Phil Flynn: Bailout Bounce

There is nothing like a big bailout to get energy traders' minds off of the dangerous world we live in. Oil prices are defying a stronger dollar as the market is rallying on the news that Europe finalized a 67.5 billion Euro bailout of Ireland and created a plan that could have bondholders taking haircuts to help pay for their solvency.

Yet oil may also be getting a geo-political bounce as tension rise in the world and I am not just talking about the Korean Peninsula. A revelation from Wiki-Leaks may add to tensions in the Middle East and perhaps even threaten the delicate peaceful balance that sort of exits there. Reuters News reported that, “Saudi King Abdullah has repeatedly urged the United States to attack Iran’s nuclear programs, according to a vast cache of diplomatic cables released on Sunday in an embarrassing leak that undermines U.S. diplomacy.

The more than 250,000 documents, given to five media groups by the whistle blowing website Wiki Leaks, provide candid and at times critical views of foreign leaders as well as sensitive information on terrorism and nuclear proliferation filed by U.S. diplomats, according to The New York Times. The White House condemned the release by Wiki Leaks and said the disclosures may endanger U.S. informants abroad.” It could also create tension in the OPEC cartel as Iran may try to retaliate against Saudi Arabia in some way.

The Saudis already have their hands full fighting Al-Qaeda and other terrorist rightfully fear a nuclear armed state sponsor of terror like Iran. The Saudi King in the leaked memo said that the US should, “cut off the head of the snake”. It’s good to be back! Make sure you are signed up for Phil's daily trade levels! He can be reached at pflynn@pfgbest.com. Also make sure you catch Phil on the Fox Business Network where you can see him every day!


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Crude Oil , Gold and Natural Gas Technical Outlook For Monday Nov. 29th

Crude oil was higher overnight as it extends last week's short covering rebound off the 50% retracement level of the August-November rally crossing at 81.14. 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 84.69 are needed to confirm that a short term low has been posted. If January renews this month's decline, the 62% retracement level of the August-November rally crossing at 79.24 is the next downside target.

First resistance is the 20 day moving average crossing at 84.69.
Second resistance is the reaction high crossing at 85.75.

Crude oil pivot point for Monday morning is 83.69

First support is last Tuesday's low crossing at 80.28.
Second support is the 62% retracement level of the August-November rally crossing at 78.56.

Gold was lower overnight as it continues to correct some of the rally off the mid-November low. Stochastics and the RSI are turned neutral signaling that sideways to lower prices are possible near term.

If December renews this month's decline, the reaction low crossing at 1315.60 is the next downside target. If December extends the rebound off the mid-November low, the reaction high crossing at 1388.10 is the next upside target.

First resistance is last Tuesday's high crossing at 1382.90.
Second resistance is this month's high crossing at 1424.30.

Gold pivot point for Monday morning is 1,362.30

First support is the 25% retracement level of this year's rally crossing at 1330.20.
Second support is the reaction low crossing at 1315.60.

Natural gas was higher overnight and is poised to extend this month's rally. Stochastics and the RSI are overbought, diverging but are turning neutral signaling that sideways to higher prices are possible near term.

If January extends the aforementioned rally, the 38% retracement level of the June-October decline crossing at 4.654 is the next upside target. Closes below the 20 day moving average crossing at 4.234 would confirm that a short term top has been posted.

First resistance is last week's high crossing at 4.515
Second resistance is the 38% retracement level of the June-October decline crossing at 4.654

Natural gas pivot point for Monday morning is 4.411

First support is the 10 day moving average crossing at 4.318
Second support is the 20 day moving average crossing at 4.234




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Gold/Silver – Controlling Your Trades, Money & Emotions

Last week we had typical pre-holiday light volume trading going into US Thanksgiving. The previous week I warned every one to trade with extreme caution because of the light volume and the fact that the market is on the verge of a sizable drop for both stocks and commodities. Any price action could not be taken seriously because of the light volume. We will not know until later this coming week what the big money wants to do… Buy or Sell, also what the manipulators will do… Seems like there are a lot of wild cards out there with Europe issues and both unemployment and payroll numbers out on Friday morning.

Below are a few charts showing my intermediate term outlook for gold and silver.

Gold & Silver Futures – Daily Chart
You can see both metal are showing a possible reversal head and shoulders pattern. While they have yet to confirm and close below the neck line we must be aware of this pattern and the risk/potential it provides us with. Both metals are still in an uptrend but showing signs of weakness.

US Dollar Index – Weekly Chart
This chart is not really that helpful for trading stocks, commodities or options right now but I wanted to post it because it allows me to show you how I analyze the market and my trades.

As you can see, the past 3 weeks have been in a strong uptrend reaching the first resistance level. The point of this chart is to show you that if you step out to the next longer time frame you can get a solid feeling of where an investment will find major support and resistance levels. Any investment not matter if it’s a stock, commodity or currency, if the price is trading in the middle of a large range like this chart you should not be taking large positions because it almost becomes a 50/50 bet on the market which is not a good winning strategy unless you are very experienced at managing your trades and money.

