Chevron Reports Second Quarter Net Income of $7.2 Billion

SP500, Russell 2K, Dollar Index and Gold’s – Fake out or Shakeout?

Chevron Corporation (NYSE: CVX) today reported earnings of $7.2 billion ($3.66 per share – diluted) for the second quarter 2012, compared with $7.7 billion ($3.85 per share – diluted) in the 2011 second quarter.

“Our second quarter earnings and cash flow were among our strongest ever, even with softer oil markets,” said Chairman and CEO John Watson. “Despite current weakness in the global economy, we continue to invest in our long term growth projects to help deliver affordable energy to meet future demand. We took several important steps to advance our major upstream capital projects, in particular achieving milestones in our natural gas development projects in the Asia-Pacific region. We also expanded our global exploration resource acreage, including new leases in the Gulf of Mexico where we already hold a significant position.”

Read the entire earnings report

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SP500, Russell 2K, Dollar Index and Gold’s – Fake out or Shakeout?

 From The Technical Traders.......

Today has been quite a trading session with risk assets rocketing higher after Mario Draghi of the European Central Bank reiterated what has already been stated. The S&P 500 Index (SPX) is posting some nice gains, but price has not taken out the recent ascending trendline illustrated in the daily chart of SPX shown below. Until that ascending trendline is taken out, the bears remain in control of the price action.

S&P 500 Index (SPX) Daily Chart

Today’s rally has certainly served to work off short term oversold conditions. With the first GDP estimate for the 2nd Quarter scheduled for tomorrow things could get interesting. In the meantime, the closing price today is key. My expectation is that we will not see the S&P 500 Index push back above the ascending trendline today. For the price action to flip back bullish, we need a much stronger than expected GDP result tomorrow.

Another key daily chart which helps provide support that the bears remain in control of the price action is the Russell 2000 Index (RUT). The RUT has given back roughly 50% of its entire move and at this point has failed to even regain the 200 period moving average on the daily chart. Price action would need to climb over 20 points to simply backtest the breakdown level illustrated below.

Russell 2000 Index (RUT) Daily Chart

As long as the RUT holds below the key rising trendline, the bulls must be questioned. However, should the S&P 500 Index and the RUT push back above the ascending trendlines on their daily charts I will become much more constructive regarding the short to intermediate time frames for risk assets.

The other key chart of the day can be found no further than the U.S. Dollar Index futures. The U.S. Dollar Index futures absolutely collapsed today and move all the way down to test the 50 period moving average on the daily chart. So far, the short-term rising trendline has offered support along with the 50 period moving average and the Dollar has bounced sharply higher.

U.S. Dollar Index Futures Daily Chart

As long as price holds above the short-term rising trendline, the Dollar will be able to continue to push higher from this level. Should a breakdown occur we have even more support below around the $81 price level. After a move this strong, it could take days and maybe even weeks for the Dollar to regain its footing. However, the forthcoming Federal Reserve announcement next week will likely seal the Dollar’s fate.

Gold and silver futures are both trading nicely higher on the session in light of the weaker Dollar. However, both precious metals have faded later today as the Dollar started to drift back to the upside. Gold and silver are trying to breakout, but we need to see some continuation before I intend to get involved.

Gold Futures Daily Chart

Sometimes weak breakouts in price action can lead to ugly reversals. I’m not suggesting that a failed breakout will occur in gold and silver futures, but I remain cautious as the breakout so far does not have me totally convinced. Volume in silver is not spiking like it should be and gold volume is also weak considering the possibility that major breakouts are taking place.  Another element that is simply not confirming with strong price action or volume is the gold miners. On a day like today, all that they can muster is a relatively small gain on super light volume. Caution is warranted!

Oil futures are also not shooting considerably higher even though the Dollar remains under pressure. To me, today seems like it could be a misdirection day based on the price action and lack of volume we are seeing to the upside in hard assets like gold, silver, and oil. In addition, volume in the major equity indices and futures is super light. For now, I am going to remain cautious and will likely look to avoid taking on any major risk until the dust settles on the GDP number and the Fed’s future decision. Sometimes sitting in cash is not so bad after all!

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Is Gold Ready to Run to All Time High?

Just under two weeks ago I updated my subscribers with a chart pattern on the GLD ETF, and in that update we discussed what to look for to find clues in this GOLD consolidation that has continued from last August-September highs. My theory all along has been that we peaked in a “Wave Three” top at 1900-1920 last fall after a Fibonacci 34 month rally from $681 per ounce. The ensuing corrective patterns are part of a normal “Wave 4” consolidation that works off the sentiment and overbought nature of that wave 3 updraft. Following this consolidation, I fully expect GOLD to continue past the $1900 per ounce area and run to $2300 per ounce or higher in a Wave 5 rally into the summer of 2013.

