Crude Oil Prices Fall Victim to China Syndrome

New measures by Chinese authorities to curb bank lending reversed a rally in energy prices early in the week, bringing West Texas Intermediate futures down more than 4% in the second half of the week to below $75 a barrel by Friday.

China continued its efforts to slow down its economy and prevent overheating, and told some banks to stop making certain kinds of loans. The Chinese move on Wednesday hit all commodities across the board, from gold to lead, with the prospect of slower economic growth in the country.

Not even the news that China’s oil imports in December exceeded 5 million barrels of oil a day for the first time could stop the decline.

U.S. data, meanwhile, showed that demand for oil had slipped 1.8% in the four weeks leading to Jan. 15 from the like period a year ago, when the U.S. economy was in the grip of a recession. Crude inventories declined in the week, against expectations, but gasoline inventories rose. Continued milder weather in the Northeast further dampened heating oil prices.

News that utilization of U.S. refinery capacity fell to its lowest levels since the 1980s drove home the point that demand for distillates was lagging. Refinery utilization in the previous week dropped 2.9 percentage points to 78.4% of the 17.6 million barrels per day total capacity, the lowest level in two decades except for periods when hurricanes shut down refinery operations.

The U.S. and China are the world’s top two oil-consuming countries, so the signs of weakening demand in both were bearish for energy prices.

As if all that wasn’t enough, the announcement by the White House on Thursday of tough new measures to limit banks’ proprietary trading threw a double whammy in energy markets. There were concerns that Wall Street banks, among the biggest energy traders, would have to cut back their activities. Plus, the news sent equities into a tailspin, and dragged down commodities prices.

The uncertainty about U.S. bank restructuring reversed the dollar’s climb against the euro, which had also weighed on crude oil prices. After dropping below $1.41, the euro bounced back up above that level at the end of the week.

But continuing concerns about Greece’s debt and new uncertainty about whether Ben Bernanke will be confirmed for a second term as Federal Reserve chairman supported the dollar and were likely to dampen any strong rise for the euro, analysts said.

By Darrell Delamaide for Oil Price.Com

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ExxonMobil Sees Alaska as Major Natural Gas Supplier

With large North Slope resources, Alaska has the opportunity to be a major supplier of natural gas to North America, Rich Kruger, president of ExxonMobil Production Company, said today in a keynote address at the 2010 Meet Alaska Conference in Anchorage.

The development of natural gas at Point Thomson stands out as a great example of the opportunity. Kruger said, "It is currently one of Alaska's largest active North Slope projects in execution phase, providing new jobs and investment in the state. ExxonMobil wants to see Point Thomson developed. We believe it underpins the success of the Alaska Pipeline Project. The owners' commitment to achieving progress at Point Thomson is demonstrated by investments which have now topped $1 billion."

Kruger also emphasized ExxonMobil's readiness to work with the state to resolve the Point Thomson Unit dispute and put in place predictable and durable fiscal terms necessary to underpin the pipeline.....Read the entire article.

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Crude Oil Ends The Week Lower, What's The Next Downside Target?

Crude oil closed lower on Friday as it extends last week's decline. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain bearish signal that sideways to lower prices are possible near term. If March extends this week's decline, the 87% retracement level of the December-January rally crossing at 73.95 is the next downside target. Closes above the 20 day moving average crossing at 79.98 would confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 79.33. Second resistance is the 20 day moving average crossing at 79.98. First support is today's low crossing at 74.33. Second support is the 87% retracement level of the December-January rally crossing at 73.95.

Natural gas closed higher on Friday and above last Thursday's high crossing at 5.804 tempering the bearish outlook in the market. The high range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are turning neutral to bullish signaling that sideways to higher prices are possible near term. If February renews last week's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target. First resistance is today's high crossing at 5.869. Second resistance is the reaction high crossing at 6.108. First support is last Tuesday's low crossing at 5.354. Second support is the 50% retracement level of the December-January rally crossing at 5.314.

The U.S. Dollar closed lower due to profit taking on Friday as it consolidated some of this week's rally. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If March extends this week's rally, the 38% retracement level of the 2009-2010 decline crossing at 79.71 is the next upside target. Closes below the 10 day moving average crossing at 77.59 would confirm that a short term top has been posted. First resistance is Thursday's high crossing at 79.00. Second resistance is the 38% retracement level of the 2009-2010 decline crossing at 79.71. First support is the 20 day moving average crossing at 77.79. Second support is Tuesday's low crossing at 77.59.

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The Weak End Trading Report

It’s been a crazy week for stock and futures traders as the market moved up and down like a yo-yo, finally closing down sharply on the week.

Earlier this week I posted a report showing the Volatility Index (VIX) and how it was then trading at an extreme low level which triggered the sharp market corrections. Since that post the VIX has now risen over 30% as traders start selling positions to lock in gains.

Take a quick looks at the Volatility Index chart:



Chart of S&P500 Daily Price Action
Since the low in the volatility index a few days ago we have seen the S&P500 drop over 3.4%. This sharp sell off in equities and ES futures has happened in a very short period of time making the overall market oversold when looking at short time frame of the daily chart. With the market oversold and also trading near a support level I expect we could get a weak bounce lasting 1-5 days before rolling over for another wave of selling.

