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Crude oil fell to a five week low as the dollar strengthened against the euro, reducing the appeal of commodities as an alternative investment. Oil dropped as much as 1.9 percent as the U.S. currency gained against its major counterparts on speculation China will take further steps to cool its economy, discouraging demand for higher yielding assets. A U.S. Energy Department report tomorrow will probably show oil supplies rose last week, based on a Bloomberg News survey of analysts.
“It’s a further erosion of prices exacerbated somewhat by a stronger dollar today,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas based energy consultant. “If we see another big build in crude tomorrow, I think you’ll just see the market move lower.”
Crude oil for March delivery dropped 63 cents, or 0.8 percent, to $74.63 a barrel at 10:15 a.m. on the New York Mercantile Exchange. Earlier, it touched $73.82 a barrel, the lowest since Dec. 22. Futures fell 8.8 percent in the two weeks through yesterday. The U.S. currency strengthened 0.6 percent to $1.4062 per euro as of 9:46 a.m. New York time, from $1.4151 yesterday.
Oil stockpiles probably climbed 1.58 million barrels in the week ended Jan. 22 from 330.6 million the prior week, according to the median of 18 analyst estimates in the survey of analysts. Oil inventories were 6.5 percent above the five year average in the week ended Jan. 15. Refining rates, already at their lowest outside the Atlantic hurricane season since at least 1989, probably fell 0.1 percentage point, according to the Bloomberg survey.....Read the entire article.
Crude oil was lower overnight and is poised to extend last week's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.
If March extends last week's decline, December's low crossing at 72.45 is the next downside target. Closes above the 10 day moving average crossing at 77.69 are needed to confirm that a short term low has been posted.
Crude oil pivot point for Tuesday, our line in the sand is 74.91
First resistance is the 10 day moving average crossing at 77.69 Second resistance is the 20 day moving average crossing at 79.69
First support is last Friday's low crossing at 74.01 Second support is December's low crossing at 72.45
Natural gas was lower overnight as it consolidated some of last Friday's rally. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term.
If March extends last Friday's rally, the January's high crossing at 6.027 is the next upside target. Closes below the 10 day moving average crossing at 5.604 would temper the near term friendly outlook in the market.
Tuesday's pivot point for natural gas is 5.749
First resistance is last Friday's high crossing at 5.804 Second resistance is December's high crossing at 6.027
First support is the 10 day moving average crossing at 5.604 Second support is the reaction low crossing at 5.327
The U.S. Dollar was higher overnight hinting that the correction off last week's high might be ending. Stochastics and the RSI are diverging but remain neutral to bullish signaling that sideways to higher prices are possible near term.
If March extends last week's rally, the 38% retracement level of the 2009 decline crossing at 79.71 is the next upside target. Closes below the 20 day moving average crossing at 77.84 would confirm that a short term top has been posted.
First resistance is last Thursday's high crossing at 79.00 Second resistance is the 38% retracement level of the 2009 decline crossing at 79.71
First support is the 10 day moving average crossing at 77.87 Second support is the 20 day moving average crossing at 77.84
While downside momentum is diminsihing a bit, intraday bias is still on the downside. Crude oil's fall from 83.95 is expected to continue and sustained d break of 61.8% retracement of 68.59 to 83.95 at 74.46 will target a rest on 68.59 support. On the upside, above 76.68 resistance will turn intraday bias neutral and bring consolidations. But break of 79.16 resistance is needed to indicate that fall from 83.95 has completed. Otherwise, short term risk will remain on the downside.
In the bigger picture, upside momentum is clearly diminishing as seen in bearish divergence condition in daily MACD. However, there is no confirmation that medium term rise has topped out yet as long as 68.59 support holds. Such medium term rise could still continue and above 83.95 will target 50% retracement of 147.27 to 33.2 at 90.24, which is close to 90 psychological level. Nevertheless, even in such case, we'll continue to look for reversal signal and expect crude oil to top out finally as it approaches 90 level. ON the downside, 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.
If the Chinese banks have problems and dramatically slow lending, can the oil bull market continue? How about the carry trade? Concerns are mounting around the banks, raising the question as to whether the China commodity consuming gravy train will continue at the previous rapid pace. Overnight these concerns are coming to the forefront as Chinas fourth largest is looking to raise 40 billion yuan or the equivalent of $5.86 billion dollars to shore up its capital base and maintain its lending capacity.