What can we continue to watch for clues though as to when this new uptrend begins? Specifically a close over 158 on the GLD ETF (About $1630 on the GOLD Charts) would confirm that the wave 4 lows are in at the $1520 area and the early stages of Primary wave 5 to the upside have begun. The only downside risk I have near term between now and October is if we drop below 153 on the GLD ETF, it would likely point to GOLD dropping to the $1445-$1455 per ounce area, the same low target I have had for 9 plus months now as the worst case downside.

Advice would be to start scaling into long positions on a break over 158 on the GLD ETF and adding on pullbacks along the way up. If we can’t break 158 then the advice is to sit back and watch before acting.

Below is the chart I completed for my subscribers about fourteen or so days ago, and we continue to use it as our short term indicator for the next leg up or down. Eventually, gold will run to all time highs, we simply would like to time our entry and reduce our risk as much as possible.

If you would like to receive occasional free weekly reports on the SP 500, gold and silver  sign up at Market Trend Forecast and or take advantage now of a one time 33% off discount code to subscribe and receive updates five days a week.

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National Oilwell Varco Announces Second Quarter 2012 Earnings

How To Position Yourself for a 10 Year Pattern Breakout

National Oilwell Varco, Inc. (NYSE: NOV) today reported that for its second quarter ended June 30, 2012 it earned net income of $605 million, or $1.42 per fully diluted share. Earnings per share increased 26 percent compared to the second quarter of 2011 and were sequentially flat compared to the first quarter of 2012. Excluding transaction charges of $28 million pre tax, second quarter 2012 net income was $626 million, or $1.46 per fully diluted share.

The Company’s revenues for the second quarter of 2012 were $4.7 billion, which improved 10 percent from the first quarter of 2012 and 35 percent from the second quarter of 2011. Operating profit for the second quarter of 2012 was $907 million or 19.2 percent of sales, excluding transaction charges. Year over year second quarter operating profit increased 27 percent and sequentially second quarter operating profit increased three percent.

Backlog for capital equipment orders for the Company’s Rig Technology segment was $11.28 billion at June 30, 2012, up nine percent from the end of the first quarter and up 46 percent from the end of the second quarter of 2011. During the second quarter of 2012 the Company’s Rig Technology segment booked incoming new capital equipment orders of $2.73 billion (through a combination of $2.22 billion in new orders and $0.51 billion in orders through acquisitions completed during the quarter) offset by revenues out of backlog of $1.82 billion.

Pete Miller, Chairman, President and CEO of National Oilwell Varco, remarked, “Our Company achieved strong earnings this quarter, thanks to the hard work of our many dedicated employees. All three segments posted higher sequential and year over year revenues and operating profit, and we are pleased at the high level of demand we continue to see for new drilling equipment.

The Company continues to expand organically as well as through acquisitions. We closed six transactions during the quarter for total consideration of $2.0 billion, to strengthen the technology, product and service offerings we provide our oil and gas customers around the globe. Most markets we serve have remained buoyant, despite lower commodity prices, and we therefore expect solid results for the second half of the year.”

Read the entire earnings report

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Exxon Mobil Announces Second Quarter 2012 Results

How To Position Yourself for a 10 Year Pattern Breakout

Exxon Mobil Corporation free trend analysis > NYSE:XOM

		Second Quarter						First Half
		2012		2011		%		2012				2011		%
Earnings Excluding Special Items 1
$ Millions		15,910		10,680		49		25,360				21,330		19
$ Per Common Share
Assuming Dilution		3.41		2.18		56		5.41				4.32		25
Special Items
$ Millions		0		0				0				0
Earnings
$ Millions		15,910		10,680		49		25,360				21,330		19
$ Per Common Share
Assuming Dilution		3.41		2.18		56		5.41				4.32		25
Capital and Exploration
Expenditures - $ Millions		9,339		10,306		-9		18,173				18,127		0

EXXONMOBIL'S CHAIRMAN REX W. TILLERSON COMMENTED....


“Second quarter results reflect our ongoing commitment to develop and deliver the energy needed to help meet global demand and underpin economic recovery and growth. Despite global economic uncertainty, we continue to invest throughout the business cycle taking a long-term view of resource development.


“Second quarter earnings of $15.9 billion included a net gain of $7.5 billion associated with divestments and tax-related items. Excluding these items, second quarter earnings were $8.4 billion.


“Capital and exploration expenditures were $9.3 billion in the second quarter and a record $18.2 billion for the first six months of 2012 as we progress our plans to invest about $37 billion per year over the next five years to help meet the global demand for energy.


“The Corporation distributed $7.7 billion to shareholders in the second quarter through dividends and share purchases to reduce shares outstanding.”