There are several reasons I feel this will happen:
1. Experience from seeing setups/patterns like this across many different indexes and investment vehicles leads me to believe distribution of shares are now starting to flood the market.
2. The market sentiment surveys are still extremely bullish. What does this mean? Well if almost everyone is bullish, then who is left to buy?
3. As the good old saying goes “Buy the Rumor, Sell the News”. With earning season starting I cannot help but think everyone (smart money) will be selling into the good earnings news as dumb money buys into stocks as they meet or beat earnings. This inflow of dumb money is exactly what the big guys need to unload massive amounts of shares at a premium. Also I would like to point out that earning estimates have been very low that past year which I think has been on purpose for the institutions. This makes it very easy for companies to beat estimates each quarter giving the warm cozy feeling to retail investors (us, the small guys)
4. Also Chares Biderman on Bloomberg pointed out the other day that the market looks to be manipulated by the feds as virtually all the gains have been produced after hours in the futures market.



Chares Biderman Video
The United States in my opinion is much more corrupt than most people think and I don’t really want to get into this rather large and interesting debate at the moment. But Charles Biderman has some very interesting points which fall in line with my thinking about how much of what is happening is really natural and what is completely manipulated in the past 10 months of rising market prices.

Must Watch 5 Minute Video



Quick Technical Chart Update on Gold
I thought this chart may be of interest to some of you as it shows two perfect textbook plays on the 4hr gold futures trading chart.

As you can see the first pattern is a reverse head & shoulders pattern. This is bullish and a breakout above the neckline would signal a buy point. Now if we use basic technical analysis with this pattern we can measure the potential move up by looking reverse head and shoulders pattern. You take the low of the upside down head $1075, and go straight up to the neckline at $1117. That is a total of $42. So if we add that $42 to the breakout point above the neckline then we can have a price target of $1117 + $42 = $1159.

As we can see the price of gold over the next couple days rallied to the $1160 level. Trading is not that easy but that is how it works in general. The hard part is knowing how to manage your trade and I scale out of positions as the price matures reaching short term resistance levels and by adjusting my stops accordingly to lock in maximum gains while minimizing downside risk.

A couple days later the same chart formed a regular Head & Shoulders and has since moved its potential measured move. I m not expecting a weak bounce in gold as with the overall stock market, but I am still not sure that the selling is over.



The “Weak’end Trading Conclusion:
In short, the market was turned upside down this week. Those who follow me should be in cash or mostly in cash as this drop was anticipated a few days ago.

Trading during fast moving markets is much tougher for swing traders as pivot points for indexes and commodities tend to happen during the intraday or during futures trading at night. High volatility like this is fantastic for active traders who focus on shorter time frames like the 4hr and 60minute charts, as opposed to trading just the daily chart and entering and exiting positions at the open and close each day.

I continue to watch the market and plan on providing some of these short term setups on the 4 hour chart using both the GLD etf gold fund and the YG Gold futures mini contract.

If you are interested in Trading Gold Futures and other contracts please just click here to receive my Free Futures Trading Newsletter.

Chris Vermeulen "The Gold and Oil Guy"



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Phil Flynn: They Are So Tired

They're so tired, they haven't slept a wink. They're so to tired, their mind is on the blink. They wonder if they should get up and fix themselves a drink but what they really are wondering where all the bullish momentum has gone. I mean come on it seemed like the oil bulls were on top of the world as the year started on such a bullish note. The bulls had their arguments like cold weather and China but with every passing day those arguments become more tired.

On the other hand the bearish case is wide awake. We have weak demand, ample inventories, rising OPEC and non OPEC production and questions about the continued growth in China oil demand. Now throw in some proposed new banking regulations that could zap demand and it's the bull's worst nightmare. No wonder they can't get any sleep. The bull market and the bulls are just downright tired.

The Energy Information Agency weekly report did not help out the bullish case. The EIA did report that oil supplies fell modestly (400,000 barrels) and that we had a big drop in distillates (3.3 million barrels) but are we not to expect that when the weather is cold? And we are still above the average range in both categories. At the same time we had a huge build in gasoline supply 3.3 million barrels and a historical low refining run rate of 78.4 % which just seems too scream out weak non-weather related demand.

Of course the oil bulls would tell you that it is not about US oil demand but demand from China. Yet is it possible that the oil demand story is not all it seems or at the very least the oil market got far ahead of the China demand story. I have been raising this issue for some time. Yesterday I warned that despite the fact of an explosive Chinese growth rate of 10.7%, the impact of China raising reserve rates and desperately reigning in credit could cause problems for the oil bulls.

I warned that even though it raised market fears, the Chinese government will take even more steps to reign in credit. I said that the market's reaction to the banking news could really be saying something more profound about how the market feels about the Chinese economy and even more, the health of the Chinese banking system as a whole.....Read the entire article.

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Crude Oil Falls to Lowest in a Month on Concerns Over U.S. Demand, China

Crude oil fell to a one month low in New York after equities dropped on President Barack Obama’s proposed restrictions on risk taking at financial institutions and on speculation China will raise interest rates. Oil fell as much as 2 percent as stocks tumbled on the U.S. plan to bar banks from trading for their own accounts. U.S. refineries ran at 78.4 percent of capacity last week, the lowest rate outside the Atlantic hurricane season since at least 1989, an Energy Department report yesterday showed.