Last week I said that in the beginning of the year many Chinese lending institutions went on a massive lending spree, seemingly lending money to anything that moved. It is possible that these intuitions were either driven by greed or the realization that they knew that soon the Chinese government would raise rates and stop the lending party.Bloomberg News reported that the Chairman of the China Banking Regulatory Commission said that loans in China were “relatively high”.
He said that some banks were asked to stop lending because they failed to meet reserve requirements. Obviously the failure to meet these requirements and the Chinese government dramatically moving to reign in credit, means that many lending institutions in China are trying to lend every penny they have available to them. We'll see if there is a global double dip in the economy. It is possible that these intuitions could have some problems.
Now the China bank 6 year bond issuance is subject to the approval of bond holders but raise the larger issue how the markets are going to handle the removal of stimulus. Or what is more, how will the world handle a China whose growth may not be all it is cracked up to be.
Long term we still feel oil is on a long term journey near $40 a barrel. Today March crude oil has strong support near the 7400 handle with resistance near 7700. We should see some swings this week ahead of the Fed meeting.
Get ready to sign up for trading from the Trade strategist by calling Phil at 800-935-6487 or by emailing me at pflynn@pfgbest.com. And also check me out each day on the Fox Business Network.
Crude oil closed higher due to short covering on Monday as it consolidates some of last week's decline. The high range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI are oversold but remain bearish signal that sideways to lower prices are possible near term.
If March extends last week's decline, December's low crossing at 72.45 is the next downside target. Closes above the 20 day moving average crossing at 79.89 would confirm that a short term low has been posted.
Monday evening's daily pivot point is 74.89, weekly pivot is 76.01
First resistance is the 10 day moving average crossing at 78.53 Second resistance is the 20 day moving average crossing at 79.89
First support is last Friday's low crossing at 74.01 Second support is December's low crossing at 72.45
It was a heart pounding week on Wall Street as traders and investors locked in profits during 2010’s first round of earnings season. While it is normal to see selling of shares after good news hits the market, last weeks melt down was over exaggerated and for good reasons.
In short, we expected good earnings and that is why the markets have been crawling higher the past couple months (buy on rumor, sell on news). But what made last weeks sell off so strong was the fact the market was way overbought on the short term time frame and looking ready for a correction already. So we saw twice the selling pressure crammed into one week.
Looking back at a 12 year chart of the Dow Jones Industrial Average we can see the market is now trading at a major resistance level. There are two scenarios the market will likely follow in the coming 12 months. And it could take a year for each of these scenarios to unfold.
Scenario #1 – The market could top then start heading lower to test the 2009 March low. I don’t want this but it could still happen. Topping is a process. Unlike most bottoms which happen very quickly, tops tend to drag out much longer. In this case I figure we are looking at 4-12 month time frame for the market to truly roll over and confirm that we are in a major bear market again.
Scenario #2 – If the market holds up relatively well and forms a bull flag then we can expect to see higher prices in the future. If this happens it will take 4-12 months to unfold also.
Both scenarios have characteristics associated with them, so as the market progresses I will update on the market internals which will help tell us if the underlying market is holding up well or deteriorating. Only time will tell and we will play it one candle at a time.
Gold Stocks – Rockets or Rocks?
The gold stock index closed below its support trend line which held up for over a year. This is not a good sign for gold or gold stocks but there is light at the end of the tunnel.
Simple technical analysis is telling us to be cautious at these price levels. If we zoom way out on the charts the current price level and chart patterns on these charts scare me. The gold stock/Gold ratio chart is trading under resistance and the HUI (gold stock index) is trading near the 2008 high. What I do not like is the technical breakdown on the HUI monthly chart. You can see the trend line break on the chart with my small zoomed in picture.
The good news is that everything looks to be extremely over sold on the 60 minute charts so I am expecting a bounce across the entire market for a 1-5 day dead cat bounce. Friday we did see gold stocks move up strong off their lows out performing the price of gold. This is positive for gold and stocks. Depending on how that unfolds we could take a short term momentum play to profit from a possible leg lower.
Precious Metals ETF Daily Charts – Gold & Silver Gold and silver lost some shine last week as they plunged towards their next support level. A bounce is expected but then I feel we are heading lower and this will likely shake out the majority of traders before starting another rally higher.