SECOND QUARTER HIGHLIGHTS

• Earnings of $15,910 million increased $5,230 million or 49% from the second quarter of 2011. Earnings included a net gain of $7.5 billion associated with divestments and tax-related items.
• On June 1, ExxonMobil completed the restructuring of its Downstream and Chemical holdings in Japan. Under the restructuring, TonenGeneral Sekiyu K.K. (TG) purchased ExxonMobil’s shares in a wholly-owned affiliate in Japan for approximately $3.9 billion. As a result, ExxonMobil’s effective ownership of TG was reduced from 50% to 22%.
• Earnings per share (assuming dilution) were $3.41, an increase of 56%.
• Capital and exploration expenditures were $9.3 billion, down 9% from the second quarter of 2011.
• Oil-equivalent production decreased 5.6% from the second quarter of 2011. Excluding the impacts of entitlement volumes, OPEC quota effects and divestments, production was essentially flat.
• Cash flow from operations and asset sales was $13.9 billion, including proceeds associated with asset sales of $3.7 billion.
• Share purchases to reduce shares outstanding were $5 billion.
• Dividends per share of $0.57 increased 21% compared to the second quarter of 2011.
• ExxonMobil and Rosneft signed agreements to jointly develop tight oil reserves in Western Siberia and establish a joint Arctic Research Center for Offshore Developments.
• ExxonMobil has filed permit applications to progress plans for a world class petrochemical expansion on the U.S. Gulf Coast, in anticipation of a 2016 start-up. The potential project would include a new ethane cracker and premium product facilities at ExxonMobil’s integrated Baytown complex in Texas.
• ExxonMobil and joint venture partner Saudi Basic Industries Corporation will proceed with construction of a world scale specialty elastomers facility. The 400 thousand metric tons per year facility will be integrated with the existing Al Jubail complex in Saudi Arabia, and completion is anticipated in 2015.
  
  Read the entire earnings report at ExxonMobil.Com

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Spot Natural Gas Prices at Marcellus Trading Point Reflect Pipeline Constraints

How To Position Yourself for a 10 Year Pattern Breakout

Daily natural gas spot prices between Tennessee Gas Pipeline (TGP) Zone 4 Marcellus and Henry Hub have diverged recently largely due to rising Marcellus production, which has outpaced the growth of available take away pipeline capacity in northern Pennsylvania. As a result, the spot price of natural gas at the TGP Zone 4 Marcellus trading point has fallen, at times considerably, below the spot price at Henry Hub in Louisiana, and is currently the least expensive wholesale natural gas in North America.

To address this rapid growth in natural gas production, several Northeast interstate pipeline projects were completed in 2011, adding nearly 1.5 billion cubic feet per day (Bcf/d) of capacity in Pennsylvania. Many additional pipeline projects have been proposed or are in various stages of completion in the Northeast to reduce transportation constraints caused by growing Marcellus natural gas production. EIA's website has information on the status of some of these pipeline projects.



Dry natural gas production in Pennsylvania, a key part of the Marcellus supply basin, continues to grow and according to Bentek Energy is now approaching 6 Bcf/d. Estimated June 2012 Marcellus dry natural gas production (5.7 Bcf/d) has nearly doubled since June 2011 (2.9 Bcf/d) and represents about 9% of overall U.S. dry natural gas production. Further, Bentek Energy estimates that there are over 1,000 natural gas wells that have been drilled in northern Pennsylvania but which are not yet producing natural gas because there is not enough interstate and gathering pipeline infrastructure to accommodate the new production.

Source: U.S. Energy Information Administration based on Bentek Energy, LLC.

Note: Reflects monthly averages of Bentek Energy's daily estimates of dry natural gas production for the state of Pennsylvania. These figures exclude a small amount of natural gas production received directly by local distribution companies and end users via gathering lines that are not subject to Federal Energy Regulatory Commission posting requirements for interstate natural gas pipelines.     

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Offshore Oil Expansion Passes U.S. House as Obama Considers Veto

How To Position Yourself for a 10 Year Pattern Breakout

The Republican led U.S. House of Representatives passed legislation opening the California and Virginia coasts for offshore oil drilling, defying a presidential veto threat.

The measure, if approved by the Senate, would replace President Barack Obama’s 2012-2017 leasing plan, almost doubling total sales to 29 from 15 and speeding auctions off the north coast of Alaska.

“We can do better than the president’s proposed plan, and our nation deserves better,” said Representative Doc Hastings, a Washington Republican and bill sponsor. “By passing this bill, we are standing up for American energy and American jobs and moving our country forward.”

Republicans and the American Petroleum Institute, the largest trade group representing the energy industry, criticized Obama for limiting access to offshore resources after the record 2010 spill at a BP Plc (BP) well in the Gulf of Mexico.

The administration “strongly opposes” the measure and senior Obama advisers would recommend a veto, according to a July 23 statement of administration policy. The Senate, where Democrats have a majority, doesn’t plan to take up similar legislation.

The Interior Department has held two auctions for drilling leases since BP’s Macondo well blow out, killing 11 workers and spewing about 4.9 million barrels of oil into the Gulf of Mexico.

