Azlin Ahmad, editor of crude oil at Argus Media, offers her take on what oil demand will be like in 2010, with CNBC's Chloe Cho & Rebecca Meehan.
Wednesday, December 16, 2009
Small Energy Firms Yielding to International Giants
Exxon Mobil Corp.'s acquisition of XTO Energy Inc. is the latest sign of a changing of the guard in the U.S. oil patch, as the small companies that led an exploration boom in the past decade start to give way to the international giants. XTO, based in Fort Worth, Texas, was one of dozens of independent producers that pioneered a revolution in the U.S. natural gas industry in recent years. While global companies like Exxon and Chevron Corp. largely stayed on the sidelines, independents like XTO, Chesapeake Energy Corp. and Devon Energy Corp. leased millions of acres of land across the U.S. in search of new sources of gas and, to a lesser extent, oil.
But pumping the gas is proving to be a lot more expensive than finding it, which has led to an increasing number of joint ventures between the independent companies and the major multinational oil players, and with the acquisition announced Monday, an outright company sale. More deals are likely, analysts say, though they suggest that it may be hard to find buyers large enough to absorb the biggest independent companies.....Read the entire article.
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Oil Extends Gain After U.S. Government Releases Supply Report
Crude oil futures extended gains after the U.S. Energy Department released its report on stockpiles. Crude oil for January delivery rose $1.49, or 2.1 percent, to $72.18 a barrel at 10:31 a.m. on the New York Mercantile Exchange. Oil traded at $71.71 before the release of the report at 10:30 a.m. in Washington.....From Bloomberg News.
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Crude Oil Higher Overnight, Hinting a Short Term Low is Near
Crude oil was higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are oversold and are turning neutral to bullish hinting that a short term low might be in or is near.
Closes above the 20 day moving average crossing at 74.82 are needed to confirm that a short term low has been posted. If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target.
Wednesday's pivot point, our line in the sand is 70.38
First resistance is the 10 day moving average crossing at 72.10
Second resistance is the 20 day moving average crossing at 74.82
First support is Monday's low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16
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Natural gas was higher overnight as it extends last week's rally and tested the 62% retracement level of the October-December decline crossing at 5.565. Stochastics and the RSI are overbought but remain bullish signaling that sideways to higher prices are possible near term.
If January extends this month's rally, the 75% retracement level of the October-December decline crossing at 5.807 is the next upside target. Closes below the 20 day moving average crossing at 4.953 would temper the near term bullish outlook in the market.
Natural gas pivot point for Wednesday is 5.459
First resistance is the overnight high crossing at 5.569
Second resistance is the 75% retracement level of the October-December decline crossing at 5.807
First support is the 10 day moving average crossing at 5.088
Second support is the 20 day moving average crossing at 4.953
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The U.S. Dollar was lower due to profit taking overnight as it consolidates some of this month's rally. Stochastics and the RSI are overbought but remain neutral signaling that additional gains are possible near term.
If March extends this month's rally, the reaction high crossing at 77.81 is the next upside target. Closes below the 20 day moving average crossing at 75.90 would confirm that a short term top has been posted.
First resistance is Tuesday's high crossing at 77.58
Second resistance is the reaction high crossing at 77.81
First support is the 10 day moving average crossing at 76.50
Second support is the 20 day moving average crossing at 75.90
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Closes above the 20 day moving average crossing at 74.82 are needed to confirm that a short term low has been posted. If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target.
Wednesday's pivot point, our line in the sand is 70.38
First resistance is the 10 day moving average crossing at 72.10
Second resistance is the 20 day moving average crossing at 74.82
First support is Monday's low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16
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Natural gas was higher overnight as it extends last week's rally and tested the 62% retracement level of the October-December decline crossing at 5.565. Stochastics and the RSI are overbought but remain bullish signaling that sideways to higher prices are possible near term.
If January extends this month's rally, the 75% retracement level of the October-December decline crossing at 5.807 is the next upside target. Closes below the 20 day moving average crossing at 4.953 would temper the near term bullish outlook in the market.
Natural gas pivot point for Wednesday is 5.459
First resistance is the overnight high crossing at 5.569
Second resistance is the 75% retracement level of the October-December decline crossing at 5.807
First support is the 10 day moving average crossing at 5.088
Second support is the 20 day moving average crossing at 4.953
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The U.S. Dollar was lower due to profit taking overnight as it consolidates some of this month's rally. Stochastics and the RSI are overbought but remain neutral signaling that additional gains are possible near term.