If you are going to trade then you want to focus on the underlying trend and you do that by looking at the next larger time frame. For example: if you focus on trading the daily chart, then you must step back each week and review the weekly chart to be sure you are trading with the underlying trend which is up for the dollar right now.

Weekend Trading Ideas:
Tuesday morning we saw the SP500 gap lower and continue to sell off. Traders started panicking out of their long positions and we could see it using the intraday market internals charts, which I cover each morning in the pre-market trading videos. Me being a contrarian (buying into market fear, selling into market strength) I used that high level of fear in the market along with the expected light volume holiday week ahead as an excuse to book profits near the lows on SP500 using the SDS bear fund allowing us to profit from the falling market. I feel we are going to have some crazy moves on the markets going into year end and it should be a lot of fun if done correctly.

Trading in general is a very difficult task especially if you are doing it for a living and planning on using your monthly income to pay bills, salaries etc… We all know the stress which comes with trading and if do not have a solid trading strategy, rules and cannot properly manage yourself (emotions) then you are most likely running into problems like over trading, getting shaken out of trades easily, and taking bigger risks than your account can handle. Each of these cause more traders to blow up their accounts and big up on trading.

I am giving away my book on how you can control your trades, money and emotions. This short and to the point guide is full of my trading techniques, tips and thoughts which will help you get a handle of your emotions turning the market noise into music.

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Reuters: Crude Oil Approaches Two Week High on Ireland Rescue

Crude oil rose past $84 on Monday after the European Union approved a rescue for Ireland and outlined a permanent system to resolve the euro zone's debt crisis, providing some confidence that energy demand growth will remain resilient next year. U.S. crude for January rose as much 0.8 percent to $84.46 a barrel, nearing Friday's peak of $84.53, the highest intraday price since November 16, and was up 52 cents at $84.28 by 9:09 p.m. EST. Prices reached a two year high of $88.63 on November 11.

ICE Brent for January rose 57 cents to $86.15, returning to positive territory as the dollar pared gains. Finance ministers from the 16 nation euro zone, anxious to prevent market contagion engulfing Portugal and Spain, unanimously endorsed an emergency loan package of 85 billion euros ($115 billion) to help Dublin cover bad bank debts and bridge a huge budget deficit.

"The southern European sovereign debt crisis would have to take a severe turn for the worse to derail positive commodity price trends that are finding strong support from improving fundamentals and positive market sentiment toward growth assets" following the second wave of U.S. expansionary monetary policy, Barclays Capital analysts, including Kevin Norrish, said in a report on Monday.

Still, some market participants were wary that the package for Ireland would fail to end Europe's credit problems, citing the Greek crisis as a precedent of how markets intially reacted positively to a bailout and then slumped. "It is just a relief rally, but there are still so many structural problems that people are already targeting other dominoes like Portugal and Spain," said Michelle Kwek, an analyst at Informa Global Markets in Singapore.

Currency and bond traders doubted the deal was enough to prevent fiscally pressured Portugal and Spain from being next in line to suffer a debt crisis. "Markets are not believing measures will be enough to contain the crisis, and that also combines with the tensions in Korea. You wouldn't want to be punting on anything," Kwek said.......Read the entire article.


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6 Natural Gas Stocks for 2011

Dan Dicker argues why he thinks 2011 will be the year for natural gas and reveals his top stock picks.



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Bloomberg: Talk of $100 Oil Returns as Options Jump Most in 3 Months

Oil’s return to $100 has become the biggest bet in the crude options market.

The price of options to buy December 2011 futures at $100 a barrel jumped 14 percent on Nov. 24, the largest one day gain in three months, according to data compiled by Bloomberg. So called open interest for the contract has risen 51 percent this year to 45,424 lots, the highest for any crude option on the New York Mercantile Exchange.

The increase in trading of $100 options shows some investors anticipate oil will rise at least 19 percent to levels last reached in 2008. While crude is up 5.5 percent this year as the economy recovers, Morgan Stanley said Nov. 1 that prices will reach $100 next year as spare production capacity shrinks. At the same time, BNP Paribas SA said Nov. 18 further price gains “will be difficult” as the Federal Reserve seeks to revive the U.S. economy through an extended stimulus program and Europe struggles to contain its sovereign debt crisis.

“The tug of war in oil prices continues as the short term debt market concerns obscure improving oil market fundamentals,” Lawrence Eagles, global head of commodities research at JPMorgan Chase & Co. in New York, said in a Nov. 26 report.

Futures for January delivery on the Nymex snapped two weeks of declines last week, rising 2.8 percent to $83.76 a barrel as of Nov. 26. Options contracts that give investors the right to buy December 2011 futures at $100 a barrel rose to $5.55 on Nov. 24, from $4.87 the day before, the largest increase since Aug. 27, Bloomberg data show. They have averaged $6.40 this year and ended last week at $5.46.......Read the entire article.