In an auction last month, Royal Dutch Shell Plc (RDSA) offered $406.6 million, or 24 percent of all winning bids, to drill in the central Gulf of Mexico, followed by Statoil ASA (STO) with $333.3 million, the Interior Department said June 20.

Chevron Corp., Exxon Mobil Corp., Apache Corp., LLOG Exploration Offshore LLC, Stone Energy Corp., Noble Energy Inc. and ConocoPhillips were among companies submitting winning bids, according to a list posted June 20 on the Interior Department website.

The bill is H.R. 6082.

Posted courtesy of Bloomberg News and Katarzyna Klimasinska. Katarzyna can be reached at kklimasinska@bloomberg.net

Monthly Long Term Chart Analysis & Thoughts

How To Position Yourself for a 10 Year Pattern Breakout

As mentioned last Friday just before things took a dive on the weekend, a look at the major market indices did not look promising. If we take an even longer term look and examine the monthly charts we can see that The S&P 500 as well as the Dow Jones have been approaching multi decade rising channel resistance lines. Further, they also appear to be forming bearish rising wedge patterns.

Monthly Long Term Chart Analysis & Thoughts....

As many of my longer term subscribers can attest to, I always preach that technical analysis is one part art and one part science: you can never be completely certain on what the outcome of a pattern is going to be. However, we can use historical analysis to make better investments. The great American Novelist Mark Twain probably said it best in that “history does not repeat itself, but it rhymes”. Regarding a rising wedge pattern, we know that roughly two thirds of the time they will break to the downside. This also means that one third of the time they break to the upside.

In accomplishing our goal of capital growth we must do a number of things. We must make returns on our investments, we must protect our investments, and we must limit our losses. While all three aspects work in tandem with each other, there are times when focus must be allocated to one specific approach.

Regarding the current technical setup, I’m not so focused on the 67% chance that these wedges will break to the downside, but more so the impact of each outcome on the average Joe’s portfolio and mom and pop businesses. The S&P 500 and the Dow are approaching long term resistance lines that have been in place for decades. If we do break to the downside, which I suspect we will, there could be a very significant sell off with consequences that no one can predict at this point though I mention some things in the chart above. Alternatively, there is significant overhead resistance in the various indices, and I don’t believe an upside break would be too monumental.

That being said, I always like to keep an open outlook and wait for the right opportunity. I’m trying to think of scenarios that would prelude further upside action and I really am not coming up with much. As evidenced by the completion of the recent 5 wave uptrend on the S&P that coincided nicely with the various quantitative easing policies, Ben Bernanke and the fed have had less and less impact. I truly can’t see many fiscal developments that would prompt any significant bullish action.

The only scenario I really think that could pump up equities is a series of positive earnings announcements. A lot of expectations, earnings numbers, guidance, etc… have been revised downwards over the last couple of quarters, so there is the opportunity for some positive surprises that could lead to some bullish price action. In absence of such a scenario, I really can’t think of much else that would prompt a run up.

Look at these charts of positive and negative earnings surprises… and the dates and remember what happened following this negative data....

Positive Earnings Surprise

Negative Earnings Surprise

That being said, I am recommending two courses of action. For those steadfast bulls, lock in some profits and/or buy some protection. Missing out on some of the upside is a lot better than losing some of the gains you have fought so hard for over the past couple of years. For the more aggressive traders and investors, start following my updates a little more regularly as I foresee many shorting opportunities coming up in the future. As many of you know, sell offs are often quick and abrupt, and timing is extremely important when playing the downside.

Further, trading could get very volatile in the near future. Historically, and even more so looking forward as August and September have been very costly for the average investor. Our focus will be in taking the highest probability trades that offer the best risk to reward scenarios. There will be times when we miss trades, and times when they’re not timed perfectly. But, as those who have been with me for a while can attest to, patience pays off in the long run....

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Chris Vermeulen

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After Keystone Pipeline Failure, Canada Running to China for Crude Oil Deals

After 1949 when the Communists defeated the Nationalists for control of China, the mournful refrain from Washington, D.C. was “Who Lost China?” This arrogant display of superpower Cold War finger pointing ended with a number of careers destroyed and an unfair smear on the U.S. State Department that in some ways has never been entirely eradicated.

In today’s highly charged political climate, it will come as no surprise when some U.S. politicians come down hard on the Obama Administration for what will no doubt be described as driving Canada’s energy sector into the arms of China:

Cnooc Ltd. (883)’s $15.1 billion cash takeover bid for Nexen Inc. (NXY) signals a Canadian shift toward China and away from the U.S. as the nation’s traditional oil and natural gas partner and main export market.

