Crude is bubbling to 2 year highs, with Byron Wien, Blackstone Advisory Svs., and Tom Petrie, Bank of America Merrill Lynch.
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Wednesday, November 10, 2010
Goldman Sachs: Oil Will Be "Substantially Higher" by 2012
“Despite the recent rally, we believe that forward price levels offer good hedging opportunities,” Goldman analysts, led by Allison Nathan in New York, said in the report. “We continue to expect improving fundamentals will provide additional support to prices.” Oil climbed to the highest in two years yesterday, and is up 7 percent this month, on speculation the Federal Reserve’s stimulus program will weaken the dollar, bolstering the investment appeal of commodities. U.S. crude inventories plunged 7.4 million barrels last week, the biggest drop since September 2008, according to an American Petroleum Institute report yesterday.
The Fed said Nov. 3 it will buy an additional $600 billion of Treasuries through June to spur the economy. Investors should have an “overweight allocation” on commodities because this policy, along with the global recovery, is positive for prices, according to Goldman.......Read the entire article.
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Crude Oil Technical Outlook For Wednesday Morning Nov. 10th
Closes below the 20 day moving average crossing at 83.49 are needed to confirm that a short term top has been posted. If December extends the aforementioned rally, the 75% retracement level of May's decline crossing at 88.07 is the next upside target.
First resistance is Tuesday's high crossing at 87.63
Second resistance is the 75% retracement level of May's decline crossing at 88.07
Crude oil pivot point for Wednesday morning is 86.61
First support is the 10 day moving average crossing at 84.88
Second support is the 20 day moving average crossing at 83.49
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Tuesday, November 9, 2010
Commodity Corner: Crude Oil Ends 6 Day Rally
According to the Energy Information Administration's (EIA) report, 2010 U.S. natural gas production should increase 2.5 percent from 2009 levels and 0.2 bcf a day for October's marketed natural gas production. The intraday range for natural gas was $4.06 to $4.23. RBOB gasoline for December contract also settled up Tuesday, adding 0.65 cent, to $2.19 a gallon the highest since Aug. 3. Gasoline prices fluctuated between $2.16 and $2.20 Tuesday.
Courtesy of Rigzone.Com
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Sharon Epperson: Where is Crude Oil and Gold Headed on Wednesday?
CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil and gold are likely headed tomorrow.
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Stock Market and Commodities Commentary For Tuesday Evening Nov. 9th
Crude oil closed lower due to profit taking on Tuesday as it consolidates some of the rally off August's low. The low range close sets the stage for a steady to lower opening on Wednesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If December extends the aforementioned rally, the 75% retracement level of May's decline crossing at 88.07 is the next upside target. Closes below the 20 day moving average crossing at 83.34 would confirm that a short term top has been posted. First resistance is today's high crossing at 87.63. Second resistance is the 75% retracement level of May's decline crossing at 88.07. First support is the 10 day moving average crossing at 84.40. Second support is the 20 day moving average crossing at 83.34.
Natural gas closed higher on Tuesday renewing the rally off October's low. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If December extends the rally off October's low, the 38% retracement level of the June-October decline crossing at 4.362 is the next upside target. Closes below last Thursday's low crossing at 3.743 would confirm that a short term top has been posted. First resistance is today's high crossing at 4.228. Second resistance is the 38% retracement level of the June-October decline crossing at 4.362. First support is last Thursday's low crossing at 3.743. Second support is the reaction low crossing at 3.500.
The U.S. Dollar closed higher on Tuesday and above the 20 day moving average crossing at 77.34. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term. Closes above the reaction high crossing at 78.61 are needed to confirm that a short term low has been posted. If December extends the decline off August's high, the November 2009 low on the weekly continuation chart crossing at 74.21 is the next downside target. First resistance is the reaction high crossing at 78.51. Second resistance is the reaction high crossing at 78.61. First support is last Wednesday's low crossing at 75.24. Second support is the November 2009 low on the weekly continuation chart crossing at 74.21.
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How Long and How High for Gold, and How to Play It
From David Banister at Market Trend Forecast.Com......
Regular readers of my articles on Gold over the past few years know that I have a theory on this Gold Bull market. In summary, it’s that we are in a 13 Fibonacci year uptrend that started in 2001, and now we are in the final 4 years of that uptrend. It is in this last 5 year window that I theorized started in August of 2009 that investors really get involved. As the crowd comes in, prices push higher and higher, and then more and more investors come in and so forth.