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Seeking cash, Venezuela's Chavez looks to sell Citgo

President Hugo Chavez is promising to build new public housing complexes, boost social programs and renovate the long neglected Caracas subway, and he needs money. The ambitious plans will squeeze Venezuela's coffers at a time when oil earnings have slipped and Chavez is sending his foreign allies generous amounts of crude on credit. So he has raised a possibility that once seemed remote: selling off Venezuela's U.S. based oil company, Citgo Petroleum Corp.

For Chavez, it's an idea driven both by hard money realities and by politics. Getting rid of the company and its refineries in the U.S. would give Chavez billions of dollars for domestic spending as he approaches his 2012 re-election bid and seeks to remedy problems including an acute shortage of affordable housing. A sale would also fit with the leftist leader's interest in distancing Venezuela from the U.S. while building stronger ties with allies such as Russia, China and Iran.

Citgo has delivered oil to Venezuela's No. 1 client for two decades, but judging by Chavez's complaints about Citgo not turning a profit, he seems more than ready to sell it, if a buyer can be found. "Citgo is a bad business, and we haven't been able to get out of it," Chavez said in a televised speech late last month. He ordered his oil minister, Rafael Ramirez, to look at options for selling off the state oil company's assets in the United States.

Chavez says the Houston based company could be worth at least $10 billion, but analysts say it would likely fetch much less, perhaps half that, and it might be hard to find a buyer in a difficult economic climate.......Read the entire article.


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Oil N' Gold Focus Reports: Crude Oil, Natural Gas and Gold Weekly Technical Outlook

Nymex Crude Oil (CL)

Crude oil's recovery was limited at 84.53 last week and the outlook remains basically unchanged. Price actions from 80.06 is still being treated as correction to fall from 88.63 only. With 4 hours MACD staying below signal line, initial bias is neutral this week. On the downside, below 80.06 will indicate that fall from 88.63 has resumed and should target 61.8% retracement of 70.76 to 88.63 at 77.59 and below. However, note that break of 84.53 resistance dampen this view and argue that fall from 88.63 might be completed already. In such case, stronger rebound should be seen to retest 88.63 high instead.

In the bigger picture, the steeper than expected fall from 88.63 is mixing up the outlook and argue that rise from 64.23 is possibly finished with three waves up to 88.63. In other words, it could be the second wave of consolidation from 87.17 and the third wave might have just started. We'll now slightly favor more decline as long as 88.63 resistance holds. Nevertheless, medium term rise from 33.2 is treated as the second wave of the consolidation pattern that started at 147.27. As long as 64.23 support holds, medium term rise from 33.2 is still in favor to extend to 50% retracement of 147.27 to 33.2 at 90.24 and possibly higher before completion.

In the long term picture, rebound from 33.2 is not finished yet. But overall view remains unchanged. Crude oil is in a long term consolidation pattern from 147.27, with first wave completed at 33.2, second wave from there unfolding. Current development suggests that a breach of 61.8% retracement at 103.70 is likely. But we'll then start to focus on reversal signal again above 103.70.

Nymex Crude Oil Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

Nymex Natural Gas (NG)

Natural gas rose further to as high as 4.411 last week and closed strongly. Initial bias remains on the upside for further rally this week. Current rise from 3.255 should now be targeting next key resistance at 5.194. On the downside, below 4.115 minor support will turn intraday bias neutral again. But after all, we'd still favor another rise as long as 3.71 support holds, even in case of deep retreat.

In the bigger picture, break of the falling trend line from 6.108 add some credence to the case that decline from there is completed with three waves down to 3.22 already. That is, it's merely a correction to rebound from 2.409 and such medium term rally is possibly resuming. Break of 5.194 resistance will solidify this case and target another high above 6.108 to 100% projection of 2.409 to 6.108 from 3.255 at 6.954 next. On the downside, break of 3.71 support is needed to invalidate this view. Otherwise, we'll stay bullish.

Nymex Natural Gas Continuous Contract 4 Hour, Daily, Weekly and Monthly Charts

Comex Gold (GC)

Gold's recovery from 1329 was limited at 1382.9 and reversed. The structure of such recovery suggests that it's merely a correction to fall from 1424.3. Initial bias remains cautiously on the downside this week for 1315.8/1329 support zone. Decisive break there will complete a head and shoulder top reversal pattern and should turn outlook bearish for deeper fall. On the other hand, strong rebound from 1315.8/1329 will indicate that gold is merely in sideway consolidation and another high would still be seen before topping.

In the bigger picture, rise from 1155.6 is treated as the fifth wave of the five wave sequence from 1044.5, which should also be fifth wave of the rally from 681 (2008 low). There is no confirmation of topping yet. However, note that 1424.3 record high was close to two important projection target, 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 and 100% projection of 253 to 1033.9 from 681 at 1462. Reversal should be imminent. Break of mentioned 1315.8/1329 will signal that 1424.3 is an important top and gold should have started a sizeable medium term correction that should dip back into 1044.5/1227.5 support zone at least.