If March extends this month's rally, the reaction high crossing at 77.81 is the next upside target. Closes below the 20 day moving average crossing at 75.90 would confirm that a short term top has been posted.
First resistance is Tuesday's high crossing at 77.58
Second resistance is the reaction high crossing at 77.81
First support is the 10 day moving average crossing at 76.50
Second support is the 20 day moving average crossing at 75.90
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Crude Oil and Natural Gas Technical Outlook For Wednesday Morning
Nymex Crude Oil (CL)
Crude oil's break of 71.35 resistance suggests that a short term bottom is in place and stronger rebound should now be seen towards 38.2% retracement of 82.0 to 68.58 at 73.71 and possibly above. Nevertheless, upside should be limited by 61.8% retracement at 76.87 and bring fall resumption. Below 68.58 will target 65.05 key support next.
In the bigger picture, we're favoring the case that medium term rise from 33.2 has completed at 82.0 with bearish divergence condition in daily MACD. The break of medium term trend line support last week affirms this case and should pave the way to 58.32 cluster support (50% retracement of 33.2 to 82 at 57.60) for confirmation. As noted before, rise from 33.2 is treated as part of the correction pattern that started at 147.27. Firmed break of 58.32 support will argue that the down trend from 147.27 might be resuming for another low below 33.2. On the upside, break of 79.04 resistance is needed to invalidate this view, otherwise, outlook will remain bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.
Nymex Natural Gas (NG)
Natural gas's rally extends further as expected and reaches as high as 5.569 so far. At this point, intraday bias remains on the upside as long as 5.37 minor support holds and further rise should be seen to 61.8% projection of 2.409 to 5.318 from 4.157 at 5.955 next. On the downside, below 5.37 minor support will turn intraday bias neutral and bring retreat, probably to 4 hours 55 EMA (now at 5.159). Nevertheless, downside should be contained above 4.837 support and bring rally resumption.
In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005 and might have completed at 2.409 already. Rise from 2.409 resumes as expected after consolidations from 5.318 completed. Current rally should now be targeting 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. Break of 4.432 support is needed to indicate that natural gas has topped. Otherwise, outlook will remain bullish.....Nymex Natural Gas Continuous Contract 4 Hours Chart.
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Tuesday, December 15, 2009
Crude Oil and Natural Gas Commentary For Tuesday Evening
Crude oil closed higher due to short covering on Tuesday as it consolidated some of this month's decline. The high range close sets the stage for a steady to higher opening on Wednesday.
If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 75.24 are needed to confirm that a short term low has been posted.
First resistance is the 10 day moving average crossing at 72.63
Second resistance is the 20 day moving average crossing at 75.24
First support is Monday's low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16
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Natural gas closed higher on Tuesday as it extends this month's rally. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.
If January extends this month's rally, the 62% retracement level of this fall's decline crossing at 5.565 is the next upside target. Closes below the 20 day moving average crossing at 4.922 would temper the near term friendly outlook in the market.
First resistance is today's high crossing at 5.530
Second resistance is the 62% retracement level of this fall's decline crossing at 5.565
First support is the 10 day moving average crossing at 4.987
Second support is the 20 day moving average crossing at 4.922
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The U.S. Dollar closed higher on Tuesday as it extends this month's rally. The high range close sets the stage for a steady to higher opening on Wednesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.
If March extends its current rally, the reaction high crossing at 77.82 is the next upside target. Closes below the 20 day moving average crossing at 75.83 would temper the near term friendly outlook in the Dollar.
First resistance is today's high crossing at 77.57
Second resistance is the reaction high crossing at 77.82
First support is the 10 day moving average crossing at 76.30
Second support is the 20 day moving average crossing at 75.83
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Oil Rises, Snaps 9 Day Drop as U.S. Industrial Output Gains
Oil rose, snapping the longest decline since 2001, on a report that U.S. factories churned out more goods in November than anticipated, a signal that fuel demand will increase. Oil gained for the first time in 10 days as the Federal Reserve said that output at factories, mines and utilities climbed 0.8 percent last month, the fourth increase in five months. Germany’s IFO economic institute raised its 2010 outlook for growth in Europe’s biggest economy.