“We’re watching the stock market and what’s going on in China,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “The market is still digesting the massive drop of the last couple days, so we probably won’t see any big move in the next couple days.” Crude oil for March delivery declined $1.17, or 1.5 percent, to $74.91 a barrel at 10:15 a.m. on the New York Mercantile Exchange. Futures touched $74.58, the lowest level since Dec. 23. March oil has dropped 4.4 percent this week as declines in equity markets dented investor confidence and a stronger dollar reduced the appeal of commodities as an alternate investment.....Read the entire article.

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Crude Oil Daily Technical Outlook For Friday

Crude oil's correction from 83.95 resumed and dropped to as low as 75.82 so far. While another fall could still be seen, downside is expected to be contained by 61.8% retracement of 68.59 to 83.95 at 74.46 and bring strong rebound. Above 78.25 minor resistance will flip intraday bias back to the upside for 83.95 resistance first. However, note that sustained trading below 74.46 fibo support will argue that rise from 68.59 has completed and will turn focus back to this key support level.

In the bigger picture, whole medium term rise from 33.2 is still in progress but after all, there is no change in the view that it's merely a correction to fall from 147.27. Therefore, we'd continue to look for reversal signal in case of another rise and as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. On the downside, however, considering continuous bearish divergence condition in daily MACD, a break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Crude Oil Lower, Oversold, But Signals Remain Bearish

Crude oil was steady to slightly lower overnight as it extends this week's decline. Stochastics and the RSI are oversold but remain bearish signaling that sideways to lower prices are possible near term.

If March extends this week's decline, the 75% retracement level of the aforementioned rally crossing at 75.46 is the next downside target. Closes above the 20 day moving average crossing at 80.05 are needed to confirm that a short term low has been posted.

Friday's pivot point, our line in the sand is 76.70

First resistance is the 10 day moving average crossing at 79.46
Second resistance is the 20 day moving average crossing at 80.05

First support is the overnight low crossing at 75.62
Second support is the 75% retracement level at 75.46

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Could There Be....More Upside in Chevron?

Stephanie Link, director of research for Action Alerts Plus Portfolio, reveals why they still love Chevron and are buying the stock despite its recent 40% move.



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Stronger Dollar, Demand Concerns Keep The Advantage to the Crude Oil Bears

Crude oil closed lower on Thursday as it extends last week's decline. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI remain bearish signal that sideways to lower prices are possible near term.

If March extends last week's decline, the 75% retracement level of the December-January rally crossing at 75.46 is the next downside target. Closes above the 10 day moving average crossing at 80.21 would confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 80.02
Second resistance is the 10 day moving average crossing at 80.21

First support is today's low crossing at 75.66
Second support is the 75% retracement level of the December-January rally crossing at 75.46

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Natural gas closed higher due to short covering on Thursday but the mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI are bearish hinting that additional weakness is possible near term.

If February renews last week's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target. Closes above last Thursday's high crossing at 5.804 would temper the near term bearish outlook in the market.

First resistance is last Thursday's high crossing at 5.804
Second resistance is the reaction high crossing at 6.108

First support is last Tuesday's low crossing at 5.354
Second support is the 50% retracement level of the December-January rally crossing at 5.314

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The U.S. Dollar closed higher on Thursday but well off session highs due to profit taking, which erased most of its early gains. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.

If March extends this week's rally, the 38% retracement level of the 2009-2001 decline crossing at 79.71 is the next upside target. Closes below the 10 day moving average crossing at 77.52 would confirm that a short term top has been posted.

First resistance is today's high crossing at 79.00
Second resistance is the 38% retracement level of the 2009-2001 decline crossing at 79.71

First support is the 20 day moving average crossing at 77.79
Second support is Tuesday's low crossing at 77.52

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Oil Extends Drop After Report Shows Increase in U.S. Gasoline Inventories

Crude oil fell to a four week low after a U.S. Energy Department report showed that refineries slashed operating rates as fuel demand declined. Plants ran at 78.4 percent of capacity last week, the lowest rate since September 2008 when hurricanes struck the Gulf of Mexico. Gasoline supplies surged to the highest level since March 2008. Fuel use in the past four weeks fell 1.8 percent from a year earlier. Oil also dropped as the dollar strengthened and stocks declined. “Refineries aren’t running and we still got a big build in gasoline inventories,” said Phil Flynn, vice president of research at PFGBest in Chicago. “This is a signal that demand is very weak in the U.S., and there is no sign that it will increase anytime soon.”

Crude oil for March delivery fell $1.22, or 1.6 percent, to $76.52 a barrel at 11:57 a.m. on the New York Mercantile Exchange. Futures touched $76.02, the lowest level since Dec. 23. Oil traded at $77.41 before the release of the report at 11 a.m. in Washington. The greenback strengthened after a report said the European Union was preparing a loan for Greece, which Finance Minister George Papaconstantinou denied.
The U.S. currency traded at $1.4095 per euro, from $1.4106 yesterday. The greenback touched $1.4029, the highest level since July 30. The Standard & Poor’s 500 Index slipped 1.5 percent to 1,121.37 and the Dow Jones Industrial Average declined 1.8 percent to 10,416.79.....Read the entire article.

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Crude Oil Bulls Struggle to Hold the 50% Retracement Level

Crude oil was steady to slightly lower overnight but remains above the 50% retracement level of the December-January rally crossing at 77.41. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near-term.

If February extends this month's decline, the 62% retracement level of the aforementioned rally crossing at 75.85 is the next downside target. Closes above the 10 day moving average crossing at 80.00 are needed to confirm that a short term low has been posted.