In the long term picture, rise from 681 is treated as resumption of the long term up trend from 1999 low of 253. 100% projection of 253 to 1033.9 from 681 at 1462 is almost met and a sizeable correction should be around the corner. Though, even in case of deep fall, 55 months EMA (now at 931 level) should present strong support to contain downside and bring another up trend.

Comex Gold Continuous Contract 4 Hours, Daily, Weekly and Monthly Charts

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Commodity Corner: Crude Oil Ends Lower on Stronger Dollar

Crude oil lost ground Friday, dogged by a weaker euro resulting from continued fears that Europe's spate of debt crises will spread from Ireland to Portugal and Spain.

Oil for January delivery fell 10 cents to end the day at $83.76 a barrel. The euro declined 0.9 percent against the greenback Friday. Thanks to Ireland's debt woes, along with those elsewhere in the bloc, the EU currency has slipped by more than seven percent in less than a month. A stronger dollar makes oil less of a value for those holding other currencies. Oil traded from $82.78 to $83.87 Friday.

Buoyed by predictions of colder temperatures in December for much of the country, January natural gas rose by a penny Friday to settle at $4.40 per thousand cubic feet. The December contract, which expired Wednesday, settled at $4.27.

The January natural gas futures price fluctuated from $4.35 to $4.48 Friday. December gasoline was unchanged Friday, again settling at $2.21. It traded within a range from $2.20 to $2.23.

Posted Courtesy of Rigzone.Com

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Crude Oil Futures Decline on Concern Ireland Crisis May Spread, Tension in Korea

Crude oil fell from a one week high on concern Ireland’s debt crisis will spread to Portugal and Spain, reducing economic growth and fuel demand, and as tensions in Korea mounted. Oil dropped as the euro declined to a two month low against the dollar, curbing investor demand for commodities. Euro area finance ministers plan to complete an agreement on an Irish bailout on Nov. 28, a European Union official said on condition of anonymity. North Korea warned its confrontation with South Korea could lead to war.

“Concerns that the European debt crisis will spread pushed the euro to a new two month low against the dollar,” said Tom Bentz, a broker with BNP Paribas Commodity Futures Inc. in New York. The oil market is down “primarily on European debt worries.” Crude oil for January delivery slipped 10 cents to settle at $83.76 a barrel on the New York Mercantile Exchange. The January contract gained 2.2 percent this week. The front month contract added 2.8 percent for the week and has increased 7.4 percent in the past year.

Brent crude oil for January settlement declined 52 cents, or 0.6 percent, to end the session at $85.58 a barrel on the London based ICE Futures Europe exchange. Brent added 1.5 percent for the week. Shoppers crowded U.S. stores for Black Friday, the biggest shopping day of the year and a bellwether for the holiday season. Analysts’ estimates for holiday sales vary from little changed to increases of 4.5 percent. The National Retail Federation has forecast November-December holiday sales will rise by 2.3 percent from a year ago, the most since 2006.......Read the entire article.

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Bruce Pile: Oil....Beyond the Barrel - And Over the Cliff

From guest analyst Bruce Pile of  Good Stock Investing......

As the price of oil climbs through $85 a barrel, it reminds me of the explanations flying around a little over two years ago as oil went to this level for the first time. "It's all the funds chasing the hot commodity, the only game in town" was the refrain. It's all a bubble and we will have stable oil at $35 soon - that's what Steve Forbes and many others said. But now, as oil goes through $85, it's not the only game in town. In fact, it's been the dog underperforming just about everything. No desperate performance chasing mania is driving the price of oil today as we threaten $100 again. Could those peak oil nuts be right? Could the Great Recession be camouflaging a real supply peaking process?

There is an interesting article out just yesterday over at The Post Carbon Institute by Tom Whipple. He states:

For two weeks now the peak oil portion of cyberspace has been abuzz with commentary on the International Energy Agency’s (IEA) newly released World Energy Outlook 2010. Without missing a beat and without much explanation, the world’s leading compiler of everything about energy has gone from denying that conventional oil production will peak in our lifetime to saying it happened four years ago.

What? A conventional oil peak happening in late 2005? That's what nuts like Ken Deffeyes and me were saying back then. Overall barrels of what is classified as "oil" isn't peaking. But conventional oil was peaking then, and that's where all the net energy is. As Tom Whipple's article points out, it's net energy that is missing from the equation of energy planners. And, as I wrote in an article about back in April, this miscalculation is a potential nightmare waiting to engulf us. CNBC had just started showing their "Beyond The Barrel" story, and this prompted me to post "Beyond The Barrel - And Over The Cliff" on my blog where I look at this whole conventional vs nonconventional, net energy peak thing. This is the post:

CNBC premiered "Beyond the Barrel - the Race to Fuel the Future". This is a look at the alternatives to the crude oil bursting forth from the ground that has spoiled us for decades with cheap, abundant energy. One thing that will probably be missing in the discussion is the major issue EROEI. What is EROEI? How do you pronounce it? Well, I don't concern myself with pronouncing it, but I do get vexed by how much attention is being paid to it.......Read the entire article.


