What the GLD ETF Chart tells us about GOLD

Gold had remained in a rough 1550-1640 range for several weeks now. Tonight, we look at the GLD ETF, which represents the Gold spot price movements.  Over the past 5 months we can see in the chart below  the clear downtrend lines.

Recently, in the past 6 weeks we have seen a series of 3 higher lows including today where a lower gap filled in and then Gold reversed upwards.

What Gold needs to do, in terms of this GLD ETF is clear the 158 hurdle on a closing basis to set up a stage for a new advance. I would expect in the intervening months to October for Gold to continuing meandering and correcting to as low as 1445-1455, my longstanding Gold worst case low targets I’ve had since last September.

Near term key levels are 150 on the downside and 158 on the upside. If we close below 150 on GLD ETF then we should be looking for my 1445-1455 areas to be hit this summer before a low. If we clear 158 on the GLD ETF, then the triple bottom at 1520 is likely confirmed and we can start tracking some upside for Gold.

David A. Banister is Chief Strategist at Market Trends Forecast.com

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Using ETF's to Invest in MLP's

If you have been thinking about taking advantage of the dividends associated with MLP's but can't decide on a ticker, maybe an ETF is the way to go. In todays video Dean Zayed, CEO of Brookstone Capital, tells us how to play this using ticker AMJ as well as a couple of others.

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CME Crude Oil, Natural Gas and Gold Report for Friday July 13th

August crude oil prices established a higher high during the initial morning hours, helped by a rebound in risk taking sentiment in the wake of an as expected Chinese GDP report. While China's second quarter growth slowed to a pace not seen in three years, the reading appeared to inspire greater speculation for more economic stimulus. That is seen as a force bolstering the demand prospects for crude oil. The market also appears to be supported by reports of tighter North Sea supplies and greater US sanctions against Iran.

August natural gas prices traded in a tight overnight range as they consolidated yesterday's upside reversal action. This came after the market soldoff in reaction to yesterdays EIA storage data that showed a slightly larger than expected injection of 33 bcf. Total storage stands at 3,135 bcf or 19.7% above the 5 year average. Over the last four weeks natural gas storage has increased 191 bcf. Some traders viewed the EIA storage data as a positive because the weekly injection was about one third of the longer term average injection for this week of the year.

Gold traded nearly flat, but remained on course for a second consecutive week of losses as worries about the euro zone debt crisis and the absence of stimulus measures in the United States buoyed the dollar and its safe haven appeal. Spot gold was little changed at $1,570.14 an ounce, heading for a weekly decline of 0.8 percent.

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Gold Cycles Will Soon Forecast Where Prices Are Headed

Gold and stock market forecaster have been using cycles in price that repeat every certain amount of trading days to help them spot key reversal areas in the financial market. Almost everything in life seems to go in cycles and commodity prices and the stock market are no different.

As we all know the market is very difficult to forecast when using only one set of analysis like cycles. Analyzing price action, volume, market sentiment, market breadth, trends and inter-market analysis are the other key areas which one must understand before they can be in the zone (ZEN) with the financial market and properly forecast future prices.

This report will show you just how well cycles work if applied and traded properly.

How to Buy Dips and Sell Rips in Gold Using Cycle Analysis

The chart below is of gold and shows its short term trading cycles. I will admit this chart is hard on the eyes and as ugly as they get to bear with me.

Three different cycles have been applied to the chart using a short, intermediate and long term cycle wave length. The general idea here is that you want to trade with the underlying trend, then use these short term cycles to profit from weekly price swings.

Gold has been in a down trend for a year so the focus should be on shorting the bounces. Focusing on selling short gold during a time with 2 or more cycles are topping as you stand a great chance of the price moving in your favor within 1-3 days.

Once the price starts to move in your favor you want to scalp to profits once the short term (green) cycle drops near a reversal level. Once this takes place I always tighten my stops to breakeven, lock in some profits and continue to wait for another cycle to reach the bottom at which point I take more profit off the table and tighten my protective stop once again.

As you can see this is not the perfect system but it makes money, and if you apply more analysis to the market you can lock in more of these moves using intraday charts, volume, and sentiment levels.

