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Everyone is talking about commodities as the place to be in the coming months. I tend to agree, but it is still important to know where each commodity is trading to maximize returns and reduce risk.
That being said we are also seeing money flow out of the small cap stocks and into the large cap blue chips Stocks. These companies prove year after year that they are profitable and that’s where investors have been putting their money the past couple weeks. This can be seen by simply looking at the Dow Jones Industrial Average and the Russell 2000 index as the Russell has dropped in value much more than the Dow. But if we see the market turn back up and make a new yearly high in the coming weeks, small cap stocks will most likely provide explosive opportunities for traders.
Below is some analysis on Crude oil, Natural Gas, Gold and Silver....
GLD ETF Trading – Weekly Trading Chart By looking at the weekly chart of gold we can see two simple things. 1 – Each breakout is happening quicker as money continues to move into gold. 2 – This step like pattern (bull flags) is very powerful and can continue for a very long time.
GLD ETF Trading – Daily Trading Chart This chart shows the same price action but on a daily chart. It also shows one way to find and trade low risk setups for the GLD ETF traded fund.
SLV ETF Trading – Weekly Trading Chart Silver ETF trading has not been as exciting. Silver has yet to breakout above the 2008 high. It is actually trading at a major resistance level and still has some work to be done before looking really bullish in my eyes. This is acting like major resistance level for two main reasons.
1 – It is testing the 2008 highs where a lot of traders bought silver over a 5-6 month period. There are a lot of sellers to flush out before moving higher.
2 – The drop in silver price in late 2008 was so scary for investors who bought at $16-20 that they cannot believe they are getting their money back. I think this is making a higher volume of investors sell their positions at break even because they just want out after seeing 50% loss at one point last year.
UNG Fund Trading – Daily Trading Chart UNG has been sliding lower and lower since hitting its head on resistance back in October. The gap down on Friday is bearish indicating traders are starting to panic out of UNG and willing to get out at any price.
UNG Fund Trading – Natural Gas Seasonality Timing UNG and the seasonality chart seem to be spot on for timing the price of natural gas. Keeping an eye on seasonality and general market seasonal patterns can really help improve ones performance. It may be better to trade stocks or commodities, or maybe just carry more cash depending on the timing and situation the market is in.
USO Fund Trading – Daily Trading Chart USO has broken out from its large multi month consolidation from August – early October and is now forming a bull flag. While this flag could last a couple months I have feeling we will see a breakdown or a breakout sooner than later. This is just a gut feel and I will continue to watch and wait for a low risk setup.
Commodity Trading Newsletter Conclusion: To sum up next weeks market action I feel it will not be anything to write home about. Gold and silver will most likely trade sideways or up, natural gas should continue lower and crude oil should trade sideways. With any luck stocks will continue to rally and test the highs once again.
GLD ETF continues to be our investment of choice as it provides the more accurate low risk setups time and time again. With any luck we could get some low risk setups this week but I am not counting on it.
Saudi Aramco is abandoning the West Texas Intermediate benchmark to price oil for sale to U.S. consumers because it is “disconnected” from the company’s customers, Chief Executive Officer Khalid Al-Falih said. The state owned oil company said on Oct. 29 it will start using the Argus Sour Crude Index published by Argus Media Ltd, from next year. Sour refers to the oil’s sulfur content.
“WTI has really become disconnected with the market where we sell and what we sell -- we sell sour crude, heavier sour crude in the U.S. Gulf coast, that is where most of our barrels in North America go,” al-Falih told reporters today in Rabigh, near the Red Sea town of Jeddah in Saudi Arabia. Aramco has priced its U.S. deliveries against WTI, a light, sweet crude delivered at Cushing, Oklahoma, since 1994. The price is determined by oil futures traded on the New York Mercantile Exchange and published by Platts, the energy- information division of McGraw Hill Cos.....Read the entire article.
Sponsors of the United States Natural Gas Fund, UNG, took baby steps toward restoring the fund’s ability to issue new shares yesterday.
UNG is an exchange traded fund that invests in the natural gas futures market. The fund stopped issuing new shares on Aug. 12, citing regulatory uncertainty in the commodities marketplace. The Commodity Futures Trading Commission is investigating the role of ETFs in the commodities market and is expected to announce strict position limits for such funds. Many expect the $4 billion UNG ETF to exceed the allowable limits, as it controls a significant portion of the front-month natural gas futures market.