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Musings: Separating Wheat from The Chaff of Unconventionals

Increasingly, petroleum industry executives are speaking out about the significance of the unconventional hydrocarbon resources in this country, although they do not always agree about the longer term outlook for the resources. In some cases we question the extrapolations speakers are making about the importance of unconventional resources in the nation’s long range energy mix and, for that matter, the world’s mix.

Recently, several senior energy executives spoke at industry meetings about their views of these trends. One presentation that received media attention was by Mark Papa, CEO of EOG Resources, Inc. (EOG). His presentation was to a joint meeting of the Houston chapters of the IPAA and TIPRO. With respect to the success of unconventional drilling and production, Mr. Papa called it a “game changer” for the industry, something about which most industry participants would readily agree.

Horizontal drilling and hydraulic fracturing technologies have dramatically altered the near term supply picture and have forced energy prognosticators to recast their forecasting models. Most of them now are calling into question the need for the U.S. to import as many hydrocarbons as previously thought. Optimism is fine, but euphoria can be dangerous as it tends to create blind spots that become our downfall.

According to Mr. Papa, “There is clearly sufficient North American gas supply to last for a bunch of years; 50 years at least. And there is clearly no need for us to import LNG (liquefied natural gas) for multiple years to come.” At the present time, natural gas supplies are swamping the market due to the drop in demand associated with an overall decline in energy consumption due to the lasting effects of the recession and the surge in unconventional supply due to accelerated drilling dictated by the need for producers to hold leased acreage for which they have offered huge bonuses.......Read the entire article.


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ONG Focus: Crude Oil and Gold Daily Technical Outlook For Friday Nov. 26th

Crude Oil Daily Technical Outlook

Crude oil jumped to as high as 84.53 but was limited by mentioned 85.42 resistance and weakens again. With 4 hours MACD crossed below signal line, intraday bias is turned neutral. As noted before, decline from 88.63 is still in favor to continue with 84.52 resistance intact. Break of 80.06 will target 61.8% retracement of 70.76 to 88.63 at 77.59 and below. Though, above 84.53 will now flip intraday bias back to the upside for retesting 88.63 high.

In the bigger picture, the steeper than expected fall from 88.63 is mixing up the outlook and argue that rise from 64.23 is possibly finished with three waves up to 88.63. In other words, it could be the second wave of consolidation from 87.17 and the third wave might have just started. We'll now slightly favor more decline as long as 88.63 resistance holds. Nevertheless, medium term rise from 33.2 is treated as the second wave of the consolidation pattern that started at 147.27. As long as 64.23 support holds, medium term rise from 33.2 is still in favor to extend to 50% retracement of 147.27 to 33.2 at 90.24 and possibly higher before completion.

Nymex Crude Oil Continuous Contract 4 Hour and Daily Charts

Gold Daily Technical Outlook

With 4 hours MACD crossed below signal line, Gold's recovery from 1329 should have completed at 1382.9 already. Intraday bias is now cautiously on the downside for 1315.8/1329 support zone. Decisive break there will complete a head and shoulder top reversal pattern and should turn outlook bearish for deeper fall. On the other hand, strong rebound from 1315.8/1329 will indicate that gold is merely in sideway consolidation and another would still be seen before topping.

In the bigger picture, rise from 1155.6 is treated as the fifth wave of the five wave sequence from 1044.5, which should also be fifth wave of the rally from 681 (2008 low). Such rally might still continue towards 161.8% projection of 931.3 to 1227.5 from 1044.5 at 1449.6 before completion. Though, we're aware of long term projection target of 100% projection of 253 to 1033.9 from 681 at 1462 and we'd anticipate strong resistance from there to bring medium term correction finally. On the downside, however, break of 1315.8 support will be an early alert of medium term reversal and will turn focus back to 1155.6 support for confirmation.

Comex Gold Continuous Contract 4 Hour and Daily Charts


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Flurry of Rig Orders Marks End of Two Year Drought

Since the start of October, drilling companies have ordered at least 17 new rigs, a wave of spending that signals optimism that oil prices will remain high and that producers will continue to demand the latest advances in equipment as they tap increasingly hard to reach offshore reservoirs. Largely built "on spec", that is, without an existing contract from an oil and gas explorer,those orders mark a clear ending to a two year drought in rig purchases as drillers like Transocean, SeaDrill and Atwood Oceanics look to update and bolster their fleets.

