Goldman Sachs Issues Sell Rating on RIG....Dan Dicker Says Something Quite Different

Transocean (RIG) is one of the day's largest large cap losers after Goldman Sachs initiates coverage with a Sell rating. The firm notes that while RIG has dominated the ultra deepwater business, its rigs need extensive upgrades to keep them compliant in the post Macondo world which consensus estimates don't fully reflect.

Dan Dicker, president at MercBloc, has a very different take on how to play Transocean. And that is what makes a market. If you are a regular reader here then you know that we here at The Crude Oil Trader have very little respect for any call coming out of Goldman Sachs in the oil patch.

Here what Dan had to say today on CNBC.....



How to Trade Oil ETFs When $100 Per Barrel is Reached

Rigzone: Crude Slides 2.1% On European Debt Worries

Crude oil futures fell 2.1% to near $98 a barrel Thursday, posting the biggest decline in three weeks on continued worries about Europe's sovereign debt.

Prices had posted early gains, approaching $102 a barrel, after a larger than expected drop in new claims for U.S. jobless benefits. The Labor Department said benefits filings in the week ended Dec. 3 fell by 23,000 and were at the lowest level in nine months. Economists had expected a 7,000 decline in the week.

But the weight of concerns, as European leaders begin a two day summit meeting, hit equities price and crude tumbled. Oil, like all global markets, has been gripped by concerns in recent months that the crisis in European could trigger a global economic slowdown.

Those concerns were especially evident in the heating oil futures market Thursday, traders said, as prices fell to their lowest level since Nov. 25 on fears of a potential slowdown in U.S. exports of related diesel fuel. Latest U.S. government data show that 42% of record high exports of distillate fuel (diesel/heating oil) in September were bound for Europe.....Read the entire article.


Gold’s 4th Wave Consolidation Nears Completion and Breakout

Phil Flynn: It’s Beginning to Look a Lot Like!

It's beginning to look a lot like rates cuts, everywhere you go. Take a look at the ECB cutting rates again, with oil gains and silver bulls a-glow! It’s beginning to look a lot like rate cuts, maybe even Quantitative easing in store but the prettiest sight to see is the moment that you see oil put in a floor.

It’s all about Europe and the market expects the European Central Bank will cut rates by another quarter-point to 1%. Of course the market already wants more and hopes the ECB will add a little quantitative easing to help stimulate the economy. The market would like to see the Euro zone flush with cash ahead of its "do or die" Brussels summit as the fate of the Euro currency and the credibility of Europe hangs in the balance.

For oil the increasing prospect of a deal is very bullish. Not only will it improve demand it will devalue paper currencies that are abundant and will start too chase some goods including oil. Remember always that bailouts are bullish.

Yet yesterday’s Energy Information Report wasn’t really. The trade was shocked by a surprise build in commercial crude oil inventories which increased by 1.3 million barrels from the previous week. The expectations were that supply would fall as refiners and oil companies began to draw down inventory for year end tax considerations.

The other big story from the report was distillate inventories. The EIA said that distillate fuel inventories increased by 2.5 million barrels last week and are in the lower limit of the average range for this time of year. David Bird, the man that mashes the statistics for Dow Jones, says that, "US output of distillate fuel (diesel/heating oil) rose 4.2% to a record 5.03M barrels/day last week, EIA data show, as weekly demand was 7% above a year ago at 3.92M. Exports have been very strong of late and the EIA estimates distillates averaged a daily record near 950K barrels. The production surge helped push inventories up 2.5M barrels last week and within 2.5% of the 5-year average, the narrowest gap since October.”

Gasoline supply also surged increasing by 5.1 million barrels last week and are in the upper limit of the average range. Gasoline supply builds are the beneficiary of strong diesel demand and record distillate production. Total commercial petroleum inventories increased by 9.5 million barrels last week.

Still the overall outlook for oil is still bullish. The distillate production number indicates that refiners expect continuing strong global demand.

President Obama is still fighting the Keystone pipeline despite angering our neighbors to the North, Canada and despite the fact that the pipeline is favored by the majority of the American People. The President warned Republicans he'll veto an extension of the payroll tax if it includes a measure that forces the approval of the Keystone oil sands pipeline. Once again the President is putting his special interests ahead of US job creation and improving our nation’s energy security.