Canada’s oil sands reserves, the third-largest recoverable crude deposits in the world, were developed in part by U.S. money as companies such as California’s Richfield Oil Corp. brought technology to extract bitumen from boreal peat bogs half a century ago. Now, for the first time, a Chinese company will own and operate oil sands crude production as well as Nexen’s shale gas assets in British Columbia, along with leases in other parts of the world.

Chinese oil producers have turned more frequently to Canada after political opposition in the U.S. derailed Cnooc’s $18.5 billion bid for Unocal Corp. in 2005, and after TransCanada Corp. (TRP)’s Keystone XL pipeline route south to Texas was blocked by President Barack Obama’s administration last year. 

The Nexen deal is important for two reasons. First, it potentially represents some absolution for CNOOC, which is best known in foreign investment circles as the company which botched the 2005 U.S. UNOCAL takeover, not taking into account American politics and the need for a public relations strategy. As the Nexen deal will require regulatory approval in several jurisdictions, we will see what lessons CNOOC has learned from the failed UNOCAL bid.

Second, as Bloomberg points out, the deal represents a further shift by Canada away from the U.S. towards China. Another deal involving Sinopec and Talisman Energy was announced yesterday as well, and there have been other recent transactions, including CNOOC’s takeover of Nexen partner Opti Canada.

Why is this happening? Read the entire article > "After Keystone, Canada Running to China for Oil Deals"

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First Offshore Sale Under 2012-2017 Leasing Program Announced

Financial Market Forecast is Looking Bleak

The U.S. Bureau of Ocean Energy Management (BOEM) will offer over 20 million acres offshore Texas as part of the Western Gulf of Mexico Lease Sale 229, Secretary of the Interior Ken Salazar and Bureau of Ocean Energy Management Director Tommy P. Beaudreau announced Monday.

The sale, scheduled to take place in New Orleans on Wednesday, Nov. 28, will be the first offshore sale under the Obama administration's new Outer Continental Shelf Oil and Gas Leasing Program for 2012-2017.

"We are moving forward expeditiously to create jobs by implementing the President's offshore oil and gas strategy for the next five years, a smart plan that focuses on the areas that contain the overwhelming majority of the energy resources," Salazar said in a statement Monday.

"With comprehensive safety standards in place, this sale will help us to continue to responsibly grow America's energy economy and reduce our dependence on foreign oil," Salazar said.

Read the entire Rigzone article.

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Addison Armstrong: Where Are Oil Prices Now?

Financial Market Forecast is Looking Bleak

Mideast violence is pushing oil higher, while Europe's economy is bringing the commodity lower, reports CNBC's Sharon Epperson, with Addison Armstrong, Tradition Energy.

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Financial Market Forecast is Looking Bleak

From guest blogger Chris Vermeulen.....

This week could be a huge one for stocks and commodities. This morning the dollar index is taking another run at our weekly chart resistance level. If it can break out and start to rally this week then a possible 4-6 week sell off in stocks and commodities may be just starting.

And we know just how we are going to play it when it does!

Watch the morning video or at least the last 4 minutes where I cover the SP500 intraday and daily chart which shows the main cycles. The video clearly explains where the market seems to be trading in terms of cycles and what we should expect this week and in the coming month.

Read and watch Chris' > "Financial Market Forecast is Looking Bleak"


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Halliburton Announces Second Quarter 2012 Earnings [HAL]

Halliburton (NYSE:HAL) announced today that income from continuing operations for the second quarter of 2012 was $745 million, or $0.80 per diluted share. This compares to income from continuing operations for the first quarter of 2012 of $635 million, or $0.69 per diluted share. First quarter reported results included $300 million ($191 million, after tax, or $0.20 per diluted share) for an estimated loss contingency related to the Macondo well incident.

Halliburton’s consolidated revenue in the second quarter of 2012 was $7.2 billion, compared to $6.9 billion in the first quarter of 2012. Consolidated operating income was $1.2 billion in the second quarter of 2012, compared to $1.0 billion in the first quarter of 2012. All international regions experienced double digit percentage revenue and operating income growth from the first quarter of 2012. North America margins were negatively impacted, however, by rising costs and pricing pressure in production enhancement services.

“I am pleased with our second quarter results, which set a new revenue record for the total company and all three of our international regions,” commented Dave Lesar, chairman, president and chief executive officer.

"We continue to be successful in executing our strategy of market share growth while maintaining a focus on industry leading returns. From a global perspective, we achieved record revenues in eight of our product service lines, with four of them. Cementing, Completion Tools, Multi Chem, and Testing and Subsea, generating record operating income as well.

“Consolidated revenue for the second quarter was up over 5% sequentially. The international rig count was up 3% during the quarter, compared to a 15% increase for our international revenues. North America rig count decreased 17%, while our North America revenues were essentially flat compared to the first quarter. Key strategic market share gains in international operations, continued capacity additions, and strong utilization contributed to this outperformance.