The very recent rally has pushed us up to about $1,420 per ounce, on the way to my projected $1480-$1520 pivot highs on this leg from the $1040 area in February of this year. Subscribers to my TMTF newsletter have learned about Elliott Wave Theory and how to properly apply it to benefit from both the ups and the downs in various parts of the markets, as well as commodities and precious metals. If I am correct, we are in the 3rd wave up of 5 total waves from the August 2009 $900 per ounce levels. The first leg went from $900 to $1225, the second leg was corrective to $1,040, and now this 3rd wave should complete at around 150% of the 1st wave’s amplitude. In English, the probabilities are for Gold to continue higher to about $1527 per ounce, possibly a tad higher if the typical Elliott Wave patterns take hold, and also assuming again that I am correct in my read of those patterns.
One of the better ways to play this next 4 years of upside with intervening corrections is to look at prospect generator companies. These are Gold, Silver, and Copper explorers that do the early field work in identifying prospects for drilling. They then farm out these projects to willing partners and retain equity stakes and /or percentiles of the project itself. This reduces their need for capital while retaining nice upside for shareholders, and diversifying. When you are a tad long in this current wave pattern’s tooth, this is way to stay onboard, but not go overboard. I have personal ownership positions in a few of these types of companies, and my subscribers are aware of the few that we really prefer. Should one of the projects not pan out, you are not placing your entire shareholder bet on one drill project, and yet if they hit on a few, the upside can be substantial.
In the meantime, below is a chart pattern of where I see this rally peaking out and where I forecasted recent pivots. As we approach these levels, ($1480-$1525), it may be a good idea to pull back on some of your positions whether it be the metal itself or individual stocks.
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Regular readers of my articles on Gold over the past few years know that I have a theory on this Gold Bull market. In summary, it’s that we are in a 13 Fibonacci year uptrend that started in 2001, and now we are in the final 4 years of that uptrend. It is in this last 5 year window that I theorized started in August of 2009 that investors really get involved. As the crowd comes in, prices push higher and higher, and then more and more investors come in and so forth.
The very recent rally has pushed us up to about $1,420 per ounce, on the way to my projected $1480-$1520 pivot highs on this leg from the $1040 area in February of this year. Subscribers to my TMTF newsletter have learned about Elliott Wave Theory and how to properly apply it to benefit from both the ups and the downs in various parts of the markets, as well as commodities and precious metals. If I am correct, we are in the 3rd wave up of 5 total waves from the August 2009 $900 per ounce levels. The first leg went from $900 to $1225, the second leg was corrective to $1,040, and now this 3rd wave should complete at around 150% of the 1st wave’s amplitude. In English, the probabilities are for Gold to continue higher to about $1527 per ounce, possibly a tad higher if the typical Elliott Wave patterns take hold, and also assuming again that I am correct in my read of those patterns.
One of the better ways to play this next 4 years of upside with intervening corrections is to look at prospect generator companies. These are Gold, Silver, and Copper explorers that do the early field work in identifying prospects for drilling. They then farm out these projects to willing partners and retain equity stakes and /or percentiles of the project itself. This reduces their need for capital while retaining nice upside for shareholders, and diversifying. When you are a tad long in this current wave pattern’s tooth, this is way to stay onboard, but not go overboard. I have personal ownership positions in a few of these types of companies, and my subscribers are aware of the few that we really prefer. Should one of the projects not pan out, you are not placing your entire shareholder bet on one drill project, and yet if they hit on a few, the upside can be substantial.
In the meantime, below is a chart pattern of where I see this rally peaking out and where I forecasted recent pivots. As we approach these levels, ($1480-$1525), it may be a good idea to pull back on some of your positions whether it be the metal itself or individual stocks.
If you would like to follow David Banister's free weekly updates or consider subscribing, sign up at Market Trend Forecast.Com and Receive a Special Coupon Offer Today
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Phil Flynn: Dollar Drubbing And Hot Commodities!