Hello shale and goodbye to coal! In a must read in Today’s Wall Street Journal it is reported that “naural gas will replace coal as the leading fuel for generating electricity in the U.S. by 2025, when it will also become the world's No. 2 overall fuel source thanks to its abundance and a drive for cleaner burning energy, according to the latest long term outlook from Exxon Mobil Corporation.

The closely watched study, set to be released Thursday, forecasts that global energy demand will grow about 30% by 2040 as the world population climbs to nine billion from seven billion.

Natural gas will overtake coal as the second largest fuel source overall, ranking behind oil and powering everything from electrical plants to home heating systems. But Exxon said coal use will continue to grow through 2025 around the world, primarily in developing nations such as China and India and the African continent, because economic growth will be fastest in emerging nations.

But thereafter coal use will start to drop, for the first time in history, according to the study, which Exxon uses to help its long range planning. Key drivers in that expected drop in coal use will be growing demand for fuels that produce fewer greenhouse gases and a decline in China's population expected after 2030.

Exxon in recent years has moved to expand its natural gas business, including the $25 billion purchase of U.S. shale gas producer XTO Energy in 2010.” Don’t miss it!

The CME is looking into a new crude contract. The CME is thinking about a possible futures contract that could be physically settled with delivery to the Gulf Coast. Stay tuned!

I hate to say I told you so, but I did tell you that Libya’s oil production would come back much faster than expected. The EIA confirmed that saying that pace of Libya's re entry into world oil markets has exceeded our prior expectations and those of many other outside observers.” {not mine!} While opinions vary significantly on the eventual trajectory for Libyan oil production, nearly all forecasts have steadily shifted upwards as the country's oil sector and related institutions continue to progress.

The EIA says that “Libya’s National Oil Corporation (NOC) claims to be on track to meet its goal of returning to pre-war crude oil production levels of 1.65 million barrels per day (bbl/d) by the end of 2012. Most analysts now expect production to reach anywhere between 1.0 and 1.6 million bbl/d during that timeframe. Based in part on developments in recent weeks (Table 1), the U.S. Energy Information Administration (EIA) expects that Libyan output may ramp up to 1 million bbl/d by the beginning of the second quarter of 2012. Thereafter, EIA expects crude oil production to plateau somewhat, increasing only gradually to about 1.2 million bbl/d by the end of 2012, along an uneven and non linear path.”

EIA gas report today! The street is looking for a 13 withdrawal! I say 3. Get a trial to Phil's daily trade levels by emailing him at pflynn@pfgbest.com


Gold’s 4th Wave Consolidation Nears Completion and Breakout

Musings: Imagining The Future for The Natural Gas Industry

A week ago Monday, the December natural gas futures contract traded on the CME exchange closed out its existence at $3.36 per thousand cubic feet of gas (Mcf), down $0.18 from the closing price of $3.54/Mcf posted the previous trading day, which happened to be the Friday after Thanksgiving and a notoriously light trading day. Natural gas prices had been buoyed in the period immediately before Thanksgiving by expectations that colder than normal weather over large parts of the gas consuming areas of the country would hike demand.

Futures prices were higher despite large and growing natural gas storage volumes. On that last trading day, cold weather prospects had shifted in favor of expectations for warmer than anticipated temperatures and thus depressed gas demand. The price drop, one of the largest daily corrections in a long time, brought further pain to industry participants. But as one private equity investor very active in the upstream oil and gas business put it, "It's got to change!" Yes, it will. The problem is that it could get worse!

The price drop, one of the largest daily corrections in a long time, brought further pain to industry participants

We've been spending considerable time wrestling with trying to define the natural gas industry's outlook as it is very important for this country's economy and for those people who are actively engaged in the business. Could it get worse? Can it get better? Current industry conditions reflect a certain Jekyll and Hyde quality, activity is up and growing but the price for the product is low and falling. What would it take for natural gas prices to recover? Would those actions help or hurt future industry activity?

Beyond those immediate concerns, we are wrestling with what the next phase for the industry might look like? How will the industry change as it transitions from its current state to whatever that next phase is? Will natural gas play an even greater role in our nation's power generation business? Can natural gas power a meaningful segment of our future car and truck fleet? Will the U.S. remain a natural gas importer or become a significant gas exporter?