Read the entire Halliburton earnings report

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Andrew Su: Crude Oil to Head Below $90 This Week

Andrew Su, CEO of Compass Global Markets says that WTI crude prices will head lower this week as speculation of more quantitative easing from the Federal Reserve eases.

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Schlumberger [ticker SLB] Announces Second Quarter 2012 Results

Schlumberger Limited (NYSE:SLB) today reported second quarter 2012 revenue of $10.45 billion versus $9.92 billion in the first quarter of 2012, and $8.99 billion in the second quarter of 2011.

Income from continuing operations attributable to Schlumberger, excluding charges and credits, was $1.4 billion. An increase of 8% sequentially and 20% year on year. Diluted earnings per share from continuing operations, excluding charges and credits, was $1.05 versus $0.96 in the previous quarter, and $0.86 in the second quarter of 2011.

Following Schlumberger’s previously announced sale of both the Wilson distribution business and its equity ownership interest in CE Franklin Ltd. (CE Franklin), the Distribution segment has been reclassified to discontinued operations. All prior periods have been restated accordingly.

Schlumberger recorded charges of $0.02 per share in the second quarter and $0.01 per share in the first quarter of 2012 and $0.05 per share in the second quarter of 2011.

Oilfield Services revenue of $10.45 billion was up 5% sequentially and increased 16% year on year. Pretax segment operating income of $2.1 billion was up 8% sequentially and increased 20% year on year.

Schlumberger CEO Paal Kibsgaard commented, “Solid activity growth and a consistent focus on execution led to results that continued to strengthen in the second quarter.

Read the entire quarterly report

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Put Your Seatbelts On, It’s About To Get Bumpy!

It was just about a year ago today when the S&P was sitting at fresh highs and everyone was enjoying a rather upbeat summer. It was a nice summer, the markets were calm, and there was a surreal sense of optimism. Then, in the matter of a few days, things got real ugly, real quickly.

Well, it doesn’t seem like too much has changed since then. We’ve had mixed earnings reports, ever evolving worries in Europe, and the always looming fiscal mess in the U.S. Once again, are we in the calm before the storm?

It looks like things in Europe may start to heat up again. Riots turned violent again in Spain as protestors took to the street over austerity measures. With seemingly no resolution, a sinking tourism industry in the PIGS, and a typically hot summer August on its way, all signs point to further turmoil.

Technically, we’re currently seeing a number of bearish indicators setting up in the S&P and other markets. First, on the weekly chart of the SP500 Futures we can see what appears to be a bear flag formation developing. Note the recent rise in price since the beginning of June on decreasing volume.


Weekly SP500 Futures Chart Patterns

Daily Chart Elliott Wave Count For SP500

A second look at the S&P daily illustrates a down trend and 5 wave count bounce in the market, both are currently pointing to lower prices.

>> Completion of two intermediate cycles within longer term 5 wave pattern

>> Downwards wave one from April until beginning of June followed by wave 2 correction from June until present.

The wave two correction typically proceeds the longest wave, wave three, which is pointing towards a large move down (Note that in the first shorter term cycle the downwards wave three was the longest by far. We expect the same to be repeated in the longer term cycle.)

SP500 BIG PICTURE Wave Count

A look at the longer term view once again using the weekly chart, again supports our argument for a major correction. We have just completed a 5 wave pattern since the 2009 lows, and it is looking more like a big pull back is due. Remember most major trends end after the fifth wave.

Copper Weekly Chart Patterns

If we take a look at the copper ETF, “JJC”, we are provided with further justification. Copper is often referred to as “Dr.Copper” due to its industrial application and is known to be a leading indicator for equity markets. Copper has significantly underperformed equity markets and is likely leading the next move down. A look at the weekly chart which points to a rather dismal outlook. There is a major head and shoulder patterns developing.

Major Market Pattern Analysis Conclusion:

Last summer turned into a bloodbath with nothing but red candlesticks taking stocks and commodities sharply lower. If you haven’t already, it’s time to lock in some profits. Short, intermediate, and long term cycles are pointing down, and the increasingly bearish technical developments cannot be ignored. We’ll be looking at entering multiple shorts potentially in the very near future once/if setups present themselves.

 Buckle up and stay tune for more....

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Chris Vermeulen

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Geology and Technology Drive Estimates of Technically Recoverable Resources

A common measure of the long-term viability of U.S. domestic crude oil and natural gas as an energy source is the remaining technically recoverable resource (TRR). TRR estimates are a work in progress, changing as more production experience becomes available and as new technologies are applied to extract these resources. The greatest uncertainty is associated with the "estimated ultimate recovery," or EUR, per well.

EIA updates its TRR estimates using the latest available well production data. EIA's recently released Annual Energy Outlook 2012 (AEO2012) contains a detailed discussion of TRR estimates and resource uncertainty. AEO2012 projections also include sensitivity cases varying the EUR per well and a high-TRR case. The TRR estimates provide context for the size of the resource, while projected production depends strongly on the number of wells, the EUR per well, other well characteristics, and economics.