Since halting the issuance of new shares, UNG has traded at a sharp premium to its underlying net asset value, as demand for the fund has outstripped supply. As of 2:32 p.m. ET, Aug. 21, it was trading at a 16% premium to NAV. The sponsors of UNG have been looking for ways to maintain exposure to the natural gas market while reducing the number of futures contracts they hold. Yesterday, UNG secured a $500 million total return swap that could help.
Total return swaps are privately negotiated agreements between two parties to exchange cash flows based on the performance of a target index. In this case, UNG entered into an agreement with a bank to exchange cash flows based on the performance of a front month natural gas futures contract. Because swap contracts are privately negotiated and not linked to any underlying holding, they should not count toward any new CFTC limits.....Read the entire article.
I was just looking at the charts and they are beginning to look very, very bullish. The formation I show you in today’s video is a classic continuation pattern to the upside. This pattern also confirms a Fibonacci target number we are looking at.
This video is short and to the point and I think it will get you thinking about this energy market.
Just Click Here to watch the video and as always our videos are free to watch and there is no need to register. After you watch the movie, please feel free to leave a comment.
* Natural gas spot prices fell over the week at most market locations, declining on average 16 cents per million Btu (MMBtu). Decreases ranged between 2 cents and 77 cents per MMBtu. In the few trading locations where prices rose, increases were modest, ranging between 1 and 4 cents per MMBtu. The Henry Hub natural gas spot price fell 10 cents on the week, closing at $4.49 per MMBtu.
* At the New York Mercantile Exchange (NYMEX), the December 2009 natural gas contract fell 34 cents per MMBtu, or 7 percent. The November contract expired on Wednesday, October 28, at $4.289 per MMBtu.
* Working natural gas in storage increased to 3,788 billion cubic feet (Bcf) as of October 30, according to EIA�s Weekly Natural Gas Storage Report. This figure represents an implied net injection of 29 Bcf. Storage levels reached new record highs in all three storage regions, as well as on a national level.
* The West Texas Intermediate (WTI) crude oil contract rose $2.91 per barrel, or 4 percent, ending the report week at $80.30 per barrel, or $13.84 per MMBtu.
* The number of natural gas rotary rigs rose by 3 to 728, according to data Baker Hughes Incorporated released on October 30.
Precious Metals ETF have gone wild the past 2 weeks. Last week we saw gold and silver prices drop sharply as it shook out short term trader’s stop orders before breaking out and moving higher. Also there is a disconnect between the gold and the dollar. Energy commodities like natural gas and crude oil are moving in opposite directions and look to be picking up speed. Natural gas is losing pressure and oil is on fire.
GLD ETF Trading – Pivot Trading Low Last week we had our pivot trading low generate another buy signal for gold. Trading pivot lows is a simple trading strategy. I call them low risk setups and take advantage of buying a stock, commodity or currency after a pullback to support and when a reversal candle is formed. This chart clearly shows when you are trading with the trend buying on the dips is generally a low risk play with great up side potential.
Precious Metals ETF Trading – Gold Bullion Takes Control This is a chart which shows the performance of gold stocks (red), silver bullion (blue) and gold bullion (green). As you can see the past 2 weeks while the market has been selling down precious metals stocks have been hit harder than silver and gold.
Because of the heavy selling in stocks recently the smart money had been going into commodities especially gold bullion. Gold stocks are a great play but this is telling us investors feel safer in physical bullion than stocks.
Gold is the most known precious metal and safe haven which is why it’s holding value better than silver and stocks. This week we are seeing gold become more valuable in several major currencies which means gold is actually making a real move higher.
USO ETF Trading – Breakout & Bull Flag Crude oil has had some great breakouts this year and it looks like we are about to get another buy signal shortly. We had a breakout in Oct from the large pennant and are now flagging which is very bullish. We could see USO reach $50 in the next month or two.
UNG ETF Trading – Pivot Low or Waterfall Sell Off? Natural gas is at a crucial level for a higher low bounce or another massive panic sell off. Trading right now with UNG is a 50/50 shot so we will just have to wait and let things unfold more before taking any action.
The Stock Markets, Precious Metals & Energy Trading Conclusion: The market is starting to feel a little squirmy as it tries to find support. Small cap stocks continue to get crushed while blue chip (large cap) stocks are holding more of their value. Gold has broken higher this week while silver and precious metal stocks under perform their big sister Yellow Gold.
Crude oil is holding up nicely forming a 3 week bull flag and showing signs of life while natural gas continues to get hammered.
The market has been jumpy the past 2 weeks because market participants are very uneasy about the future direction of the US dollar.