These and many other questions have been filling our head and dominating our discussions with people in the business. To try to make sense of what is happening now, but more importantly what might happen in the future, we felt we needed to step back and take a very high level perspective of the business and current trends. It meant we needed to get away from the trees that restrict our view of the forest. (It will take several articles to examine these issues and attempt to define how the future might unfold.)

So far this year, it becomes clear we have experienced two distinctly different outlooks for the industry.

When we look at a chart of the price of the near month natural gas futures contract (Exhibit 1) so far this year, it becomes clear we have experienced two distinctly different outlooks for the industry. One was predicated on optimism about a growing economic recovery coupled with anticipation for falling natural gas production. The other view was marked by a weak economy with a potential for it getting worse given global economic and credit market uncertainties, coupled with growing frustration over continuing production growth despite weak natural gas prices.......Read the entire "Musings From The Oil Patch" article


Is This December Similar to 2007 & 2008 for Gold & Stocks?

Gold Bulls Take The Advantage Going Into Thursday

Gold [February contract] closed higher on Wednesday and the high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term.

If February extends the rally off November's low, November's high crossing at 1806.60 is the next upside target. Closes below November's low crossing at 1670.50 would renew the decline off November's high.

First resistance is last Friday's high crossing at 1767.10. Second resistance is November's high crossing at 1806.60. First support is November's low crossing at 1670.50. Second support is the reaction low crossing at 1607.30.



Gold’s 4th Wave Consolidation Nears Completion and Breakout

Is this the top for Crude Oil?

Crude oil closed lower on Wednesday as it consolidates some of the rally off the November 25th low. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term.

If January renews the rally off October's low, the 75% retracement level of the May-October decline crossing at 105.42 is the next upside target. Closes below the reaction low crossing at 94.99 are needed to confirm that a short term top has been posted.

First resistance is the 75% retracement level of the May-October decline crossing at 105.42. Second resistance is the 87% retracement level of the May-October decline crossing at 110.46. First support is the reaction low crossing at 94.99. Second support is the reaction low crossing at 89.05.


Gold’s 4th Wave Consolidation Nears Completion and Breakout

Gold and Crude Oil Trend Analysis

With a Chart Analysis Score of -50, gold is stuck in a trading range. Despite the move up and pullback in gold last week, it did not change the status of our weekly Trade Triangle. We remain positive on this market longer term and expect we will see it move much higher in 2012 as inflation kicks in around the world. Long term traders should remain positive for this precious metal. Intermediate term traders should be out of this market at the moment and on the sidelines waiting for a buy signal with the weekly Trade Triangle.

BIG PICTURE   Trading Range
Monthly trade triangles for Long term trends = Bullish
weekly trade triangles for intermediate term trends = Bearish
daily trade triangles for short term trends = Bearish
Combined Strength of Trend Score = -50

The $101.75 area basis the January contract appears to be offering resistance for crude oil at the present time. Crude oil remains the shining star of the commodity world and has become the currency of choice. With all of our Trade Triangles green, giving us a +90 Chart analysis score, it would appear as though we are in a strong bullish trend. At the present time all our Trade Triangles remain in a positive mode which is the direction of the major long term trend. Major resistance remains between the $102 and $103 levels. Long term, and intermediate term traders should be long this market with appropriate money management stops.

BIG PICTURE Strong Trend Bullish
Monthly Trade Triangles for Long Term Trends = Bullish
Weekly Trade Triangles for Intermediate Term Trends = Bullish
Daily Trade Triangles for Short Term Trends = Bullish

Combined Strength of Trend Score = +90

HOW TO USE THE MARKETCLUB SCORING SYSTEM
Score: 50 – 65 Trading Range
Score: 70 – 80 Emerging Trend
Score: 85 – 100 Strong Trend


Gold’s 4th Wave Consolidation Nears Completion and Breakout

Crude Oil Bulls Take The Advantage Into Wednesday Trading

Crude oil closed higher on Tuesday as it extends the rally off the November 25th low. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If January renews the rally off October's low, the 75% retracement level of the May-October decline crossing at 105.42 is the next upside target. Closes below the reaction low crossing at 94.99 are needed to confirm that a short term top has been posted. First resistance is the 75% retracement level of the May-October decline crossing at 105.42. Second resistance is the 87% retracement level of the May-October decline crossing at 110.46. First support is the reaction low crossing at 94.99. Second support is the reaction low crossing at 89.05.