Thursday's pivot point for crude oil is 78.08

First resistance is the 20 day moving average crossing at 79.59
Second resistance is the 10 day moving average crossing at 80.00

First support is Tuesday's low crossing at 77.07
Second support is the 62% retracement level of the December-January rally crossing at 75.85

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Crude Oil Technical Outlook For Thursday Morning

Intraday bias in crude oil remains neutral as it's still staying is tight range above 76.76. Another fall is expected as long as 79.62 minor resistance holds and below 76.76 will target 83.95 towards 61.8% retracement of 68.59 to 83.95 at 74.46. But downside should be contained there and bring rally resumption. On the upside, above 79.26 minor resistance will flip intraday bias back to the upside for retesting 83.95 resistance first. Further break of 83.95 high will target upper trend line resistance at 87/88 level again. However, note that sustained trading below 74.46 fibo support will argue that rise from 68.59 has completed and will turn focus back to this key support level.

In the bigger picture, whole medium term rise from 33.2 is still in progress but after all, there is no change in the view that it's merely a correction to fall from 147.27. Therefore, we'd continue to look for reversal signal in case of another rise and as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. On the downside, however, considering continuous bearish divergence condition in daily MACD, a break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Choppy SP500, Gold Stock Meltdown and Dollar Strengthens

From guest blogger Chris Vermeulen....

For the past few weeks I have been expecting the market to correct. By looking at the price action on the weekly and daily charts we can see that there has not been any real pullback since November and that is important to note. Without regular market corrections stocks start to become over bought meaning everyone has/is buying them and no real sellers have jumped off the trend. So when the price in an over bought market starts to slide lower we generally see everyone rush to hit their sell buttons. This is what causes the high volume breakdowns similar to the GLD (Gold) breakdown last December.

Another way of getting a feel for the market to know if it is over bought is to look at market sentiment for bulls vs. bears (buyers vs. sellers). Currently almost everyone is bullish and with this high of a reading we must start protecting our positions by tightening stops and/or get ready to play the coming correction with a short term trading strategy.

We can add another level of analysis to assist our understanding of the market if we look at the 60 minute charts of the SPY & IBM.

The chart below of the SPY (SP500) clearly shows we are in choppy times. With the majority of investors buying up stocks left, right and center because they are bullish on both the economy and individual companies, we have continued to see the index crawl higher. This has been going on for almost 3 months now but the more recent price action in the SPY chart clearly shows there are some BIG sellers unloading positions into this buying pressure. When the big sellers slow their selling we see the price drift back up until selling kicks back in. This is a warning signal for lower prices in the coming days.

The IBM chart shows a perfect example of the ‘Buy on the Rumor – Sell on the News’ saying we all know. The share price of IBM ran up into their earning news as traders know IBM is great for beating estimates. Once the great news came out which actually beat the estimates, the price sold off. This is happening everywhere with stocks.

In short, the market looks top heavy and has also rallied into earning season. These two points really have me on edge for taking a long trade at the moment.



Gold Stocks and the Dollar

The HUI (Gold Stock Index) has been on fire the past 10 months. Both gold and gold stocks have been leading the market higher. But the past month we have seen gold stocks under perform the SP500 and as of today are testing a key support level. Only time will tell if it bounces or breaks, so keep a close eye on your positions.

I use the UUP etf of the US Dollar to show the price action of today’s price move. The US Dollar is now above a key resistance level and has started to move higher. If the Dollar continues higher commodities across the board will have downward pressure. This could trigger a large sell off in the gold and gold stocks which I think are still over bought using a short term time frame.



Gold & Oil Futures Trends

The trend of gold and oil has been down the past few days. Gold broke down in the past 24 hours in overnight trading which triggered a wave of selling when the US market opened.

Gold and oil are currently trading between key support and resistance levels. I am looking for gold to drift back up to the $1130 level where I will look for a short setup as the current price action is not bearish on the intraday charts.

Oil is still bullish so I am not really looking to short it at this time. I will wait for another low risk buy signal.



Commodity Trading Conclusion

I feel the broad market could be ready for a large correction ranging from 5-10%. I am calling it a correction as I want to stay positive thinking. But it could be the start of a major market top. Market tops tend to be a process and take several months to roll over. So let’s focus on protecting our money and wait for a pullback that will allow us to load up with some great positions in the coming weeks.

Patience is how money is made in the market. Waiting for the market to come to you is vital for success. Also having the patience to let winners run by scaling out (selling a portion) of a position when the price reaches a support or resistance level makes it easier to let them run. Each time you sell some of a position you are locking in a profit and lowering your risk for the balance of that trade.

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Crude Oil Bears Take a Clear Near Term Advantage

Crude oil closed lower on Wednesday as it extends last week's decline. The low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI remain bearish signal that sideways to lower prices are possible near term.

If February extends last week's decline, the 62% retracement level of the 2008 decline crossing at 75.85 is the next downside target. Closes above the 10 day moving average crossing at 80.55 would confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 79.39
Second resistance is the 10 day moving average crossing at 80.55

First support is Tuesday's low crossing at 76.76
Second support is the 62% retracement level of the 2008 decline crossing at 75.85

Can you learn to trade crude oil in just 90 seconds?

Natural gas closed lower on Wednesday and the low range close sets the stage for a steady to lower opening on Thursday. Stochastics and the RSI are neutral to bearish hinting that additional weakness is possible near term.

If February extends last week's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target. Closes above last Thursday's high crossing at 5.804 would temper the near term bearish outlook in the market.