The move also indicates how the global enthusiasm for exploiting offshore oil and gas continues, despite the slowdown in U.S. drilling that came as a result of the Deepwater Horizon oil spill.
Of the 17 orders so far this quarter, 13 are for jackup rigs, which stand on legs and typically operate in water depths up to 400 feet. By comparison, only eight jackups were ordered in the two years that ended Sept. 30, according to Tom Curran, senior analyst with Wells Fargo Securities' Oilfield Services & Drilling team.

The quarter's four orders for floating deep-water rigs, which can take three years or more to construct, are the first shipyards have seen since 2008, Curran said. The orders primarily have gone to yards in Southeast Asia......Read the entire article.



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Bloomberg: Crude Oil Declines Because of Concern Ireland Debt Crisis May Spread to Spain

Crude oil declined in New York amid concern Ireland’s debt crisis will spread to Portugal and Spain, diminishing the appeal of the region’s assets. Futures slipped as the euro dropped against the dollar, curbing investor demand for raw materials. Floor trading was closed yesterday for Thanksgiving in the U.S. and electronic trades will be booked with today’s for settlement purposes.

With the U.S. markets closed “attention was instead focused on Europe and Ireland bailout talks, with sovereign debt concerns weighing on oil prices,” Mark Pervan, head of commodity research at Australia & New Zealand Banking Group Ltd. in Melbourne, said in a note today. The January contract fell 32 cents, or 0.4 percent, to $83.86 a barrel, in electronic trading on the New York Mercantile Exchange at 11:58 a.m. Sydney time. Futures are 2.9 percent higher this week, heading for the first weekly gain in three weeks. Prices are up 5.6 percent this year.

Oil rose the most in four months on Nov. 24 after U.S. jobless claims fell to the lowest level since 2008, bolstering optimism economic growth will accelerate in the biggest crude consuming nation. The Labor Department said applications for unemployment benefits declined by 34,000 to 407,000. Brent crude for January settlement gained 26 cents, or 0.3 percent, to settle at $86.10 a barrel on the London based ICE Futures Europe exchange yesterday.

Posted courtesy of Bloomberg News

Bloomberg reporter Ben Sharples can be contacted at bsharples@bloomberg.net


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The S&P 500, Gold, Crude Oil, and the Banks

As you probably already know option trading has become a growing branch of the trading world. The reasons for this rapid growth are numerous but include the ability to control risk, take advantage of the inevitable decay of the time premium portion of an option’s price, and to exploit the predictable and stereotypic changes in the factors controlling option pricing that occur on a regular basis. Nobody knows the in's and out's of options trading better the J.W. Jones. Here is his latest article that will get you ready for Monday's trading session......

Stocks were back on sale Tuesday when the S&P 500 suffered more than a 1.40% decline by the closing bell. Some market prognosticators pointed their fingers at the dollar, other pointed at the Korean situation, and still others had their eyes fixed on Ireland and the Eurozone as potential causes for the sharp selloff. The S&P 500 is currently oversold on the short term chart and either a bounce or period of consolidation is likely. At this point, chasing stocks in either direction will only satisfy the desires of the smart money, who will likely blow these anticipatory traders into trading fodder in coming weeks.

Right now, patience is a must. The day before Thanksgiving is synonymous for light volume as are most days preceding a holiday. Thanksgiving leads us into the holiday season which typically is characterized by low volume until after the New Year. As most traders know, when volume is light the market typically has a positive bias. I would not be shocked to see U.S. stocks trading higher Wednesday and/or Friday.

While the short term charts are oversold, the longer term charts continue to have a technical bias to the upside assuming the 50 period moving average does not get violated. Time will be the final arbiter as to whether this correction is relatively mild before stocks continue higher, or if this is the beginning of a larger correction.

Gold (GLD Daily)
At this point in time, gold is forming a possible head and shoulders pattern on the daily chart. While it is too early to determine if the pattern will play out, if the expected price action confirms the head and shoulders top then the measured move would indicate price levels around the GLD 120-122 area will likely be revisited. Currently gold and the GLD trading ETF are not offering a great risk/reward entry from a long or short perspective, and even if it were I would simply watch the action unfold until we get confirmation that the head and shoulders pattern is going to either be confirmed or fail. Caution is warranted and risk remains high.

Oil (USO Weekly)
USO has been in a consolidating pattern for well over a year and it continues to build this monster base between the 32 – 42 price levels. When this base is finally broken, a major move in oil will likely be underway. I am expecting that price will get close or test the bottom of the range for an outstanding low risk long entry using the bottom of the base as a backstop for risk definition. It is hard to say where price is heading in the short term, but from a fundamental perspective oil has some positive bias with increasing demand coming from emerging markets and a slowdown in future supply.

The Banks (XLF Daily)
Recently the XLF ETF (the financials) had a breakout of a long-term consolidation pattern which has failed. With that failure, the broader markets have sold off from recent highs. If the XLF and KRE continue to be under pressure, it is unlikely that the broader market as a whole will continue higher. It is critical for traders to follow the financial sector because the broad markets will go nowhere without their participation.