.

TRR estimates consist of "proved reserves" and "unproved resources." As wells are drilled and field equipment is installed and productivity is assumed, unproved resources become proved reserves and, ultimately, production. The TRR estimate for a continuous-type shale gas or tight oil area is the product of land area, well spacing (wells per square mile), percentage of area untested, percentage of area with potential, and the estimated ultimate recovery (EUR) per well.

The Annual Energy Outlook 2012 unproved TRRs are shown in the figures above for the major shale gas and tight oil formations. The formation parameters that result in these TRR are provided elsewhere. The volume of total TRR due to proved reserves is not shown. "Tight oil" refers to crude oil and condensates that are produced from low permeability sandstone, carbonate, and shale formations. The tight oil TRRs are for the entire formation, including the non shale portions.

Read the entire article at EIA.Com

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Welcome BreitBurn Energy Partners to the COT Fund

We are proud to announce that we have added BreitBurn Energy Partners [ticker BBEP] to the COT Fund. BreitBurn has picked up some recent analyst upgrades and with a reliable 10.2% dividend we felt it was a good addition to our list of MLP's. BreitBurn adds diversity to the MLP side of our portfolio as it focuses on the western portion of the U.S. yet still has holdings throughout the east.

Todd Johnson wrote on Seeking Alpha this week....Breitburn Energy Partners offers an enticing 10.2% dividend yield to retirees. The upstream master limited partnership (MLP) generates revenues via natural gas and oil production. I would like to highlight 3 reasons why this MLP has its financials in order to pay out reliable dividends. The 10.2% yield can't be ignored by retirees in the world of a 2.61% 30 Year Treasury Bond yield. Click here to read Todds entire article.

In May equities research analysts at Citigroup lifted their price target on shares of Breitburn Energy from $26.00 to $27.00. The analysts wrote, “BBEP announced on 05/10/2012 that it signed two separate purchase agreements to acquire oil and natural gas properties in the Permian Basin for a combined price of $220 million, subject to customary closing conditions. The acquisition is expected to close within 60 days from the date of the announcement and will be funded with the company’s revolving credit facility.”

BBEP has been the subject of a number of other recent research reports. Analysts at Global Hunter Securities initiated coverage on shares of Breitburn Energy in a research note to investors on Tuesday, April 17th. They set a “buy” rating and a $22.00 price target on the stock. Separately, analysts at Barclays Capital reiterated an “equal weight” rating on shares of Breitburn Energy in a research note to investors on Friday, March 30th. Finally, analysts at Deutsche Bank initiated coverage on shares of Breitburn Energy in a research note to investors on Tuesday, February 14th. They set a “hold” rating on the stock.

But just this week has been upgraded by TheStreet Ratings from hold to buy. With The StreetWire saying....The company's strengths can be seen in multiple areas, such as its robust revenue growth, compelling growth in net income, good cash flow from operations, impressive record of earnings per share growth and notable return on equity. We feel these strengths outweigh the fact that the company shows low profit margins.

BreitBurn Energy Partners is an independent oil and gas limited partnership, focused on the acquisition, exploitation and development of oil and gas properties for the purpose of generating cash flow to make distributions to our unitholders. Our assets consist primarily of producing and non producing crude oil and natural gas reserves located in the Los Angeles Basin in California, the Wind River and Big Horn Basins in central Wyoming, the Powder River Basin in eastern Wyoming, the Evanston and Green River Basins in southwestern Wyoming, the Sunniland Trend in Florida, the Antrim Shale in Michigan, and the New Albany Shale in Indiana and Kentucky.