Energy Fund Trading – USO & UNG
Commodity and Stock Market Index Trading Conclusion: This month looks and feels like last Jan – March, but reversed. The market is now getting choppy as the bulls and bears fight for direction making is difficult to swing trade. Times like these are best for intraday traders, not swing traders. Trading tops is actually much more difficult than trading a bottoming market in my opinion so I will be picky with trade setups. My number one goal is to preserve capital and avoid choppy market conditions as part of managing risk.
Final trading thoughts, I look for the broad market to get a possible bounce this week, but I feel lower prices are still to come. The USO oil fund looks prime for the picking and that could be our next trade.
Crude oil traded little changed in New York as the declining dollar tempered selling driven by concerns that China will raise interest rates. Oil recovered from a near one month low as equity markets rose and the weaker U.S. currency heightened the appeal of dollar priced assets for hedging inflation. OPEC nations must improve their compliance with the group’s output quotas to prevent further pressure on oil prices, Shokri Ghanem, chairman of Libya’s National Oil Corp., said yesterday.
“With OPEC ready to act if there’s further weakening, I think prices may be nearing a bottom,” said Christopher Bellew, senior broker at Bache Commodities Ltd. in London. “Weakness in the stock markets and the prospects of monetary tightening in China helped trigger the exit of some speculative money.” Crude for March delivery was at $74.82 a barrel, up 28 cents, in after-hours electronic trading on the New York Mercantile Exchange at 11:35 a.m. in London. Earlier the contract fell as much as 43 cents to $74.11. Futures dropped 2 percent to $74.54 on Jan. 22, the lowest settlement since Dec. 22.
Brent oil for March settlement climbed as much as 67 cents, or 0.9 percent, to $73.50 a barrel on the London based ICE Futures Europe exchange. It was at $73.36 a barrel, up 53 cents, at 11:35 a.m., having fallen 2.4 percent to $72.83 on Jan. 22. U.S. stock index futures gained on signs Ben S. Bernanke will be confirmed as Federal Reserve chairman for a second term. The dollar declined 0.2 percent to $1.4189 per euro as of 11:07 a.m. in London.
Crude oil was slightly higher overnight due to short covering as it consolidated some of last week's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.
If March extends last week's decline, December's low crossing at 72.45 is the next downside target. Closes above the 10 day moving average crossing at 78.49 are needed to confirm that a short term low has been posted.
Monday's pivot point for crude oil is 75.02
First resistance is the 10 day moving average crossing at 78.49 Second resistance is the 20 day moving average crossing at 79.87
First support is last Friday's low crossing at 74.01 Second support is December's low crossing at 72.45
Natural gas was lower overnight as it consolidated some of last Friday's rally. Stochastics and the RSI are turning bullish signaling that sideways to higher prices are possible near term.
If March extends last Friday's rally, the January's high crossing at 6.027 is the next upside target. Closes below the 10 day moving average crossing at 5.594 would temper the near term friendly outlook in the market.
Natural gas pivot point for Monday is 5.779
First resistance is last Friday's high crossing at 5.804 Second resistance is December's high crossing at 6.027
First support is the 10 day moving average crossing at 5.594 Second support is the reaction low crossing at 5.327
The U.S. Dollar was lower due to profit taking overnight as it consolidates some of last week's rally. Stochastics and the RSI are diverging but remain neutral to bullish signaling that sideways to higher prices are possible near term.
If March extends last week's rally, the 38% retracement level of the 2009 decline crossing at 79.71 is the next upside target. Closes below the 10 day moving average crossing at 77.71 would confirm that a short term top has been posted.
First resistance is last Thursday's high crossing at 79.00 Second resistance is the 38% retracement level of the 2009 decline crossing at 79.71
First support is the 20 day moving average crossing at 77.80 Second support is the 10 day moving average crossing at 77.71
Does this week's negative action in the markets spell a fantastic buying opportunity? Is it time to short this market or just wait quietly on the sidelines? What exactly does our Fibonacci levels tell us?
In today’s short video we take a fresh look the S&P 500 and what we think it is going to do in 2010. We will also be looking at an important “Trade Triangle” that has just flashed an important signal for this index.
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Good Trading, Ray C. Parrish President/CEO The Crude Oil Trader