Like it or not, our financial complex has to be healthy in order for our economy to improve with any lasting effect. If banks are not lending, then it is safe to say the economy is not expanding at a fast pace. If the banks are not profitable or are not consistently growing their revenues, this would again be a negative indicator regarding economic growth.

There are a lot of analysts who are showing concerns over future profitability amid countless issues which include mortgage defaults, over exposure to commercial real estate and development loans, and potential prosecution in lieu of the way the large money-center banks handled foreclosures. Additionally, companies like PIMCO and other investment firms are attempting to return the mortgages they bought back to the banks through legal action which could lead to further losses. While the outlook is certainly not great, I would not expect any powerful rallies if financials are not following along.

Conclusion
With the shortened holiday week, I will not be offering an option trading setup. I am simply watching the price action and sitting in cash. When volume is this light, the markets generally have an upward bias and with the large selling volume we witnessed on Tuesday, a bounce is likely overdue. Until the S&P 500 gives up the 50 period moving average, we remain in a technically constructive pullback which could potentially lead to higher prices. If we get a daily close on the S&P below the 50 period moving average, all bets are off.

In closing, I hope this find you well and I wish all of you and your families a safe and Happy Thanksgiving!

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Holiday Squeeze on the Dollar, Gold & Stocks

The past week and a half has been as choppy as it gets for the stocks market. Thankfully the herd mentality (fear & greed) stays the same. Understanding what others think and feel when involved in the market is one of the keys to making money consistently from the market. The crazy looking chart below I will admit is a little tough on the eyes, and I should have used red and green for holiday colors but green just was not going to work today so bear with me.

Market Internal Indicators – 10 minute, 7 day chart
This is a simple chart to read if you understand how to trade these market internal indicators (NYSE volume ratio, NYSE Advance/Decline line, and Total Put/Call ratio).

It shows and explains how I get a read on the overbought/sold conditions in the market. There are several other criteria needed to pull this trade off but it is these charts which tell me to start getting ready to take partial profits, buy or take short positions.

The top section shows the NYSE volume ratio line. When the green line spikes is means there are more sellers than buyers by a large amount and I call this fear. On the other hand when he red line spikes it shows everyone is chasing the price higher because they can’t stand the thought of missing another rally. I call this greed or panic buying. You buy into fear, sell/short into greed.

Important point to note though… We are getting another sell/short signal here (Wednesday) but knowing Friday will be light volume and knowing that light volume means higher prices, I think we should get a better opportunity to short this new down trend next week at possibly a higher level. The market may have a short squeeze in the next 2-3 days. Just so you know, a short squeeze is when the market breaks to the upside on light volume forcing the short positions to cover. This creates a pop in price, only for it to drop quickly after. But, if we get a pop with solid volume behind it, then we could just see the up trend start again and we would then look to play the long side. Only time will tell…

Rising Dollar & Gold – I Don’t Get It?
That is the question everyone seems to be asking this week. I think what we are seeing is straight forward. Traders/investors are selling Euros because of the issues overseas and are buying the dollar along with gold and silver.

Generally when the dollar raises gold drops, but they are both moving up in sync, and really I don’t see the problem with this as it has happened many times in the past. Currently I am neutral on gold and silver because of this situation though. I feel something is about to happen in a week or so that will change things in a big way.

Mid-Week Gold, Dollar & Stock Trading Conclusion:
In short, the equities market is now in a down trend and overbought here. It’s prime for a short position but with the holiday, light volume Friday, and most likely a follow through buying session on Monday I think its best to sit in cash without the stress of wondering what will happen on Monday. Just enjoy the holiday.

Recently members had a great short play locking in 2.2% gain on one of our positions this week as we shorted the market using the SDS inverse SP500 ETF. We also continue to hold two other positions with a 22 and 24% gain thus far and I think going into year end things are really going to heat up.

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Commodity Corner: Crude Oil Up 3.2%

Positive economic data and a lower than expected build in U.S. crude oil inventories resulted in a pre holiday boost for January oil futures.

The front month futures price settled at $83.86 a barrel Wednesday, a $2.61 gain from the previous day, after trading within a range from $80.97 to $83.75. Supporting oil were statistics released Wednesday indicating some glimmers of hope for the U.S. economy. According to the U.S. Department of Commerce, personal income increased 0.5 percent in October above private sector expectations. In addition, the agency stated that real consumer spending rose by 0.3 percent during the same period.

Also benefiting oil was an economic indicator in the Thomson Reuters/University of Michigan Surveys of Consumers, a monthly publication that was released Wednesday. The latest findings observe a 5.8% increase in consumer sentiment, from 67.7 in October to 71.6 in November. Nevertheless, the survey's authors caution that the significant increase does not necessarily mark a "turning point" in consumers' personal financial prospects. Indeed, they note that many consumers continue to report worsening personal finances.