How to Find Market Cycles

You must have an analysis tool that can read the market and find cycles within it. Once you know how many days the most frequent cycles are occurring you can then use a custom cycle indicator to overlay them on the charts as seen in the gold chart above. The visual overlay is the key to spotting market reversals and areas to add to a position or trim profits. Look at the chart below for a visual of how I find my cycles.

Gold Cycle Forecast Conclusion:

In short, gold overall remains in a down trend. But from looking at the gold chart and its short term cycles I have a feeling we will be seeing price trade sideways this week and a bounce next week.

The next week will be very interesting as these cycles will actually give us an early warning if the overall gold market is about to bounce or sell off. The question is what the cycles do in the next few days while gold flirts with support…

It does take some time/experience to read the cycles and get a feel for how they move so don’t worry about it if you don’t fully grasp the idea from this short article. 

Find out more on cycles and trading at The Gold & Oil Guy.com

Chris Vermeulen

Rising Production in the Permian Basin

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The Permian Basin, a long time oil and natural gas producing region in west Texas and eastern New Mexico, is showing signs of new life. The active rig count has grown from 100 rigs in mid 2009 to over 500 rigs in May 2012. According to data from the Texas Railroad Commission and the New Mexico Energy, Minerals and Natural Resources Department, oil production from the Permian has increased fairly steadily over the past few years, reaching the 1 million barrels per day (bbl/d) threshold in late 2011, the first time since 1998.

Sources: U.S Energy Information Administration, based on Baker Hughes, Railroad Commission of Texas, and New Mexic

Growing oil production in the Permian Basin and other Texas plays, most notably the Eagle Ford shale, may be starting to strain existing takeaway capacity and is creating a need for Texas oil to serve more distant refineries. While new pipeline projects are scheduled to come online, current transportation constraints have caused Permian crude oil, which is priced in Midland, Texas, to sell at a significant discount to WTI beginning in January 2012.

CME Group Crude Oil, Natural Gas and Gold Market Recap for Tuesday July 10th

August crude oil prices trended lower throughout the session marking the lows of the day into the pit close. Early pressure in the crude oil market came from a resolution to the oil workers' strike in Norway and from weaker than expected Chinese oil import data for the month of June. The global oil demand story came under greater scrutiny following the EIA's monthly report that showed another downward revision in 2012 global oil demand. The agency sited lower economic growth forecasts. Another source of weakness in the crude oil market came from an afternoon sell off in US equity markets and gains in the US dollar. Expectations for this week's EIA crude oil stocks report are for a draw in the range of 1.25 to 1.50 million barrels.

Natural gas remains on a bit of a roller coaster ride... big decline on Friday, strong recovery on Monday and yet another sell off today. This type of trading action is very indicative of a market forming a top as well as a market that is laden with uncertainty. The main uncertainty that continues to hover over this market is will the rest of the summer weather result in enough cooling related demand to prevent the industry from hitting storage capacity limitations prematurely.

The EIA in the latest forecast (see below for the main highlights) is projecting inventory at the end of October to hit a record high of 4 TCF. With maximum storage capacity of just 4.1 TCF (EIA numbers) that leaves just 100 BCF storage space available for injections during the month of November... which are common...especially if winter type weather gets a late start. This also assumes that storage capacity is equally distributed in all three regions...which it is not. We could hit capacity limitation in the Producing region well before other regions.

The other issue overhanging this market is what will be the strategy of the utility sector in how much coal versus Nat Gas they consume for power generation. At current prices the economics are favorable to coal and I would expect utilities to burn more coal in lieu of Nat Gas and unless the Nat Gas price falls back to below the $2.70 to $2.75 level this move back to coal will continue. If so hitting record high inventory levels could then occur earlier than the EIA projection of the end of October.

After an early attempt to rally gold prices fell back and in the process the August gold fell back to this week's lows. Adverse currency market action, a noted reversal in equities and selling in a number of physical commodity markets seemed to leave gold in a patently bearish posture. Surprisingly gold was initially lifted on hopes for favorable progression in the Euro zone debt crisis but that story line ultimately seemed to be responsible for the washout in gold prices. In retrospect, seeing evidence of added weakness in the Chinese economy, in the wake of the Chinese trade deficit released seemed to spark fears that more serious slowing was in the offing before the Chinese begin to pull out the really aggressive stimulus guns.