Crude oil rose after a government report showed that U.S. inventories unexpectedly dropped as imports declined to a two month low. Stockpiles of crude oil fell 3.94 million barrels to 335.9 million last week, the Energy Department said today. A 1.5 million barrel gain was forecast, according to the median of responses in a Bloomberg News survey of analysts. Oil also advanced as equities gained and a weaker U.S. dollar bolstered the appeal of commodities as an alternative investment. “The inventory report today was definitely supportive,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “Prices were already up because of the weak dollar and rising stocks. These numbers just added to the upward momentum.”
Crude oil for December delivery rose 59 cents, or 0.7 percent, to $80.19 a barrel at 2:12 p.m. on the New York Mercantile Exchange. Futures touched $81.06, the highest since Oct. 26. Prices are up 80 percent this year. Oil traded at $80.13 before the release of the supply report at 10:30 a.m. in Washington. “It is very hard to justify oil going from $30 to above $80 based only on the fundamentals of supply and demand,” Nouriel Roubini, the economist who predicted the global economic crisis, said today at the Inside Commodities Conference in New York. Oil touched $32.40 in December. Current prices are “in part” a bubble.....Read the entire article.
U.S. crude oil refinery inputs averaged 14.0 million barrels per day during the week ending October 30, 233 thousand barrels per day below the previous week’s average. Refineries operated at 80.6 percent of their operable capacity last week. Gasoline production increased last week, averaging 9.0 million barrels per day. Distillate fuel production increased last week, averaging 4.0 million barrels per day. U.S. crude oil imports averaged 8.1 million barrels per day last week, down 764 thousand barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 8.6 million barrels per day, 1.5 million barrels per day below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.1 million barrels per day. Distillate fuel imports averaged 197 thousand barrels per day last week.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 4.0 million barrels from the previous week. At 335.9 million barrels, U.S. crude oil inventories are near the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 0.3 million barrels last week, and are above the upper limit of the average range. Finished gasoline inventories increased while blending components decreased last week. Distillate fuel inventories decreased by 0.4 million barrels, and are above the upper boundary of the average range for this time of year. Propane/propylene inventories decreased by 1.4 million barrels last week and are in the upper half of the average range.....Read the entire report.
Crude oil rose more than $1 a barrel after failing to decline below a two week low and as the India’s central bank purchase of gold bolstered the appeal of commodities to investors. Selling stopped after futures fell to $76.55 a barrel earlier today, the lowest intraday price since Oct. 15. When prices do not drop after reaching a new low, technical traders see it as a sign to purchase oil. Prices also increased after the Reserve Bank of India bought 200 metric tons of gold from the International Monetary Fund.
“Oil tested support in the $76.50 area and failed to break through,” said Tom Bentz, a senior energy analyst at BNP Paribas Commodity Futures Inc. in New York. “From a technical standpoint, this was a sign that prices are moving higher.” Crude oil for December delivery climbed $1.16, or 1.5 percent, to $79.29 a barrel at 1:37 p.m. on the New York Mercantile Exchange. Prices have risen 78 percent this year. Oil fell as much as 2 percent earlier today on the announcement that the Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc received a second bailout from U.K. taxpayers, signaling that the global economy may take longer to recover from the worst recession since the 1930s.....Read the entire article.
In our last video on the S&P 500 (10/27), we indicated that this market may have topped out for the year. Today’s action puts in place a weekly “Trade Triangle” which indicates that a temporary or a permanent top is now in place for this market.
In this latest video, we share with you some of the ideas that we think could potentially come into play for this market. Not only do we have some downside targets in mind, but we also see a pattern that could evolve in the next several weeks which will confirm that we’ve made a serious high in this market.
Just Click Here to watch the new video and please take a moment to leave a comment on what you think of the video and where the SP 500 is headed.
Crude oil rose from a two week low as manufacturing expanded in the U.S. and China in October, signaling energy demand is increasing in the world’s two biggest oil consuming countries. Oil gained as the Institute for Supply Management said U.S. manufacturing grew at the fastest pace in more than three years. Chinese manufacturing climbed to the highest level in 18 months, according to a purchasing managers’ index from HSBC Holdings Plc today and a government backed index issued yesterday.
“It’s a great indication that the industrial component of these economies, which is the energy intensive component, is doing better than it was,” said Brad Samples, a commodity analyst for Summit Energy Inc. in Louisville, Kentucky. “As opposed to the trend last year when it was falling, now it’s rising.” Crude oil for December delivery climbed $1.28, or 1.7 percent, to $78.28 a barrel at 11:23 a.m. on the New York Mercantile Exchange. Earlier, it touched $78.38 a barrel. Futures lost 4.4 percent last week, the first pullback in a month.....Read the entire article.
