to Sell New Onshore Alaska Oil Leases "Late This Year"

The U.S. government plans to sell oil leases on public land in Alaska's national petroleum reserve "late this year," the Bureau of Land Management said Tuesday.

The BLM said it plans to sell leases on tracts of land in the northeast and northwest areas of the reserve. In preparing for the sale, the agency issued a draft "determination of adequacy" showing that the leases meet the requirements of the National Environmental Policy Act.

The lease sale is part of an effort by the Obama administration to conduct annual oil and natural gas lease sales in the reserve, the agency said.


Posted courtesy of Rigzone.Com

J.W. Jones: The SP 500 and the Dollar Ahead of the Fed Meeting

The Federal Reserve is holding a two day meeting Tuesday and Wednesday of this week. Market participants are expecting the Federal Reserve to prop up financial markets yet again with some grand new plan. The fact is the Federal Reserve is running out of bullets.

Interest rates cannot move much lower in terms of the Federal Funds rate, additional quantitative easing seems redundant since Treasury yields are close to all time lows, and finally a twisting of maturities will do little to alter the current economic conditions. The Federal Reserve is just repeating practices which have proven over a long term do little to create jobs or get the economy moving in the right direction. A stock market rally does not help a person looking for a job!

It is possible that even if the Federal Reserve proposes additional stimulus the market could sell off. I have been trading less in this environment and have been focusing on looking for trade setups that could work regardless of price action. For now I am sitting predominantly in cash waiting to see how price action reacts to the news flow tomorrow.

S&P 500
If I had to guess, I continue to believe that the S&P 500 will get back to test the key 1,250 – 1,280 price level. While this resistance level is apparent, Mr. Market will be able to tear up traders if price jams into that resistance zone. Mr. Market loves nothing more than to shake people out of positions. If price works higher I would expect the 1,250 – 1,280 price range to offer just enough risk / reward to get investors and traders involved in a choppy trading environment. The key upside levels on the S&P 500 are shown below on the daily chart of the S&P 500 Index ($SPX):



The flip side of that argument would see the S&P 500 jamming into recent resistance around the 1,230 price level. If prices rolled over and momentum picked up, a test of the recent August lows would likely transpire and could produce a breakdown and a lower low.

When looking at recent price action, the S&P 500 Index has put in a series of higher lows which is a bullish signal, however the S&P 500 has a long road ahead to break out above the 2011 highs. If the S&P 500 carves out a lower high on the S&P 500 Index at 1,230, 1,250, or even 1,280 and subsequently takes out the August lows then the secular bear will be back. The weekly chart of the S&P 500 Index ($SPX) shown below illustrates key support levels:



For now I am just going to sit in cash and wait for Mr. Market to provide me with some better clues. The trading range is pretty wide going from around 1,100 to 1,280. What I will be watching for is a strong move supported with volume that pushes price out of this range. As of the close today, price action was trading around the middle of this range but depending on how price action reacts to the news that comes out Wednesday it is possible that in coming days we could see a breakout in either direction.

Dow Jones Industrial Average
It will likely surprise long time readers that I am actually going to comment on the Dow. I will keep this brief, but I wanted to point it out to readers as I have not heard much mention of this pattern in the main stream financial media.

Over the weekend I was looking at some longer term charts and I accidentally stumbled across this head and shoulders pattern on a weekly chart of the Dow Jones Industrial Average. I rarely pay much attention to the Dow as I monitor the S&P 500 closely. However, I could not ignore what I was seeing. I also noted that a similar pattern also exists on the S&P 500.

I am generally not the kind of trader who tries to predict where price action will arrive in the distant future. However, I am not going to ignore clear chart patterns that I recognize regardless of the time frame I am looking at.

For those not familiar with a head and shoulders pattern, it is a very ominous signal. Head and shoulders patterns are generally topping formations that if triggered result in violent selloffs. On this chart the pattern is obvious and if the pattern were triggered the forthcoming price action would be decisively negative for domestic equities. The long term monthly chart of the Dow is shown below:



If the pattern is triggered on an undercut of the March 2009 lows, the head and shoulders formation would produce selling pressure that would target the 3,800 – 4,000 level on the Dow. Yes, you read that right! I want readers to recognize that this pattern is not a given and it could play out over a long period of time. The pattern would suggest that a test of the 2009 lows is possible, but I will leave the likelihood of that test up to Mr. Market.

I view this pattern as a potential warning signal for long term equity positions. Consequently, it is far too early to jump into a plethora of short positions or sell every equity position owned simply because of this pattern. While I do not know where price goes from here or if this pattern will ever trigger, I think market participants should be aware of its existence.

It would take the perfect concatenation of events to push prices down to the March 2009 lows, but unfortunately the condition of social mood paired with all of the risks facing financial markets is notable. The recent selloff in August came on the heels of a head and shoulders pattern that was triggered. We all know how August played out, but this pattern on the Dow Jones Industrial Average has a long way to go before it can even trigger. Time will tell, but readers should at the very least put this chart pattern on your radar!

U.S. Dollar Index
The U.S. Dollar Index has ripped higher by more than 5% since August 29th. The strength in the Dollar has likely been precipitated by fear based on the European sovereign debt and banking crisis. While the Dollar certainly has long term flaws, it may simply be the best of the worst.

If the situation in Europe begins to break down further based on any number of events it could likely push the U.S. Dollar Index considerably higher. My trading partner Chris Vermeulen has been riding this strong impulse wave with his subscribers Swing trading the UUP etf and thinks there is big potential still if  Euro Land fears continue to rise.

The daily chart of the Dollar Index futures is shown below:



Mid-Week Market Trend Conclusion
Wednesday will be filled with a variety of news and headlines. The Greek government is meeting and a news release regarding the conference will likely come out around the time domestic markets in the United States open. The news has the potential to move markets considerably.


In addition, the Federal Reserve is set to end its September meeting and market participants will be sitting on the edge of their seats waiting to hear from the Federal Reserve about any stimulus the central bank may provide.


Overall, the news and headlines on Wednesday will certainly impact the current conditions of financial markets. Right now I am pleased to be sitting primarily in cash. I have a few positions open, but for the most part the trades are not directional and are profitable based on time decay.

The one directional trade I have on presently is a remaining sliver of a position I have already taken profits from and stops are in place. While I have been risk averse the past few trading sessions, I am flush with cash and ready to accept new risk if high probability setups emerge.

However, the best trade can sometimes be no trade at all and I intend to remain patient. Risk is extremely high!

Subscribers had over 100% return in August and already up over 50+% for September! Review my track record and join now at Options Trading Signals.com and receive a 24 hour 66% off coupon.

Are Sky High Gold Prices Justified?

Peter Turville-Ince, Head of Commodity & Equities Strategy at Compass Global Markets does not feel that gold is in a bubble especially with central bank inaction and the chances of rising inflation over the long term.