The Chinese are already stockpiling oil and panic buying in cotton and other commodities may start to take the place of buying US debt. Why lose money on a deckling dollar when you can make money holding gold, silver or corn! There is also some concern on the Brent side that North Sea crude production could fall. Short report today due to computer issues. Still you can always get the latest news by calling me at 800-935-6487 or email me at pflynn@pfgbest.com . You can also catch Phil on the Fox Business Network where you can see him every day!
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The Bakken Play the Oil Majors Are Watching Closely
Located on either side of the Alberta/Montana border, the key land packages in this play have been assembled with very little news or fanfare – but by some very smart and successful companies, like Crescent Point (CPG-TSX) in Canada, and Rosetta Resources (ROSE-NASD), Newfield Exploration (NFX-NYSE) and Murphy Oil (MUR-NYSE).
But these larger companies have been very tightlipped about their plans, and aside from Crescent Point’s one press release this fall, it’s not easy to get information, because everybody is still trying to buy more land. To date, there are only a handful of juniors involved in the Alberta Bakken, but juniors and the bigger intermediate producers are all putting a lot of money into this play hoping it will be just like the Saskatchewan and North Dakota Bakken play to the east, which created tens of billions of dollars in shareholder wealth and many buyouts, corporate takeovers, over the last 5 years. Recent reports by Canadian brokerage firms agree. So the play is gaining momentum but hasn’t become mainstream yet.
That will change in the coming months. The historical geological evidence is intriguing, even compelling. But there is still only one well that has been publicly reported in the whole play, though several have been drilled. And despite the fact that the Alberta and North Dakota/Saskatchewan Bakken plays have completely different geological settings, huge land prices have been paid for big parcels of Alberta Bakken land in areas where truly, very little is known about the oil formations (yes this will likely be a multi zone play if it works).
This play was discovered on the US side of the border, in Montana. And while there has actually been a lot more activity on the US side, but you have to look hard to find mention of it. Rosetta, Newfield, Murphy and Quicksilver (KWK-NYSE) have each acquired roughly 300,000 acres in northern Montana in this play, a material land position even for companies this size, but you won’t find that information anywhere except in a couple lines buried deep in their quarterly statements. Rosetta said in its quarterly released just last week they had acquired more ground. Rarely do any of them include even one slide on this play on their corporate powerpoint. Rosetta and Newfield have each publicly said they are drilling 8 wells, though most of them now are vertical test wells, which the industry calls “strat” wells, which is short for stratigraphy.
Basically they’re trying to gather geological information and determine the best place to drill a more expensive horizontal well. No results have been released to date. But I can tell by reading the research reports on these companies that the analysts down in the US are watching this play. So are the majors, which did not participate much in the shale gas or shale oil boom in North America.
On the Canadian side, land prices around the Montana border edged up consistently this year, going from a low of $83 per hectare ($33.20/acre; 2.5 acres in a hectare) to $1535/ha, or $614 per acre, taking a lot of industry people by surprise at the time. The highest price paid for one small block was over $4500/ha, or $1800/acre. Crescent Point came clean in September when they announced they had acquired over 1,000,000 acres in the play, mostly via an acquisition of a private company, Darian, which had a substantial land position, but also through some freehold staking on their own. Most of the land in the area was bought up by land brokers, a whole sub-industry in the oilpatch that acts as "front men" for the oil producers. That is not unusual.
It is unusual to see a well licensed in the name of a land broker, which is what has happened with the one well in the Alberta Bakken that everyone is watching, here is a quick quote from BMO Nesbitt on this well: “In Alberta, one horizontal well has been drilled and completed targeting the Alberta Bakken (drilled under broker: Antelope Land Services 14-7-1-21W4: TD – Wabamum; results confidential). A second horizontal well is presently drilling (Antelope Land Services 16-24-2-25W4, licensed to the Exshaw, spudded August 17, 2010), and a third horizontal well licensed by Antelope Land Services located at 3-8-1-18W4 has also been drilled and rig released on October 3, 2010, to the Exshaw. It is believed that Crescent Point Energy is the operator of these three wells.”
The few juniors in the Alberta Bakken play stand to be richly rewarded if it works out as well as the early movers hope. This will also be good news for their shareholders, here is how Macquarie Capital sees the Alberta Bakken playing out for them: “Junior companies with meaningful, strategically situated lands will be purchased outright by mid/large cap producers who seek to bolt on additional acreage to already established positions. The potential exists that players who were late to the game may try to establish a position in the play via a small corporate acquisition, once some of the associated risks have been mitigated by the early comers.” In my next two stories on this fast emerging play, I will compare what is known about it to the Saskatchewan/North Dakota Bakken, and list the junior companies involved on both sides of the border.