First resistance is last Thursday's high crossing at 5.804
Second resistance is the reaction high crossing at 6.108

First support is last Tuesday's low crossing at 5.354
Second support is the 50% retracement level of the December-January rally crossing at 5.314

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The U.S. Dollar closed sharply higher on Wednesday and above the 20 day moving average crossing at 77.79 confirming that a low has been posted. The high range close sets the stage for a steady to higher opening on Thursday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term.

If March extends this week's rally, December's high crossing at 78.77 is the next upside target. Closes below the 10 day moving average crossing at 77.48 would confirm that a short term top has been posted.

First resistance is today's high crossing at 78.64
Second resistance is December's high crossing at 78.77

First support is the 20 day moving average crossing at 77.79
Second support is Tuesday's low crossing at 77.09

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Ready to Break or is it Hit The Brakes?

Can the oil bulls catch a break as the Senate Super Majority is broken? Well maybe they might have if it weren’t for the fact that China is hitting the brakes.

The election in Massachusetts gave oil bulls a thrill but news today out of China may change that bullish mood. The petroleum market reversed course yesterday as the market correctly predicted that Republican Scott Brown would pull off an upset victory in the Massachusetts special Senate campaign to fill Senator Ted Kennedy’s vacant seat. Or as Senate elect Brown would say “The people’s seat”. The man who will block the Democrats super majority and vote against the universal health care bill sent healthcare stocks soaring helping inspire the Dow on to 115.78 point rally turning oil around on its coattails. Yet today we may see the oil market come back down to earth as reports out of China may once again zap that bullish momentum.

Just when the oil bulls thought they might catch a break, China put the squeeze on. Reuter’s News reported that the Chinese government has told several major Chinese banks to hit the brakes by making them increase their reserve requirement ratio by half a percentage point. Not only that they told these lending institutions to stop lending money for the rest of this month.....Read the entire article.

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Oil Tumbles on Dollar Strength, Forecast of U.S. Supply Gain

Crude oil fell the most in a month as a stronger dollar reduced the appeal of commodities and on speculation that U.S. inventories increased. Oil dropped as much as 2.6 percent as the dollar climbed against the euro after China took steps to curb lending and as Greece’s bonds tumbled. Prices also decreased on speculation that a government report tomorrow will show that U.S. stockpiles rose last week. “We continue to be at the mercy of the financial markets,” said Gene McGillian, an analyst and broker at Tradition Energy in Stamford, Connecticut. “Investors now treat oil as an asset class.”

Crude oil for February delivery fell $1.85, or 2.3 percent, to $77.17 a barrel at 11:17 a.m. on the New York Mercantile Exchange. Oil is heading for the biggest one day decline since Dec. 9. The February contract expires today. The more active March contract declined $1.78, or 2.2 percent, to $76.54. Chinese regulators asked some of the nation’s banks to limit credit after banks lent a record 9.59 trillion yuan ($1.4 trillion) last year. Cuts in Greece’s credit rating last month fueled investor concern that the country could be forced out of Europe’s single currency. The dollar traded at $1.41 per euro, up 1.3 percent from $1.4288 yesterday. The greenback touched $1.4093, the highest level since Aug. 19. A stronger dollar reduces the appeal of commodities as an alternative investment.....Read the entire article.

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China, B of A News Drives Demand Concerns, Here's Your Numbers

Crude oil was lower overnight but remains above the 50% retracement level of the December-January rally crossing at 77.41. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If February extends this month's decline, the 62% retracement level of the aforementioned rally crossing at 75.85 is the next downside target. Closes above the 10 day moving average crossing at 80.58 are needed to confirm that a short term low has been posted.

Wednesday's pivot point, our line in the sand is 78.62

First resistance is the 20 day moving average crossing at 79.41
Second resistance is the 10 day moving average crossing at 80.58

First support is Tuesday's low crossing at 77.07
Second support is the 62% retracement level of the December-January rally crossing at 75.85

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Natural gas was lower overnight as it extends Tuesday's decline. Stochastics and the RSI are neutral signaling that sideways to lower prices are possible near term. If February renews this month's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target.

Closes above the 20 day moving average crossing at 5.721 would temper the near term bearish outlook in the market.

Natural gas pivot point for Wednesday is 5.563

First resistance is the 10 day moving average crossing at 5.671
Second resistance is the 20 day moving average crossing at 5.721

First support is last Tuesday's low crossing at 5.354
Second support is the 50% retracement level of the December-January rally crossing at 5.314

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The U.S. Dollar was overnight and trading above the 20 day moving average crossing at 77.78. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 77.78 would confirm that a short term low has been posted while opening the door for a test of December's high crossing at 78.77.

If March renews the decline off December's high, the 50% retracement level of the November-December rally crossing at 76.66 is the next downside target.

First resistance is the overnight high crossing at 78.26
Second resistance is December's high crossing at 78.77

First support is Tuesday's low crossing at 77.09
Second support is last Wednesday's low crossing at 76.74

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Crude Oil and Natural Gas Technical Outlook For Wednesday Morning

Nymex Crude Oil (CL)

Crude oil dipped further to 76.76 but recovered strongly since then. Downside momentum remains unconvincing with 4 hours MACD staying above signal line and intraday bias is still neutral. Nevertheless, note that another fall is expected as long as 79.62 minor resistance holds and below 76.76 will target 83.95 towards 61.8% retracement of 68.59 to 83.95 at 74.46. But downside should be contained there and bring rally resumption. On the upside, above 79.26 minor resistance will flip intraday bias back to the upside for retesting 83.95 resistance first. Further break of 83.95 high will target upper trend line resistance at 87/88 level again. However, note that sustained trading below 74.46 fibo support will argue that rise from 68.59 has completed and will turn focus back to this key support level.