"While consumers clearly believe that the recovery has gained some traction, most still think that the economic gains will be too small to improve their own job and income position anytime soon," stated Richard Curtin, Surveys of Consumers Chief Economist.

In its weekly report on the country's crude oil stocks, the U.S. Department of Energy's Energy Information Administration (EIA) reported that inventories rose to 358.6 million barrels as of November 19, 2010. Last week's 1 million barrel gain reverses a sharp decline reported for the week of November 12, but the gain was lower than analysts had anticipated.

Natural gas for December delivery showed very little movement Wednesday, ending the day a penny higher at $4.27 per thousand cubic feet. Expectations of milder weather in the Northeast, along with very high storage volumes, prevented gas from increasing further. Front month natural gas peaked at $4.38 and bottomed out at $4.18.

December gasoline settled at $2.21 a gallon Wednesday, representing an eight cent gain from the previous session. Gasoline traded from $2.13 to $2.21.

Posted courtesy of Rigzone.Com


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SP 500, Crude Oil, Natural Gas, Gold and U.S. Dollar Commentary For Wednesday Evening Nov. 24th

The S&P 500 index closed higher due to short covering on Wednesday as it consolidated some of Tuesday's decline. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are neutral to bullish signaling that a short term low might be in or is near. Closes above Monday's high crossing at 1206.00 would temper the near term bearish outlook. If December renews the decline off this month's high, the 25% retracement level of the July-November rally crossing at 1169.37 is the next downside target. First resistance is Monday's high crossing at 1206.00. Second resistance is this month's high crossing at 1224.50. First support is last Tuesday's low crossing at 1175.20. Second support is the 25% retracement level of the July-November rally crossing at 1169.37.

Crude oil closed sharply higher on Wednesday as it rebounds off the 50% retracement level of the August-November rally crossing at 81.14. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are oversold and turning neutral to bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 84.53 are needed to confirm that a short term low has been posted. If January extends this month's decline, the 62% retracement level of the August-November rally crossing at 79.24 is the next downside target. First resistance is today's high crossing at 83.95 Second resistance is the 20 day moving average crossing at 84.53. First support is Tuesday's low crossing at 80.28. Second support is the 62% retracement level of the August-November rally crossing at 79.24.

Natural gas closed lower due to profit taking on Wednesday as it consolidates some of the rally off last week's low. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If January extends the rally off October's low, the 38% retracement level of the June-October decline crossing at 4.654 is the next upside target. Closes below the 20 day moving average crossing at 4.196 are needed to confirm that a short term top has been posted. First resistance is today's high crossing at 4.515. Second resistance is the 38% retracement level of the June-October decline crossing at 4.654. First support is the 20 day moving average crossing at 4.196. Second support is this month's low crossing at 3.853.

Gold closed lower due to profit taking on Wednesday as it consolidates some of the rally off last week's low. The mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If December extends the rally off last week's low, the reaction high crossing at 1388.10 is the next upside target. If December renews this month's decline, the reaction low crossing at 1315.60 is the next downside target. First resistance is Tuesday's high crossing at 1382.90. Second resistance is the reaction high crossing at 1388.10. First support is last Tuesday's low crossing at 1329.00. Second support is the reaction low crossing at 1315.60.

The U.S. Dollar closed higher on Wednesday as it extends this month's rally. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI are overbought, diverging but are bullish again signaling that sideways to higher prices are possible near term. If December extends this month's rally, the 38% retracement level of this year's decline crossing at 80.54 is the next upside target. Closes below the 20 day moving average crossing at 78.03 would confirm that a short term top has been posted. First resistance is today's high crossing at 80.09. Second resistance is the 38% retracement level of this year's decline crossing at 80.54. First support is the 20 day moving average crossing at 78.03. Second support is this month's low crossing at 75.24.


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Crude Oil Rallies Above 83 Despite Inventory Gains

Total crude oil and petroleum products stocks declined for the 4th week, by -0.26 mmb to 1106.15 mmb in the week ended November 19. Crude oil inventory unexpectedly gained +1.03 mmb, compared with consensus of a -1.03 mmb drop, to 358.63 mmb with stock rising in 3 out 5 PADDs. Cushing stock also rose +0.56 mmb to 33.63 mmb. Utilization rate climbed +1.5% to 85.5%.

Gasoline inventory increased +1.91 mmb to 209.59 mmb while that for distillate dipped -0.54 mmb to 158.25 mmb. Gasoline demand slipped -1.37% to 8.83M bpd. Imports and production rose +39.50% and +0.12% respectively. Distillate demand claimed +0.63% to 3.80M bpd. Both imports and production soared, by 49.43% and +1.46% respectively.

WTI crude oil jumped to as high as 83.05 after the report, despite stock builds in crude oil and gasoline. A Strong rebound in the stock markets was probably the main reason driving oil prices higher.

Here is a Comparison Between API and EIA Reports


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