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Crude Oil Technical Outlook For Tuesday Morning Nov. 9th
If December extends the aforementioned rally, the 75% retracement level of May's decline crossing at 88.07 is the next upside target. Closes below the 20 day moving average crossing at 83.38 are needed to confirm that a short term top has been posted.
First resistance is the overnight high crossing at 87.63
Second resistance is the 75% retracement level of May's decline crossing at 88.07
Crude oil pivot point for Tuesday morning is 86.84
First support is the 10 day moving average crossing at 84.49
Second support is the 20 day moving average crossing at 83.38
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Monday, November 8, 2010
Commodity Corner: Crude Oil, Natural Gas Finish Higher
Also applying upward pressure on the oil futures price was a stronger dollar. The euro lost ground to the greenback amid market concerns about mounting sovereign debt problems in Ireland, Spain, and Portugal. Crude oil traded from $85.96 to $87.49.
For the second time in as many weeks, front month natural gas settled above the $4.00 mark, $4.09 per thousand cubic feet, to be exact. Despite an ongoing high inventory environment, predictions of below normal temperatures in the Northeast spurred speculation that demand for gas-fired electricity will increase over the next two weeks.
Natural gas for December delivery peaked at $4.10 and bottomed out at $3.94. December gasoline remained flat at $2.18 a gallon Monday. It traded within a range from $2.15 to $2.19.
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Stock Market and Commodities Commentary For Monday Evening No. 8th
Crude oil closed higher on Monday as it extends the rally off August's low. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If December extends the aforementioned rally, the 75% retracement level of May's decline crossing at 88.07 is the next upside target. Closes below the 20 day moving average crossing at 83.13 would confirm that a short term top has been posted. First resistance is today's high crossing at 87.49. Second resistance is the 75% retracement level of May's decline crossing at 88.07. First support is the 10 day moving average crossing at 83.99. Second support is the 20 day moving average crossing at 83.13.
Gold closed higher on Monday and above 1400 as it posted another new all time high. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices is possible near term. If December extends this year's rally into uncharted territory, upside targets will now be hard to project. Closes below the reaction low crossing at 1315.60 would confirm that a short term top has been posted. First resistance is today's high crossing at 1410.40. First support is the 10 day moving average crossing at 1359.40. Second support is the reaction low crossing at 1315.60.
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Buying Baker-Hughes' Big Run
Senior contributor Dan Dicker details Baker-Hughes' huge quarter, its subsequent ramp up and how you can make money on the stock.
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Crude Oil Declines From Two Year High After Dollar Advances Against Euro
Crude for December delivery was unchanged from Nov. 5 at $86.85 a barrel at 12:52 p.m. on the New York Mercantile Exchange. Oil has gained 12 percent in the past year. Prices jumped 6.7 percent last week, the most since February, as the Labor Department said U.S. payrolls climbed by 151,000 workers in October following a revised 41,000 drop the prior month. New York oil futures reached $87.49 a barrel earlier today, the highest price since Oct. 9, 2008, on an intraday basis. Brent crude for December settlement rose 20 cents, or 0.2 percent, to $88.31 a barrel on the ICE Futures Europe exchange in London.
The world will “have to live with current oil prices,” Qatari Oil Minister Abdullah al-Attiyah said today in Doha. The market isn’t oversupplied with oil, he added. The dollar gained 0.6 percent to $1.3943 per euro from $1.4032 on Nov. 5 in New York. The currency has advanced 1.9 percent since Nov. 4. It rose today amid concern that Ireland will struggle to plug its budget deficit......Read the entire article.
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Leverage Misuse and Abuse in FOREX
However, this low margin and high leverage is also the #1 risk and cause of loss among novice Forex traders. Misuse of leverage is the Forex cardinal sin. In the article below I'm going to explain the new leverage rules, and show you exactly how to take advantage of it! To give you even more I put together this Free Forex Toolkit with an entire video section dedicated to using the new leverage rules to consistently profit…GET IT HERE.