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The Slide in Metals, Corn & Crude Oil

CNBC's Sharon Epperson discusses the day's activity in the commodities markets and looks at where oil and precious metals are likely headed tomorrow.

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Crude Oil Declines as Norway Orders End to Strike

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Crude oil dropped from the highest close in two days after Norway ended a strike by energy workers that had threatened to halt production by western Europe’s largest crude exporter.

Futures slipped as much as 1.1 percent in New York after the Norwegian government ordered compulsory arbitration in the dispute, preventing a lockout of platform workers that was scheduled to start at midnight yesterday. Norway pumped 1.63 million barrels of oil a day in May, or about 1.8 percent of global consumption, data from the Norwegian Petroleum Directorate show.

“Traders are probably taking the premium out of oil now that they think the strike will be settled,” said David Lennox, an analyst at Fat Prophets in Sydney. “It was looking like the strike was going to deteriorate further. That risk premium is certainly coming out of crude.”

Oil for August delivery fell as much as 98 cents to $85.01 a barrel in electronic trading on the New York Mercantile Exchange and was at $85.15 at 11:05 a.m. Sydney time. The contract climbed 1.8 percent yesterday to $85.99, the highest close since July 5. Prices are 14 percent lower this year.

Read the entire Bloomberg article

CME Crude Oil, Natural Gas and Gold Market Recap

August crude oil prices trended higher throughout the US trading session, supported by the lack of progress in resolving an oil workers strike in Norway. Another source of support for the crude oil market came from weakness in the US dollar and ideas that weaker than expected global economic data could prompt central bankers to pursue more monetary stimulus. The product markets were also higher, supported by gains in crude oil and prospect that leaders in China could move to lower domestic gasoline and diesel prices in a maneuver to stoke economic growth.

So far the natural gas futures market has recovered about 2/3 of the loss from Friday's session as the market rethinks the impact on demand from the hot weather in the US even as the economics of coal to gas switching are still biased to the coal side. At the moment the macroeconomics comparing the spot Nymex Appalachian coal price to the spot Nymex Nat Gas price is favorable to the coal side. This coupled with the robust level of coal inventories at many utility sites should result in the utility sector starting to switch back to coal at the expense of Nat Gas for power generation. This is certain to have an impact on demand and will eventually have a negative impact on the underperformance of injections that has been experienced throughout the injection season so far.

On the other hand the massive heat wave that has engulfed a major portion of the US for the last several weeks is cooling down in the south for the next 6 to 10 days. However, the above normal temperatures are projected to return during the 8 to 14 day forecast period. As such Nat Gas cooling demand will likely be above normal for most of the month of July and possibly beyond that. However, the big question is ...will the above normal level of cooling related Nat Gas demand be enough to compensate for the loss of demand from switching back to coal for power generation. I do not think it will be enough and as such I still view the current level of Nat Gas futures prices to be overvalued or better said ahead of the price level that the current fundamentals would support.

Perhaps the gold market was lifted by soaring grain prices or perhaps the gold trade was simply inspired by a revival of easing prospects from the Chinese. It is also possible that gold and other physical commodity markets were lifted as a result of calls to extend the Bush tax cuts for lower incomes. It is also possible that gold saw its fortunes boosted by a bounce in the Euro, which at times was hopeful of some fresh maneuvering from EU officials.

Here's Our "Accurate" Stock Market Predictions on the Next Major Move

The term Stock market predictions is a very controversial topic and does seem to give off a negative/non-credible overtone to most traders, investors and the general public. We all know you cannot predict the market with 100% certainty, but knowing that you can still predict the market more times than not if done correctly. Keep in mind that the term “market prediction” is also known as a market forecast or technical analysis outlook and is nothing more than a estimated guess of where the price for a specific investment is likely to move in the coming minutes, hours, days, weeks and even months.

Getting back on topic, this report clearly shows how the US dollar plays a dominant role in the price of other investments. Understanding how to read the Dollar Index will make you a better trader all around when trading stocks, ETF’s, options or futures.