In the bigger picture, whole medium term rise from 33.2 is still in progress but after all, there is no change in the view that it's merely a correction to fall from 147.27. Therefore, we'd continue to look for reversal signal in case of another rise and as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. On the downside, however, considering continuous bearish divergence condition in daily MACD, a break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

Nymex Natural Gas (NG)

Natural gas' sideway consolidation is still in progress and intrady bias remains neutral. With 5.850 minor resistance intact, another fall cannot be ruled out. Below 5.354 will bring deeper pull back towards 61.8% retracement of 4.157 to 6.108 at 4.902. On the upside, break of 5.850 minor resistance will indicate that pull back from 6.108 has completed and will flip intraday bias back to the upside for a retest on 6.108 resistance.

In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005 and might have completed at 2.409 already. Rise from 2.409 is still in progress and should target 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. On the downside, break of 4.157 support is needed to indicate that medium term rise from 2.409 has completed. Otherwise, outlook is neutral at worst even in case of deep pullback.....Nymex Natural Gas Continuous Contract 4 Hours Chart.

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Crude Oil Falls as Dollar Strengthens, U.S. Inventories Forecast to Gain

Crude oil fell in New York on concern China may step up efforts to curb credit growth and on a forecast stockpiles in the U.S. will increase. Oil also pared some of yesterday’s gains as the dollar strengthened against the euro, reducing the appeal of commodities as investments. Chinese regulators asked some of the nation’s banks to limit lending after banks lent a record 9.59 trillion yuan last year and stocks surged. U.S. crude inventories probably climbed for a third week through Jan. 15, according to a Bloomberg News survey before an Energy Department report tomorrow.

“The speculation in stocks spooked the Chinese government, they don’t want to create a bubble,” said Gordon Kwan, head of regional energy research at Mirae Asset Securities Ltd. in Hong Kong. “Oil price will drift between $78 and $82. If the dollar continues to rise, it will have an impact on oil in the second quarter.” Crude oil for February delivery fell as much as 65 cents, or 0.8 percent, to $78.37 a barrel on the New York Mercantile Exchange, and traded at $78.38 at 1:06 p.m. Singapore time. February futures expire today. The more-active March contract declined 63 cents, or 0.8 percent, to $78.69.

Yesterday, the February contract gained $1.02, or 1.3 percent, to settle at $79.02 a barrel. Trades were combined with those from Jan. 18 because of the Martin Luther King Jr. holiday in the U.S. The dollar climbed to $1.4214 per euro as of 1:05 p.m. in Tokyo from $1.4288 yesterday in New York. It earlier strengthened to $1.4188, the highest level since Sept. 1.....Read the entire article.

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You’ve Lost That Bullish Feeling

You lost that bullish feeling, lost the bullish feeling. You’ve lost that bullish feeling now it’s gone, gone, gone.

The petroleum complex lost that bullish feeling failing to build upon that cold weather inspired bullish promise. After starting the year like a bullish gangbuster the oil markets seem to be coming back to earth as the supply side just gets harder to ignore. Crude ended last week on a 5 day losing streak as US inventories increased and the International Energy Agency added to the building bearish momentum and the key area for oil to take out is the 7700 a barrel range. Now the March contract has the bulk of the open interest and the market seems to fail to take out major support point during these roll over periods but the clock seems to be running out on the oil bulls.

Let’s face it, if you are very bullish what are your bullish arguments? The best one is China demand growth. Yet since China seemed to take steps to slow the economy by raising reserve requirements on their banks, that seemed to take some of the sting out of your best bullish argument. Yet overnight the Wall Street Journal reported that the Chinese Premier Wen Jiabao said that the [Chinese] government plans to maintain "reasonable and ample" money and credit supply in the first quarter, signaling it is unlikely to adopt drastic tightening measures before the domestic economy recovers further. Those comments seemed to give oil a bit of a bounce after testing the $77 a barrel range.

Mr. Wen also said Beijing aims to curb speculative property purchases as part of efforts to promote a healthy and stable development of the domestic property market. Wow, why didn’t Barney Frank think of that? He also said that China's government will take steps to ease energy supply bottlenecks in the first quarter and stabilize agricultural product price rises. Agricultural prices rises. Is that not inflation? Oops, I forgot to exclude food and energy.....Read the entire article.

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Where is Crude Oil Headed on Wednesday?

CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed tomorrow.




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Crude Oil Closes Higher But Remains Below 20 Day Moving Average

Crude oil closed higher due to short covering on Tuesday as it consolidated some of last week's decline but remains below the 20 day moving average crossing at 79.24 as it consolidated some of last week's decline. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain bearish despite today's rebound signaling that sideways to lower prices are possible near term.

If February extends last week's decline, the 62% retracement level of the 2008-decline crossing at 75.85 is the next downside target. Closes above the 10 day moving average crossing at 80.97 would confirm that a short term low has been posted.