What do we mean by low margin and what is leverage? Well basically this means that you can control a huge amount of a currency in the Forex market with a very small cash outlay. The normal stock and index options that we trade at BigTrends.com represent 100 shares of stock — you pay a premium to control/own this option. For example, in the stock option market you may be able to control the right to buy 100 shares of IBM for $500 — this is an example of leverage. However, the leverage in Forex is much greater than this in most cases … but so is the risk.
We only have to look at the recent housing market crash to see an example of where leverage and low margin caused massive losses among individual investors. People across the world were buying houses and properties beyond their means and with very little cash down. Many of these were speculative, greedy bets on a continued sharp rise in housing prices — which knowledgeable, experienced traders such as ourselves knew wouldn't continue forever. They weren't bad homeowners; they simply misused leverage.
The huge amount of potential leverage and low margin requirements in fx trading is similar to this. The latest rules allow Forex leverage for 50:1 on major currencies and 20:1 on minor currencies. Some brokers may still be able to offer 100:1 leverage. What this means is that a trader can often control millions of dollars of a currency proposition with a very small cash outlay. When novice traders allow emotions such as greed and fear to rule their trading, they often end up on the losing end of large leveraged bets.
Thanks for reading, and we've got a lot more where that came from! While you wait for our next article get our Free Forex Toolkit that will put your Forex trading on the right track!
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Bullish Forces Building in the Energy Commodities
We find it rather amusing to observe how punters/bloggers (call them what you will) are so engrossed with the whole "QE2" thing and how popular it has become to trash the Fed and/or Bernanke, yet beneath their feet, life goes on. I say this because it appears people are more concerned with what Bernanke is doing rather than taking note of what is happening on the commodity front and in particular within the energy group of commodities, that is; crude, coal, uranium, and ethanol. In essence, the energy group has been locked in a trading range since October of last year, but now some 12 months later, there is evidence from a broad based perspective that energy commodities have broken out of their trading ranges. We would not take things too seriously if there was bullish action in one or two energy commodities, but when there is strength from crude, heating oil, diesel, gasoline, bunkers, ethanol, uranium, and coal - well, you better believe that something is happening.
But, is the strength in energy commodities only due to the actions by the Fed to debase the USD? Well, yes, that is what the average analyst/blogger/commentator would have us believe...but has anyone considered what is happening outside the US, and Europe for that matter? From an economic expansion perspective, what is going on in Asia (ex Japan), China, India, South America, Australia? Do you know that over 50% of the world GDP is accounted for by so called emerging markets? OK, to get straight to the point, energy demand is increasing rapidly. What happens in the US and Europe is now of little consequence. OK, that is perhaps an exaggeration, but I hope that you get my point. I think there is a lot more at play here than just the Fed debasing the value of the USD......Read the entire article.
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Crude Oil Daily Technical Outlook For Monday Morning Nov. 8th
If December extends last week's rally, the 75% retracement level of May's decline crossing at 88.07 is the next upside target. Closes below the 20 day moving average crossing at 83.10 are needed to confirm that a short term top has been posted.
First resistance is the overnight high crossing at 87.49
Second resistance is the 75% retracement level of May's decline crossing at 88.07
Crude oil pivot point for Monday morning is 86.75
First support is the 10 day moving average crossing at 83.94
Second support is the 20 day moving average crossing at 83.10
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Sunday, November 7, 2010
Crude Oil Trades Near a Two Year High as U.S. Employment Figures Beat Forecasts
“Oil is quite positive, the market has taken heart in the unemployment rate,” said Jonathan Barratt, managing director of Commodity Broking Services Pty in Sydney. “Crude has broken through the topside of the range, so you’ve got to look for higher prices.” Crude for December delivery was at $86.90 a barrel, up 5 cents, in electronic trading on the New York Mercantile Exchange at 12:27 p.m. Singapore time. The contract earlier rose as much as 64 cents, or 0.7 percent, to $87.49, the highest since Oct. 9, 2008. Futures are up 10 percent in 2010.
The increase in U.S. payrolls was the first since May and exceeded all estimates from economists surveyed by Bloomberg News. The U.S. jobless rate held at 9.6 percent, where it’s been since August, according to the Labor Department......Read the entire article.
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SPX's Running Correction, Gold's Setup, Crude Oil Explodes!