SP500 Stock Market predictions – 10 Minute Chart:

These charts clearly show the inverse relationship between the stock market and the dollar index. Knowing how to read charts (candle sticks, chart patterns, volume etc…) is not enough to give you a winning edge. You must also understand inter-market analysis as all markets are linked together in some way and the dollar plays a major role in where stock prices will move next. Review the charts and comments below on how I came up with my stock market prediction and trade idea.

Gold Market Prediction – 10 Minute Charts

Gold is another investment which is directly affected by the price of the dollar. Review charts for more details.

Long Term Stock Market Forecast:

The weekly dollar chart is VERY IMPORTANT to watch as a short term trader and long term investor because trend changes in the dollar means you open positions will also likely change direction.

So, if we apply technical analysis to the dollar chart as seen below. You will notice we are able to create a market forecast and predict roughly where price is likely to move and how long it should take to get there. If the dollar can break above the red resistance level then we can expect a rally for 4 – 8 weeks and a price target around the 87-88 level.

If this is the case then stocks and commodities would likely do the inverse price action and move lower, sharply lower…

Stock Market Predictions & Gold Market Forecast Conclusion:

In short, the next weekly candle stick on the dollar chart could be a game changer for those who are long the overall stock market.

I will admit that the current market conditions are not easy to trade because of all the headline news rolling out of Europe each week along with economic data. And I feel as though we have been tip toeing through a mine field for the past 12+ months waiting for extremely negative news are extremely positive news to trigging a wave of buying or selling that will make our jaw drop, but it has yet to happen. Remember always use stops and don’t get over committed in a headline driven market.

If you would like to receive my free weekly analysis like this, be sure to opt-in to my list. 

Just click here to visit at The Gold and Oil Guy and sign up.

Chris Vermeulen

No End in Sight For Norways Oil Workers Strike

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Norway's oil strike looks no closer to ending, with a government mediator saying workers and employers are still "far apart" in a dispute over pay and pensions. The industry association, which includes Exxon Mobil (XOM) and BP (BP), has threatened to halt all output from Tuesday. The tactic is probably designed to force the government to halt the strike, as it has done in the past.

Negotiations failed for a third time today.

From Bloomberg News.....

Norway’s oil strike continued for a 15th day after talks supervised by a state mediator failed to reach a compromise that would prevent the dispute from escalating to include all of the country’s offshore oil and gas production.

“There are no new talks planned and we don’t know where we will go from here,” Kristin Bremer Nebben, a spokeswoman for the Norwegian Oil Industry Association, which represents employers including Statoil ASA (STL), BP Plc (BP/) and Exxon Mobil Corp. (XOM), said in a phone interview today.

6 Things Successful Traders Have in Common

Private Empire - Exxon Mobil And American Power

If you were expecting "Private Empire", the latest book by two time Pulitzer Prize winning author Steve Coll, to serve as a hit piece on Exxon Mobil (XOM) (and "big oil" in general) you'll be somewhat disappointed.

For anyone unfamiliar with his previous work, Steve Coll's earlier books include the highly recommended "Ghost Wars", arguably the definitive geopolitical account of the activities of the CIA and other national intelligence agencies in Afghanistan and Pakistan from the time of the Soviet invasion up to the eve of the 9-11. Ghost Wars won the Pulitzer Prize in 2004 for general non-fiction and was one of the books a newly elected President Barrack Obama was reported to be reading upon entering office.

Steve Coll describes in an interview with Charlie Rose what lead him to want to write Private Empire and how his original idea for the book was to tell a broader story about the oil industry in the style of Daniel Yergin's "The Prize". He soon realized, however, that he needed a central character and Exxon was for him the only logical choice.

Coll's portrait of Exxon begins in March 1989 with the Exxon Valdez oil spill in Prince William Sound, Alaska, an event which made the company the most reviled in the United Sates. The book's timeline spans the subsequent transformation of the company, which was led by CEO Lee "Iron Ass" Raymond, up through its present day stewardship by current CEO Rex Tillerson.

Along the way we learn a great deal about Exxon, including its somewhat peculiar cult like corporate culture, its blockbuster merger with Mobil, its controversial stance and efforts on global warning, the access it enjoyed to political leaders such as Vice President Dick Cheney, its somewhat misleading approach to reporting oil reserves, and the company's record setting financial success. The book in fact makes for a compelling business case study and students of business history, strategy and management will find much of interest.