Historical Dividends

Declared	Ex-Date	Record	Payable	Amount	Type
Apr 19, 2012	May 3, 2012	May 7, 2012	May 14, 2012	0.4550	U.S. Currency
Jan 27, 2012	Feb 2, 2012	Feb 6, 2012	Feb 14, 2012	0.4500	U.S. Currency
Oct 28, 2011	Nov 7, 2011	Nov 9, 2011	Nov 14, 2011	0.4350	U.S. Currency
Jul 27, 2011	Aug 5, 2011	Aug 9, 2011	Aug 12, 2011	0.4225	U.S. Currency
Apr 28, 2011	May 6, 2011	May 10, 2011	May 13, 2011	0.4175	U.S. Currency
Jan 31, 2011	Feb 4, 2011	Feb 8, 2011	Feb 11, 2011	0.4125	U.S. Currency
Oct 29, 2010	Nov 5, 2010	Nov 9, 2010	Nov 12, 2010	0.3900	U.S. Currency
Jul 30, 2010	Aug 5, 2010	Aug 9, 2010	Aug 13, 2010	0.3825	U.S. Currency
Apr 28, 2010	May 6, 2010	May 10, 2010	May 14, 2010	0.3750	U.S. Currency
Jan 30, 2009	Feb 5, 2009	Feb 9, 2009	Feb 13, 2009	0.5200	U.S. Currency
Oct 29, 2008	Nov 6, 2008	Nov 10, 2008	Nov 14, 2008	0.5200	U.S. Currency
Aug 1, 2008	Aug 7, 2008	Aug 11, 2008	Aug 14, 2008	0.5200	U.S. Currency
Apr 28, 2008	May 7, 2008	May 9, 2008	May 15, 2008	0.5000	U.S. Currency
Jan 29, 2008	Feb 7, 2008	Feb 11, 2008	Feb 14, 2008	0.4525	U.S. Currency
Nov 1, 2007	Nov 7, 2007	Nov 12, 2007	Nov 14, 2007	0.4425	U.S. Currency
Jul 27, 2007	Aug 3, 2007	Aug 7, 2007	Aug 14, 2007	0.4225	U.S. Currency
Apr 26, 2007	May 3, 2007	May 7, 2007	May 15, 2007	0.4125	U.S. Currency
Jan 22, 2007	Feb 1, 2007	Feb 5, 2007	Feb 14, 2007	0.3990	U.S. Currency

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What is T. Boone Pickens Buying?

Crude oil may have sold off hard recently, but billionaire investor T. Boone Pickens still loves energy stocks. After all, he made his fortune by investing in energy, so he knows a thing or two about picking winners among the oil, natural gas and power producers. Recently, BP Capital released its holdings as of March 31, 2012 in a 13F filing. Let’s take a closer look at some of its most bullish bets.

Top 10 Holdings

Company	Ticker	Value ($000s)	Activity
BP PLC	BP	20,345	12%
ENCANA CORP	ECA	18,392	New
NATIONAL OILWELL VARCO INC	NOV	14,262	0%
DEVON ENERGY CORP NEW	DVN	13,513	36%
TRANSOCEAN LTD	RIG	13,068	47%
CHESAPEAKE ENERGY CORP	CHK	11,563	-12%
WEATHERFORD INTL LTD NEW	WFT	10,489	35%
SANDRIDGE ENERGY INC	SD	9,250	0%
DAWSON GEOPHYSICAL CO	DWSN	8,426	0%
SUNCOR ENERGY INC NEW	SU	7,063	0%

Encana Corp (ECA) is a new position in BP’s portfolio – the fund did not report owning any shares of Encana at the end of 2011 – but it is one of its largest holdings. During the first quarter of 2012, BP initiated a new position in the company worth $18 million. A few other hedge funds also have Encana in their 13F portfolios. At the end of last year, there were 19 hedge funds reported to own this stock. Steven Cohen’s SAC Capital Advisors had nearly $100 million invested in Encana at the end of last year. Martin Whitman and Ken Griffin are also bullish about this stock. See chart below.

Pickens likes Devon Energy Corp (DVN) as well. The stock is the fourth largest position in his latest 13F portfolio. Pickens boosted his stakes in Devon by 36% over the first quarter to $190 million. Devon is also quite popular amongst the other hedge funds we track. There were 32 hedge funds with positions in Devon at the end of last year. Devon has also shifted its focus from natural gas to oil and natural gas liquids. We think Devon is well positioned to benefit from the higher margins of liquids.  See chart below. 

Of course, just because BP Capital is natgas and alternative energy-heavy doesn’t mean that Boone Pickens’ fund is eschewing traditional oil firms. His fund picked up 188,000 shares of Valero Energy (VLO) last quarter, building up a $5 million stake in the country’s largest independent oil refiner. Valero has the capacity to process more than 2.8 million barrels of crude per day through its 14 refineries, in addition to a massive ethanol business and a 1,000-unit gas station business. See Chart below.

Pickens stuck to his strong suit in energy with new picks Encana (ECA), Calpine (CPN), Exelon (EXC), Valero (VLO), and NRG Energy (NRG). He also added to BP Plc (NYSE:BP), Devon Energy (NYSE: DVN), Transocean, and Weatherford International LTD. 

Other large positions in Pickens’ portfolio are BP Plc (BP), National Oilwell Varco Inc (NOV), and Transocean Ltd (RIG). Pickens did not increase or decrease his stakes in National Oilwell. He increased his BP position by 12% and his Transocean position by 47% over the first quarter. All of these stocks have attractive valuation levels, especially BP. It is currently trading at only 5.6x its 2013 earnings and has a dividend yield of 5.12%. 

BP is the most popular oil company among hedge funds, followed by Exxon Mobil. Value investor Seth Klarman had a $400+ million position in the stock at the end of the first quarter. Billionaires Ken Fisher and Ken Griffin are among the fund managers with large XOM positions. They both boosted their stakes in XOM during the first quarter. See chart below.

Posted courtesy of  Turn Key Oil.Com


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