The financial markets continue to climb the wall of worry on the back of more Fed Quantitative Easing. Those trying to pick a top in this choppy bull market may prove to be correct for a couple hours but over time the shorts continue to get clobbered.
Quantitative easing was enough to turn gold back up and gave oil just enough of a nudge to breakout of its cup and handle pattern explained later.
The past few weeks the number of emails I receive on a daily basis about what individuals should do about short positions they took on their own has growing quickly. Usually when my inbox starts to fill up with traders holding heavy losses trying to pick a top I know something big is about to happen and its not going to be in the favor of the herd (everyone shorting). In the past couple week there have been some great entry points for the broad market whether its to buy the SP500, Dow, NASDAQ or Russell 2K. I focus on trading with the trend and entering on extreme sentiment readings as shown in the chart below.
Extreme Trend Trading Analysis
Below are my main market sentiment indicators for helping to time short term tops and bottoms. That being said I don’t pick short term tops in hopes to profit on the down side. Rather I wait for a extreme sentiment bottom to be put in place, then enter long with the up trend (Buy Low).
Once there is a 1-2% surge in price and sentiment indicators are showing a short term top I like to pull a little money off the table to lock in some profits while still holding a core position (Sell High). This is exactly what I/subscribers have done over the last couple weeks. This is a simple yet highly effective strategy and works just as well in a down trend except I focus on shorting extreme sentiment bounces. Subscribers know what these indicators are as I cover them each week in my daily pre-market trading videos as we prepare for the day ahead.
SPX Running Correction
Since early September the equities market has been on fire. In late September the market was extremely toppy looking and trading at key resistance levels from prior highs convincing a lot of traders to take a short position. But instead of a correction the market surged and has since continued to grind its way up week after week.
This rising choppy price action can be seen two ways:
1. As a rising wedge with a blow off top (Bearish)
2. Or as a Running Consolidation (Bullish)
The running consolidation happens when buyers are abundant picking up more shares on every little dip. Overall looking at the intraday price action you will see market shakeouts as it tries to buck traders out before it continues higher. This choppy looking market action if not read correctly looks extremely bearish to the novice trader and the fact the market is so overbought it easily convinces them to take short positions. This choppy action is just enough to wash the market of weak positions before starting another run up.
All that said, both a blow off rising wedge and a running correction are very bullish patterns for a period of time. Again I cannot state it enough, trade with the trend and the key moving averages.
Gold Shines On The Daily Chart
The gold story is straight forward really… Trend is up, quantitative easing is back in action and that is helping to list gold and silver prices. Key moving averages have turned back up and gold closed at a new high which shows strength.
Golden Rocket
With another round of quantitative easing just starting and gold making another new high last week there is a very good chance gold stocks will rocket higher in the coming 8 months. I have been following Millrock Resources Inc. because of the team involved with this company. A breakout to the upside here could post some exciting gains if you take a look at the chart and see where the majority of volume has traded over the years along with the bullish chart patterns (Cup & Handle/Rising Wedge) with strong confirming volume. From 84 cents to the $3.50 area there should not be many sellers other than traders slowing taking profits on the way up.
Crude Oil Breaks Out Of Cup
Crude oil has been dormant the past few weeks even though the US Dollar has plummeted. But last week’s news on more QE was enough to send oil higher. The surge took oil prices straight to the 2010 highs as expected and blew past my first target of $86.00 per barrel. I figure it will consolidate here for a while until we see if the dollar bottomed last week or is just testing the breakdown level.
Weekend Trading Conclusion:
In short, the market has played out exactly as we planned and all four of our positions are deep in the money. As we all know the market goes in waves in both price and for trade setups. The past couple weeks were great for getting into trades and now the market is running in our direction. It will take a few days for the market to stabilize (pullback or pause) before we could get anther round of trade setups. Keep position sizes small as the market remains overbought and a sharp correction could happen at any time. Until then, keep trading with the trend.
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Disclaimer: Chris owns shares of SPY and MRO.V
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Quantitative easing was enough to turn gold back up and gave oil just enough of a nudge to breakout of its cup and handle pattern explained later.
The past few weeks the number of emails I receive on a daily basis about what individuals should do about short positions they took on their own has growing quickly. Usually when my inbox starts to fill up with traders holding heavy losses trying to pick a top I know something big is about to happen and its not going to be in the favor of the herd (everyone shorting). In the past couple week there have been some great entry points for the broad market whether its to buy the SP500, Dow, NASDAQ or Russell 2K. I focus on trading with the trend and entering on extreme sentiment readings as shown in the chart below.