Read The Polycapitalist entire review



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Crude Oil Distillation and the Definition of Refinery Capacity

A crude oil refinery is a group of industrial facilities that turns crude oil and other inputs into finished petroleum products. A refinery's capacity refers to the maximum amount of crude oil designed to flow into the distillation unit of a refinery, also known as the crude unit.

The diagram below presents a stylized version of the distillation process. Crude oil is made up of a mixture of hydrocarbons, and the distillation process aims to separate this crude oil into broad categories of its component hydrocarbons, or "fractions." Crude oil is first heated and then put into a distillation column, also known as a still, where different products boil off and are recovered at different temperatures.

Source: U.S. Energy Information Administration.  

Lighter products, such as butane and other liquid petroleum gases (LPG), gasoline blending components, and naphtha, are recovered at the lowest temperatures. Mid-range products include jet fuel, kerosene, and distillates (such as home heating oil and diesel fuel). The heaviest products such as residual fuel oil are recovered at temperatures sometimes over 1,000 degrees Fahrenheit.

The simplest refineries stop at this point. Although not shown in the simplified diagram above, most refineries in the United States reprocess the heavier fractions into lighter products to maximize the output of the most desirable products using more sophisticated refining equipment such as catalytic crackers, reformers, and cokers.

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CME Recap Energy Market Report For Friday July 6th

August crude oil prices trended lower throughout the session, weighed down by rising Spanish borrowing costs and a weaker than expected read on June US Non Farm Payrolls. Added downside pressure in the crude oil market came on talk that the oil workers strike in Norway could be nearing a resolution. A rally in the US dollar and weakness in global equity markets put added pressure on the global oil demand backdrop.

This morning's EIA natural gas storage report showed a smaller than expected weekly injection of 39 bcf. August natural gas garnered modest support in the moments following the report, but concerns that prices near the $3.00 level could reduce demand, relative to coal, pressured prices back below $2.80.

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A Shocking Bankers Coup in the Euro Crisis

By Ellen Brown

On Friday, June 29th, German Chancellor Angela Merkel acquiesced to changes to a permanent Eurozone bailout fund—“before the ink was dry,” as critics complained. Besides easing the conditions under which bailouts would be given, the concessions included an agreement that funds intended for indebted governments could be funneled directly to stressed banks.

According to Gavin Hewitt, Europe editor for BBC News, the concessions mean that:

[T]he eurozone’s bailout fund (backed by taxpayers’ money) will be taking a stake in failed banks.

Risk has been increased. German taxpayers have increased their liabilities. In future a bank crash will no longer fall on the shoulders of national treasuries but on the European Stability Mechanism (ESM), a fund to which Germany contributes the most.

In the short term, these measures will ease pressure in the markets. However there is currently only 500bn euros assigned to the ESM. That may get swallowed up quickly and the markets may demand more. It is still unclear just how deep the holes in the eurozone’s banks are.

The ESM is now a permanent bailout fund for private banks, a sort of permanent “welfare for the rich.” There is no ceiling set on the obligations to be underwritten by the taxpayers, no room to negotiate, and no recourse in court. Its daunting provisions were summarized in a December 2011 youtube video originally posted in German, titled “The shocking truth of the pending EU collapse!”:

The treaty establishes a new intergovernmental organization to which we are required to transfer unlimited assets within seven days if it so requests, an organization that can sue us but is immune from all forms of prosecution and whose managers enjoy the same immunity. There are no independent reviewers and no existing laws apply. Governments cannot take action against it. Europe’s national budgets [are] in the hands of one single unelected intergovernmental organization.

Here is the text of some of the ESM’s provisions


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Norway's Statoil is preparing to shut down production on the Norwegian Continental Shelf (NCS) following a notice of lockout from the Norwegian Oil Industry Association (OLF), the company said Thursday in a statement.

A lockout means a complete shutdown of Norwegian oil and gas production, highly possible government intervention and an end to the strike, which is now running into 12 days.