The last week of October was something else. Heavy fiscal year end selling for mutual funds seemed to put a damper on good news and push stocks and commodities lower. October is historically a tough month on the US market with mutual funds locking in profits on their books.
Below are some charts showing my analysis on gold, silver, oil, natural gas and the S&P 500 index along with a seasonality chart proving that October has more selling pressure than other months.
Gold GLD ETF – Gold Pivot Trading Low – Daily Chart As you can see from the chart below we appear to be in the middle of a pivot low correction which can make for some great entry points. The trend is up, gold is oversold and it looks like we had a reversal low last week.
Silver SLV ETF – Silver Pivot Trading Low – Weekly Chart This is a chart I posted a couple months ago and so far silver has traded within the trend lines and support & resistance levels I pointed out in early August. Silver still looks bullish as it is trading at a pivot low.
Gold Miners GDX ETF – Gold Miners Pivot Trading Low – Weekly Chart Gold mining stocks appear to be trading near the bottom of the trend channel. The odds are still pointing to higher prices.
Crude Oil USO Fund – Oil Pivot Trading Low – Daily Chart This chart of USO is also from a recent post in early October. USO broke out and is now trading at our support trend lines. There was a nice reversal candle last week but the heavy selling across the entire market pulled oil back down.
Natural Gas UNG Fund – Natural Gas Pivot Trading Low – Daily Chart Pivot trading low could be close for UNG. The daily chart is telling me we saw the bottom in natural gas back in September as prices collapsed washing out most long (bullish) traders. I figure we will see prices trade between $9-12 for several months as the commodity forms a base.
S&P 500 Index – S&P 500 Pivot Trading Low – Daily Chart The broad market looks and feels oversold. This chart uses Andrews Pitchfork analysis to show where short term pullbacks to the middle trend line (middle of trading range) have been a buying opportunity. Deeper corrections drop to the bottom support trend channel. These corrections sometimes form a lower low and lower high that scares traders and inestors out of the market before heading higher.
S&P 500 Seasonality Chart – S&P 500 Pivot Trading Low This chart shows the performance for each month over the past 37 years. Simple analysis shows selling pressure in Sept and Oct as mutual funds sell positions to lock in gains for their books each year. This move is generally compounded because seasoned traders know about this seasonal movement and also sell positions and even short the market to take advantage of this at times.
I think we are inline for a perfect storm going into year end. The market is trading at a pivot low from many different analysis theories. This forms a high probability trading opportunity in the next 2 months if we see prices reverse and start heading higher this month.
Pivot Trading Low Conclusion: A lot of stocks have taken a real beating this past month as sell orders flooded the trading desks last week. Technology, financials and small cap stocks took is the worst. The sharp drop is not really what we wanted to see but it makes good sense. With those groups posting the largest gains since March it is only normal that money will be coming out of those stocks to lock in gains.
Many traders are starting to panic about another possible market melt down. This negative sentiment is a bullish indicator for higher prices. If everyone is scared and exiting their positions then we must be close to trading a pivot low.
I am still bullish on the market and will be looking for new opportunities if we see prices start to head higher this month.
Crude oil fell the most in a month after U.S. consumer spending dropped for the first time since April, increasing skepticism that the economy will strengthen. Oil decreased as much as 3.8 percent and equities declined after the Commerce Department said purchases slipped 0.5 percent in September in the world’s biggest energy consuming country. Futures climbed the most in two weeks yesterday after a government report that the U.S. grew in the third quarter.
“People are still antsy that this will be a tepid recovery,” said Chip Hodge, who oversees a $9 billion natural- resource bond portfolio as senior managing director at MFC Global Investment Management in Boston. “Given where the economy is, $80 oil doesn’t make a hell of a lot of sense.” Crude oil for December delivery fell $2.83, or 3.5 percent, to $77.04 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Prices are down 4.3 percent this week, the first decline this month. Futures are set to gain 9.1 percent in October, the biggest monthly increase since a 30 percent rally in May.....Read the entire article.
Crude oil rose the most in a month after the U.S. economy grew in the third quarter for the first time in more than a year, spurring optimism that fuel demand will increase. Oil climbed as much as 3.9 percent after the Commerce Department said that the world’s largest energy consuming country expanded at a 3.5 percent annual pace from July through September. The economy was forecast to strengthen at a 3.2 percent annual pace, according to a Bloomberg News survey.