First resistance is the 20 day moving average crossing at 79.24
Second resistance is the 10 day moving average crossing at 80.97

First support is today's low crossing at 76.76
Second support is the 62% retracement level of the 2008 decline crossing at 75.85

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Natural gas closed lower on Tuesday but the mid-range close sets the stage for a steady opening on Wednesday. Stochastics and the RSI are turning neutral to bullish hinting that additional short covering is possible near term.

Closes above last Thursday's high crossing at 5.804 would temper the near term bearish outlook in the market. If February extends last week's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target.

First resistance is last Thursday's high crossing at 5.804
Second resistance is the reaction high crossing at 6.108

First support is last Tuesday's low crossing at 5.354
Second support is the 50% retracement level of the December-January rally crossing at 5.314

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The U.S. Dollar closed higher on Tuesday and above the 10 day moving average crossing at 77.40 signaling that a short term low has been posted. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term.

Closes above the 20 day moving average crossing at 77.79 are needed to confirm that a short term low has been posted. If March renews December's decline, the 50% retracement level of the November-December rally crossing at 76.66 is the next downside target.

First resistance is the 20 day moving average crossing at 77.79
Second resistance is the reaction high crossing at 78.44

First support is last Wednesday's low crossing at 76.74
Second support is the 50% retracement level of the November-December rally crossing at 76.66

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Oil Falls to a Three Week Low as Dollar Climbs Versus Euro

Crude oil fell to the lowest level in three weeks as the dollar gained against the euro, reducing the appeal of commodities. Oil dropped as much as 1.6 percent as the greenback climbed against the common currency after German investor confidence declined. A strong U.S. currency curbs demand for raw materials as an alternative investment. “The strong dollar is weighing on prices,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “There’s a growing recognition that the big run up in prices wasn’t strongly based.”

Crude oil for February delivery fell 36 cents, or 0.5 percent, to $77.64 a barrel on the New York Mercantile Exchange. Prices touched $76.76, the lowest level since Dec. 24. February futures expire tomorrow. The more active March contract dropped 44 cents, or 0.6 percent, to $77.93 a barrel. Yesterday’s trades will be combined with today’s because of the Martin Luther King Jr. holiday in the U.S.

“Once the stock market firmed up a bit you saw oil rise from its lows,” said Phil Flynn, vice president of research at PFGBest in Chicago. “We’re back to worrying about the economy. The oil market is following anything that gives us an idea of where the economy is going.” The Standard & Poor’s 500 Index increased 0.7 percent to 1,144.02. Oil futures dropped 5.7 percent last week, the first weekly decline in five, after U.S. crude oil and fuel inventories rose.....Read the entire article.

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Crude Oil and Natural Gas Daily Technical Outlook For Tuesday

Nymex Crude Oil (CL)

With 4 hours MACD crossed above signal line, intraday bias is turned neutral for the moment. Another fall could still be seen as long as 79.26 minor resistance holds and below 77.07 will bring resumption of the correction from 83.95 towards 61.8% retracement of 68.59 to 83.95 at 74.46. But downside should be contained there and bring rally resumption. On the upside, above 79.26 minor resistance will flip intraday bias back to the upside for retesting 83.95 resistance first. Further break of 83.95 high will target upper trend line resistance at 87/88 level again. However, note that sustained trading below 74.46 fibo support will argue that rise from 68.59 has completed and will turn focus back to this key support level.

In the bigger picture, whole medium term rise from 33.2 is still in progress but after all, there is no change in the view that it's merely a correction to fall from 147.27. Therefore, we'd continue to look for reversal signal in case of another rise and as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. On the downside, however, considering continuous bearish divergence condition in daily MACD, a break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

Nymex Natural Gas (NG)

No change in outlook of Natural gas as sideway consolidation continues. With 5.850 minor resistance intact, another fall cannot be ruled out. Below 5.354 will bring deeper pull back towards 61.8% retracement of 4.157 to 6.108 at 4.902. On the upside, break of 5.850 minor resistance will indicate that pull back from 6.108 has completed and will flip intraday bias back to the upside for a retest on 6.108 resistance.

In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005 and might have completed at 2.409 already. Rise from 2.409 is still in progress and should target 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. On the downside, break of 4.157 support is needed to indicate that medium term rise from 2.409 has completed. Otherwise, outlook is neutral at worst even in case of deep pullback.....Nymex Natural Gas Continuous Contract 4 Hours Chart.

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Demand Concerns, Stronger Dollar Push Oil Sharply Lower

Crude oil was slightly higher due to light short covering overnight as it consolidates above the 50% retracement level of the December-January rally crossing at 77.41. Stochastics and the RSI remain bearish signaling that sideways to lower prices are possible near term.

If February extends this month's decline, the 62% retracement level of the aforementioned rally crossing at 75.85 is the next downside target. Closes above the 10 day moving average crossing at 80.52 are needed to confirm that a short term low has been posted.

Tuesday's pivot point, our line in the sand is 78.00

First resistance is the 20 day moving average crossing at 79.38
Second resistance is the 10 day moving average crossing at 80.52

First support is the overnight low crossing at 77.07
Second support is the 62% retracement level of the December-January rally crossing at 75.85

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Natural gas was lower overnight as it extends last Thursday's decline. Stochastics and the RSI are neutral signaling that sideways to lower prices are possible near term.

If February renews this month's decline, the 50% retracement level of the December-January rally crossing at 5.314 is the next downside target. Closes above the 20 day moving average crossing at 5.723 would temper the near term bearish outlook in the market.