The decision made by the OLF affects all 6,515 members of Industry Energy, the Organisation of Energy Personnel (SAFE) and the Norwegian Organisation of Managers and Executives (Lederne) who are covered by the offshore pay agreements.

"The conflict is deadlocked and the demands are unreasonable," chief negotiator of the OLF Jan Hodneland said in a statement.

The announced lockout will start on July 9, 2012 at 2400 local time (2200 GMT), and all production on the NCS will be halted, Statoil said.

"Statoil is planning a controlled shutdown of production and return of personnel to land from July 9, 2012 at 2400 [local time]. It will take one to four days to shut all production on the NCS, depending on the characteristics and complexity of each field," Statoil added.

The shutdown on the NCS means that Statoil will have to grapple with a production shortfall of 1.2 million barrels of oil equivalent per day. The group's lost revenue resulting from the production stoppage will amount to around $87 million (NOK 520 million) per day, up an eye-popping $57 million (NOK 340 million) from the OLF's earlier estimate on June 27, 2012.

The striking workers are demanding for an early retirement age for offshore workers at 62 but the OLF has argued that their demands are not in line with government reforms.

"The strike could be a short-term factor supporting Brent prices, but not in the long-term as there are ample crude supplies," IHS Pruvin & Gertz managing director Victor Shum told Rigzone.

The NCS contains 70 oil and gas producing fields sited on the following blocks: The North Sea 56, The Norwegian Sea 13 and The Barents Sea 1. Among the affected fields is the Oseberg field which is critical in the oil market as crude produced from it forms part of the Brent Index. The index represents the average price of trading in the 21-day BFOE (Brent Blend, Forties, Oseberg, Ekofisk) market in the relevant delivery month as reported by industry media.

Posted courtesy of Rigzone.Com

China's Top Refineries Cut July Output on Weak Demand

Top Chinese refineries will cut crude oil processing runs in July, following gains in the previous two months, as sluggish demand, poor refining margins and high fuel stocks hurt operations, a Reuters poll showed.

The 12 plants, which make up nearly a third of the capacity in China, the world's No.2 oil consumer, are located mostly in coastal areas, and plan to process 2.88 million barrels per day (bpd) of crude oil this month, the poll showed.

The daily rate, which accounts for about 84 percent of their refining capacity, is expected to be 2 percent, or roughly 60,000 bpd, lower than the actual 2.94 million bpd in June.

Oil demand in China posted in April its first yearly fall in at least three years and edged up only 0.8 percent in May as economic growth slowed.

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Market Giving Major Correction Signs

The SP 500 has rallied up into the 1375/77 pivot areas as I had outlined to my subscribers about 10 days ago on the weekend update as possible highs for C wave up from the 1267 SP 500 lows of June. Many forecasters are now getting very bullish, but I continue to see divergences with The Elliott Wave counts and other indicators that are giving me some short term concerns, and then we can determine if these are long term issues still for the markets.

Today’s Independence Day update shows a new chart pointing out prior “Recovery rally highs” since the May 2011 1370 highs on the SP 500. In each case, a major market correction unfolded when we had the NYMOT indicators at these levels along with Stochastics, CCI, and other Fibonacci indicators I incorporate at various times. Currently, we have the NYMOT indicators at a reading of 307. To understand this in context, its the highest reading in the past two years. Higher than the 1292 SP 500 rally high in October 2011 (From 1074) and higher than any other rally high in the past 24 months.

Adding to that, we have the Stochatics indicators at extreme short term highs and the CCI index is nearing the levels it read at the recent 1363 pivot highs. Finally, further puzzle pieces continue to show divergences in the Elliott Wave patterns. The rally from 1267-the current 1375 levels can’t be interpreted in my opinion as a 5 wave rally (which would be bullish), instead its an overlapping 3 wave rally in my views., or a double zig zag. These types of rallies are corrective rallies against a prevailing trend, which was down in to early June.

The rally to 1375 areas is actually in the zone I discussed a few weeks ago, and still in the 1386 or lower Fibonacci zone I’ve outlined as a C wave target for an ABC rally from 1267 June 2012 lows. My work still gives a model of 1422-1267 as 5 waves down, and 1267-current as a zig zag corrective pattern up. The market will soon tip it’s hand I think after this holiday week is over and we see a bit more volume return next week.