Gold closed slightly higher on Tuesday as it consolidated some of Monday's decline. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term. If February extends the rally off November's low, November's high crossing at 1806.60 is the next upside target. Closes below November's low crossing at 1670.50 would renew the decline off November's high. First resistance is last Friday's high crossing at 1767.10. Second resistance is November's high crossing at 1806.60. First support is November's low crossing at 1670.50. Second support is the reaction low crossing at 1607.30.

Natural gas closed higher due to short covering on Tuesday but not before spiking to a new contract low. Stochastics and the RSI are diverging but are turning bearish signaling that sideways to lower prices are possible near term. If January extends this year's decline, monthly support crossing at 3.225 is the next downside target. Closes above the reaction high crossing at 3.720 are needed to confirm that a short term low has been posted. First resistance is the reaction high crossing at 3.720. Second resistance is the reaction high crossing at 4.095. First support is today's low crossing at 3.405. Second support is monthly support crossing at 3.225.

Gold’s 4th Wave Consolidation Nears Completion and Breakout

WTI and Brent Price Spread Narrows

Between October and November, the spot price of West Texas Intermediate (WTI) crude oil increased $23 per barrel partly on signs that transportation constraints out of the U.S. Midwest, the main market for WTI, are beginning to ease. At the same time, the price of European benchmark Brent crude oil was up much less, only about $7 per barrel. As a result, the WTI-Brent crude oil price difference has narrowed. The WTI-Brent crude oil price difference was smaller earlier in the year. While the WTI-Brent oil price narrowed, gasoline prices continue to track the price of Brent as they have for much of the year. The average price for gasoline moved about 6 cents a gallon from early October through mid November and then fell 13 cents during the last two weeks of November.

Source: U.S. Energy Information Administration, based on Bloomberg.  

Gold’s 4th Wave Consolidation Nears Completion and Breakout

Gold’s 4th Wave Consolidation Nears Completion and Breakout

Back in August with Gold running to parabolic wave 3 sentiment induced highs, I warned of a major top and multi month correction.  We all know that the fundamentals for the shiny metal are stronger than ever, but you must keep in mind that the market prices all that in well l in advance.  Coupled with excessively bullish sentiment that was capped off by a USA Today cover with Gold on it, it was easy to see a major sentiment correction and therefore price decline was at hand.

If we fast forward a few months from my then blasphemous call for a top and multi month consolidation, we can see that Gold has lost favor with the taxi driving crowd and the shoe shine group both.  What has in fact happened is we have had what I call a 4^th wave triangle pattern, which works to consolidate prior gains. Triangle simple let the economics of the underlying security or commodity catch up with the prior bullish price action.  In this case, Gold was in a powerful wave 3 stage advance from the October 2008 $681 lows and over a 34 Fibonacci month period of time.  When everyone on the stage was convinced this act would continue, it was time for the curtains to draw.

The 4^th wave so far has been characterized by a typical pullback in terms of price and also time.  The drop to the $1530’s is a normal 31% Fibonacci retracement of the entire 34 month advance.  In addition, the pattern that has clearly emerged lines up as a typical 4^thwave triangle pattern, which has 5 total waves within.  Waves 1, 3, and 5 are down and 2 and 4 are up.  We are currently finishing wave 4 to the upside from the low $1600’s and likely to see a wave 5 near term to the downside.  As long as Gold holds above $1681 levels, I expect we will see a breakout north of $1775 to confirm that wave 5 up in Gold has begun.

Targets for the 5^th and final wave of this suspected 13 year cycle of Gold begin at $2360 and then we will update from there.  Below is the chart I sent to my paying subscribers last Thursday and we can see that this pattern is still playing out.  Aggressive investors would be wise to get long the metal on this final pullback, with a stop below 1680 to be conservative.

If you would like to have forecasts for price and pivot points in advance on the SP 500, Gold, and Silver that keep you on the right side of the markets, check us out at Market Trend Forecast.com

David Banister

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