Extreme Trend Trading Analysis
Below are my main market sentiment indicators for helping to time short term tops and bottoms. That being said I don’t pick short term tops in hopes to profit on the down side. Rather I wait for a extreme sentiment bottom to be put in place, then enter long with the up trend (Buy Low).
Once there is a 1-2% surge in price and sentiment indicators are showing a short term top I like to pull a little money off the table to lock in some profits while still holding a core position (Sell High). This is exactly what I/subscribers have done over the last couple weeks. This is a simple yet highly effective strategy and works just as well in a down trend except I focus on shorting extreme sentiment bounces. Subscribers know what these indicators are as I cover them each week in my daily pre-market trading videos as we prepare for the day ahead.
SPX Running Correction
Since early September the equities market has been on fire. In late September the market was extremely toppy looking and trading at key resistance levels from prior highs convincing a lot of traders to take a short position. But instead of a correction the market surged and has since continued to grind its way up week after week.
This rising choppy price action can be seen two ways:
1. As a rising wedge with a blow off top (Bearish)
2. Or as a Running Consolidation (Bullish)
The running consolidation happens when buyers are abundant picking up more shares on every little dip. Overall looking at the intraday price action you will see market shakeouts as it tries to buck traders out before it continues higher. This choppy looking market action if not read correctly looks extremely bearish to the novice trader and the fact the market is so overbought it easily convinces them to take short positions. This choppy action is just enough to wash the market of weak positions before starting another run up.
All that said, both a blow off rising wedge and a running correction are very bullish patterns for a period of time. Again I cannot state it enough, trade with the trend and the key moving averages.
Gold Shines On The Daily Chart
The gold story is straight forward really… Trend is up, quantitative easing is back in action and that is helping to list gold and silver prices. Key moving averages have turned back up and gold closed at a new high which shows strength.
Golden Rocket
With another round of quantitative easing just starting and gold making another new high last week there is a very good chance gold stocks will rocket higher in the coming 8 months. I have been following Millrock Resources Inc. because of the team involved with this company. A breakout to the upside here could post some exciting gains if you take a look at the chart and see where the majority of volume has traded over the years along with the bullish chart patterns (Cup & Handle/Rising Wedge) with strong confirming volume. From 84 cents to the $3.50 area there should not be many sellers other than traders slowing taking profits on the way up.
Crude Oil Breaks Out Of Cup
Crude oil has been dormant the past few weeks even though the US Dollar has plummeted. But last week’s news on more QE was enough to send oil higher. The surge took oil prices straight to the 2010 highs as expected and blew past my first target of $86.00 per barrel. I figure it will consolidate here for a while until we see if the dollar bottomed last week or is just testing the breakdown level.
Weekend Trading Conclusion:
In short, the market has played out exactly as we planned and all four of our positions are deep in the money. As we all know the market goes in waves in both price and for trade setups. The past couple weeks were great for getting into trades and now the market is running in our direction. It will take a few days for the market to stabilize (pullback or pause) before we could get anther round of trade setups. Keep position sizes small as the market remains overbought and a sharp correction could happen at any time. Until then, keep trading with the trend.
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Disclaimer: Chris owns shares of SPY and MRO.V
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Saturday, November 6, 2010
Commodity Corner: Crude Oil, Natural Gas, Gasoline End the Week Higher
Oil for December delivery, which had received a boost during the week from the U.S. midterm elections and the Federal Reserve's "Quantitative Easing 2" policy to stimulate the economy, got a boost Friday from new U.S. Department of Labor jobs figures. According to the Labor Department, nonfarm payroll private-sector employment increased by 151,000 jobs in October. However, the unemployment rate remained unchanged at 9.6 percent.
Crude oil traded from $85.96 to $87.22 Friday. Compared to Monday's settlement price, it is up 4.7 percent for the week.
Despite a steady string of increases throughout the week, gasoline for December delivery ended the day flat at $2.18 a gallon on Friday. Front month gasoline, which peaked at $2.19 and bottomed out at $2.16 during the day's session, finished the week up 4.3 percent.
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