With all of this said, it is difficult to be too bearish given the 52 week highs in many blue chip stocks as well as the strong advance-decline lines and recovery in some of the tech stocks of late. When you get a lot of conflicting signals like this, I try to fall back on a variety of indicators and clues to help clear up the clouds of the market.

In conclusion, near term I will be very surprised if at a minimum we do not have significant pullback in the market next week. The rally could sneak a bit higher during this holiday light volume week, so lets look to next week for volumes to return and tell the tale. Taking some gains off the table in the coming 1-2 trading days is probably not a bad move.

By David A. Banister- Chief Strategist The Market Trend Forecast


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CME Group Energy Market Report Recap for July 4th

Is the SP 500 Closing in on a Top?

August crude oil prices traded sharply higher during the US session and climbed to their highest level since May 31st. There were a number of supportive features supporting the advance including, hopes that global central bankers might offer up more stimulus to bolster growth, mounting tensions in Iran and reduced North Sea output. Reports earlier that Iran had successfully test fired mid range missiles was seen contributing to the fear premium in the crude oil market, by raising the threat of supply disruptions.

This comes along with talk that lawmakers were working toward a bill to block oil tanker traffic through the Straits of Hormuz. The oil workers strike in Norway continues and has reduced North Sea production by around 250,000 barrels per day. Further support for the crude oil market might have come on expectations that this week's EIA crude stocks report will show a draw in the range of 2.25 to 2.5 million barrels, which is a bit larger than the five year average draw for this week of the year of 1.1 million barrels.

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Is the SP 500 Closing in on a Top?

Friday’s strong move to the upside caught a lot of traders on the wrong side of the market. Regardless of whether financial pundits refer to it as a short squeeze or simply panic level buying is largely irrelevant. Time and price are always the final arbiters of financial markets. Price on Friday was clearly telling us that too many market participants were shorting equities and the Euro.

The news coming out of the European Summit is what drove prices higher according to most media outlets. However, few traders have actually taken the time to research the fact that Germany has not technically agreed to the European Stability Mechanism legislation at this point.

The German Constitutional Court has delayed the passage of the ESM legislation on the grounds that this court needs to affirm the agreement is constitutional. Several high profile politicians in Germany have allegedly filed multiple law suits surrounding the new ESM law.

Should the German Constitutional Court determine the ESM legislation is unconstitutional a referendum will go before the German people. The last thing the Eurocratic blue bloods and their banking cartel minions want is regular people actually having a say in the outcome of the Eurozone project.

Ultimately the German people do not appear to be in favor of propping up the rest of Europe in exchange for more empty promises of austerity. Furthermore, the German people recognize that they are taking on a massive risk by loaning money to insolvent banks and other Eurozone sovereigns who have not proven to be prudent with managing their current fiscal conditions.

The decision made by the German high court could have a far-reaching impact on the price action in European financial markets as well as in U.S. domestic financial markets. The outcome of the forthcoming decision will carry far more weight than Friday’s June unemployment report. Already I am reading that should the unemployment number come in significantly weaker than expected Ben Bernanke may work to convert Operation Twist into full blown QE III at the next FOMC Meeting.

The addiction to cheap money by large institutional banks will not end until the Fed is no longer able or willing to continue to print money. Should economic data continue to weaken going into earnings season I am sure the banter regarding QE III will increase at lightning pace and bad news for the economy will be good news for stocks. Poor economic data will increase the likelihood for additional liquidity being provided through a 3rd Quantitative Easing initiative.

Leaving the macroeconomic data aside and focusing on market technicals, we find several unsettling situations in a variety of underlying assets and indicators. The warnings are largely falling on deaf ears as the equity bull parade continues. Before we talk about the S&P 500 Index directly, perhaps we should examine some of the indicators and underlying assets that are sending out bearish smoke signals.

The first chart I would draw your attention to is the McClellan Oscillator which is a widely followed and focuses on market breadth as a possible market indicator for tops and bottoms. Note the key high and low points of the Oscillator and how they correspond with the S&P 500 Index.

Read the entire article and see the charts for "Is the SP 500 Closing in on a Top?"

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