“This confirms that the recession has ended and now the only question is what the pace of the recovery will be,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis. “It would appear that this would lead to increased demand.” Crude oil for December delivery rose $2.71, or 3.5 percent, to $80.17 a barrel at 1:21 p.m. on the New York Mercantile Exchange. Futures are up 80 percent this year after climbing to a one year high of $82 a barrel on Oct. 21. Prices are heading for the biggest gain since Sept. 30.....Read the entire article.
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Commodities and stocks almost look ready for a rally or at least a relief bounce. The market is down over 5% and the normal pullback this year has been 4%. Using technical analysis and inter-market analysis we can see that the market is reaching extreme lows and this usually means we are only a couple days away from a rally.
I work with several market technicians as we all analyze the market a different way and share our work with each other to gain maximum insight on the broad market moves. We analyze momentum cycles, magnetic cycles, volatility levels, support & resistance levels, volume analysis and inter-market analysis.
Each of us has found a formula which works for our individual style of trading. And by combining our work we have found that we can collectively produce some very exciting trading signals for the broad market. We focus on leveraged index funds in order to take advantage of our insights. While nothing in trading is ever perfect, the analysis for timing the broad market is very exciting.
Here are some quick charts on where the market is trading.
US Dollar – Daily Dollar Price Chart This chart is a no brainer. The trend is down and trading at resistance. If the US dollar reverses back down we will see stocks and commodities move higher.
VIX – Daily Volatility Index Again, overall the trend is down and trading at resistance. As the saying goes “When the VIX is high its time to buy”. Just to be clear, the VIX is low compared to the previous highs set back in 2008 which was around the 80 level. But, if we want to keep things simple for the current trend then the VIX is high for our current market condition. The VIX moves in the opposite direction of the equities market.
DIA – Dow Jones Industrial Average ETF Fund Here is the Dow Jones index fund and it clearly shows that when investors are selling out of their positions and getting scared of a market collapse, volume rockets higher. When we see the price pullback to possible support levels and volume increases that is a time when we should be looking to scale into a long position for a bounce, such as now.
XLE – Energy Sector ETF You can see that the energy sector is very close to a support level and volume is high. With the US dollar about to reverse back down it will help boost this sector as it is tied in with commodity prices which rise with a falling dollar. I expect we will see a price gap lower and fill this area before moving higher.
GLD – Gold ETF Fund & Silver This chart has not changed much from last weeks report. We are getting the drop as expected this week. We could see the gap fill from early October before gold stabilizes.
Silver is in the same situation. Gold and silver move in tandem so we are waiting for a bottom before looking for a low risk entry point.
Commodity & Stocks Trading Conclusion: To keep things short and to the point, I am seeing momentum cycle lows as of today, magnetic wave lows today, and most commodities and indexes trading at support. These observations, coupled with the US dollar at a possible resistance level and market volatility spiking to an extreme high, lead me think a bounce is in the cards.
The market has had an amazing rally so far this year and I feel that we will have a solid year end rally going into Christmas. That being said, the recent sharp correction could form an ABC retrace pattern which means we get a bounce in the next week or so, then one more multi day sell off which will scare even more bulls out of the market. I am going to be scaling out of this oversold play quickly to lock in some gains while allowing a smaller position to ride for larger gains.
Crude oil fell more than $2 a barrel after a government report showed an unexpected increase in U.S. gasoline stockpiles and crude supplies rose to a two month high. Gasoline inventories climbed 1.62 million barrels last week, the Energy Department said. A 1 million barrel decline was forecast, according to a Bloomberg News survey. Crude oil inventories rose as imports advanced the first time in five weeks. Oil also dropped as the dollar gained against the euro.
“The gasoline number was a big surprise and makes people less optimistic about the economy and demand,” said Sean Brodrick, natural resource analyst with Weiss Research in Jupiter, Florida. “You are also seeing strength in the dollar, further weakening the oil market.” Crude oil for December delivery fell $2.14, or 2.7 percent, to $77.41 a barrel at the 2:30 p.m. close of floor trading on the New York Mercantile Exchange. Futures touched $77.23, the lowest since Oct. 16. Prices have gained 74 percent from the end of 2008 and reached a one-year.....Read the entire article.
That is the big question on many traders’ minds as gold fell from a high around $1,070 to the lows seen on Tuesday.
In our new video that was shot at noon on Tuesday 10/27, we go into detail on what we think is going to happen to this market. We think you will see a refreshing view of the gold market and also the strategies that we’re employing to take advantage of the next big move in gold.
Just Click Here to Watch the Video and as always our videos are free to watch and there is no registration requirement.
Please take a moment to leave a comment and let us know where you think Gold is headed.