Natural gas pivot point for Tuesday is 5.606

First resistance is the 10 day moving average crossing at 5.675
Second resistance is the 20 day moving average crossing at 5.723

First support is last Tuesday's low crossing at 5.354
Second support is the 50% retracement level of the December-January rally crossing at 5.314

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The U.S. Dollar was higher due to short covering overnight as it consolidates some of last week's decline. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term.

Closes above the 20 day moving average crossing at 77.78 are needed to confirm that a short term low has been posted. If March renews the decline off December's high, the 50% retracement level of the November-December rally crossing at 76.66 is the next downside target.

First resistance is the overnight high crossing at 77.56
Second resistance is the 20 day moving average crossing at 77.78

First support is last Wednesday's low crossing at 76.74
Second support is the 50% retracement level of the November-December rally crossing at 76.66

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How to Trade Crude Oil and other Commodity ETF’s

Whether you are trading stocks, ETFs or futures, technical analysis is the preferred choice for short term traders. Technical analysis in short is the study of price and volume movements on charts. It can be used for studying charts in any time frame whether you are a 1 minute chartist or a long term investor using monthly charts.

Using technical analysis in my opinion really opens the door for a trader to lower his/her overall risk when investing money. I always like to know if the investments I am watching are trading near a critical price level (support or resistance). During these times you can take positions that have very clear entry and exit points for trading. Also it puts the odds in your favor when a position is entered in the same direction of the underlying trend.

Price action is how we make money in the market, so I strictly follow price and volume when trading as they are the least lagging indicator on what the market it doing.

I have put together a few charts using commodity ETFs to show you what I am seeing in the market and what we should expect to see in the coming days.

USO Crude Oil Fund – Daily Trend Chart
Oil has slid lower the past 5 sessions and is now nearing a support level. This has me looking for an oversold bounce with the potential to rally much higher. I am keeping an eye on this for any possible low risk setup.



UNG Natural Gas Fund – Daily Trading Chart
While UNG is not a great intermediate and long term fund to invest in, I do find it trades very nicely for intraday and short swing trades. I am neutral on natural gas for the time being. It could go either way from here and I’m not willing to take on a 50/50 probability trade. Let’s wait for something exciting to form.



Commodity Trading Conclusion
In short, gold and silver have been underperforming the market recently which is not what we want to see. They have led the market higher all year but are now taking a breather.

The way I see gold, silver, oil and natural gas is that they are trading below their recent highs and still have more room to fall before landing on a solid support level.

The stock market is now over extended and looks ready for a sharp correction. If this happens we will see commodities drop and test lower prices also.

There is not much we can do right now other than protect our current long positions by tightening our stops. Depending on the strength of the breakdown, there could be a great opportunity for short term traders (60 minute chart traders) to make some quick money. I expect a sell off which will last 3-5 days at the least.

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Chris Vermeulen "The Gold and Oil Guy"



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Crude Oil Daily Technical Outlook For Monday

Crude oil dips further to 70.07 earlier today and recovers. Nevertheless, intrady bias remains on the downside and the correction from 83.95 could still extend further towards 61.8% retracement of 68.59 to 83.95 at 74.46. But downside should be contained there and bring rally resumption. On the upside, above 80.69 minor resistance will flip intraday bias back to the upside for retesting 83.95 resistance first. Further break of 83.95 high will target upper trend line resistance at 87/88 level again. However, note that sustained trading below 74.46 fibo support will argue that rise from 68.59 has completed and will turn focus back to this key support level.

In the bigger picture, whole medium term rise from 33.2 is still in progress but after all, there is no change in the view that it's merely a correction to fall from 147.27. Therefore, we'd continue to look for reversal signal in case of another rise and as crude oil approaches 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. On the downside, however, considering continuous bearish divergence condition in daily MACD, a break of 68.59 support will confirm that a medium term top is in place and will turn outlook bearish for a retest on 33.2 low as correction from 147.27 resumes.....Nymex Crude Oil Continuous Contract 4 Hours Chart.

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Crude Oil Falls for a Sixth Day on Speculation Fuel Supplies Are Adequate

Crude oil fell for a sixth day on speculation production capacity is more than sufficient to meet increased demand as the global economy recovers from recession.
World markets are well supplied and there is no need for the Organization of Petroleum Exporting Countries to alter its output quotas, Qatari Oil Minister Abdullah bin Hamad al-Attiyah said yesterday. Temperatures in the U.S. northeast will probably be above average through Jan. 27, the national weather service said yesterday.

“It looks like a little bit of a swing in sentiment,” said Mark Pervan, senior commodity strategist at Australia & New Zealand Banking Group Ltd. in Melbourne. “The market’s been held up by some sentiment issues and some less solid fundamental factors such as some of the economic data and some of the weather forecasts. The hard supply and demand numbers behind it all really don’t hold up all that strongly.” Crude oil for February delivery fell as much as 46 cents, or 0.6 percent, to $77.54 a barrel in after hours electronic trading on the New York Mercantile Exchange. It was at $77.55 at 8:37 a.m. in Singapore.

The contract, which expires this week, dropped $1.39 to $78 on Jan. 15, the lowest settlement since Dec. 23 and a 5.7 percent loss for the week. Oil posted its first weekly decline since Dec. 11 as U.S. stockpiles rose, temperatures climbed and gains by the dollar reduced the investment appeal of commodities. The dollar rose for a third day, trading at $1.4366 against the euro today from $1.4387 late in New York last week.....

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