“The industrial production number is definitely a sign that the economy is improving, and it should lead to higher demand for oil and energy,” said Peter Beutel, president of trading adviser Cameron Hanover Inc. in New Canaan, Connecticut. Crude oil for January delivery rose $1.18, or 1.7 percent, to settle at $70.69 a barrel on the New York Mercantile Exchange. Futures have climbed 58 percent this year. Oil dropped 11 percent in the nine days ended yesterday to the lowest level since Sept. 29.....Read the entire article.
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Exxon and Nuclear Energy?
A YouTube post early on Monday explains why Exxon Mobil's "Outlook for Energy: A View to 2030" may have inadvertently revealed a future plan to get into the nuclear power business.
Check out the video to see if you're ready to buy into this conspiracy theory.
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Bloomberg Analysis: Crude Oil to Resume Decline After Bounce
Crude oil prices will probably continue to decline even after a short term rise, according to technical analysis by Newedge Group. West Texas Intermediate oil futures for February delivery are in “an underlying downtrend” that wouldn’t be affected by a small, short term rise in prices, Veronique Lashinski, a senior research analyst at Newedge USA LLC, said in a note to clients yesterday.
“Even though the daily chart points to a corrective bounce, we are not looking for a powerful correction,” Lashinski wrote. “As long as prices remain under $74.50, the overall picture will remain bearish.” The February contract traded for $71.90, up 4 cents, as of 10:21 a.m. London time today. Oil for January settled at $69.51 yesterday, marking the largest difference, or spread, between the two contracts closest to expiry since April.....Read the entire article.
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Crude Oil Higher on Overnight Consolidation, Bears Maintain The Clear Advantage
Crude oil was slightly higher due to short covering overnight as it consolidates some of this month's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.
If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 75.19 are needed to confirm that a short term low has been posted.
Tuesday's pivot point, our line in the sand is 69.44
First resistance is the 10 day moving average crossing at 72.53
Second resistance is the 20 day moving average crossing at 75.19
First support is Monday's low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
Natural gas was higher overnight as it extends last week's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If January extends this month's rally, the 62% retracement level of the October-December decline crossing at 5.565 is the next upside target.
Closes below the 20 day moving average crossing at 4.916 would temper the near term bullish outlook in the market.
Natural gas pivot point for Tuesday is 5.311
First resistance is the overnight high crossing at 5.422
Second resistance is the 62% retracement level of the October-December decline crossing at 5.565
First support is the 10 day moving average crossing at 4.976
Second support is the 20 day moving average crossing at 4.916
~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
The U.S. Dollar was higher overnight as it extends this month's rally and exceeded November's high crossing at 77.27. Stochastics and the RSI are overbought but are neutral signaling that additional gains are possible near term.
If March extends this month's rally, the reaction high crossing at 77.81 is the next upside target. Closes below the 20 day moving average crossing at 75.83 would confirm that a short term top has been posted.
First resistance is the overnight high crossing at 77.33
Second resistance is the reaction high crossing at 77.81
First support is the 10 day moving average crossing at 76.29
Second support is the 20 day moving average crossing at 75.83
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Crude Oil and Natural Gas Technical Outlook For Tuesday Morning
Nymex Crude Oil (CL)
With 4 hours MACD staying above signal line, some more sideway trading could be seen in crude oil. But such consolidation should be relatively brief. Below 68.59 will target 65.05 support next. Above 71.20 will bring stronger rebound to 4 hours 55 EMA (now at 72.30) and possibly above. But upside should be limited well below 79.04 resistance and bring fall resumption.
In the bigger picture, we're favoring the case that medium term rise from 33.2 has completed at 82.0 with bearish divergence condition in daily MACD. The break of medium term trend line support last week affirms this case and should pave the way to 58.32 cluster support (50% retracement of 33.2 to 82 at 57.60) for confirmation. As noted before, rise from 33.2 is treated as part of the correction pattern that started at 147.27. Firmed break of 58.32 support will argue that the down trend from 147.27 might be resuming for another low below 33.2. On the upside, break of 79.04 is needed to invalidate this view, otherwise, outlook will remain bearish.....Nymex Crude Oil Continuous Contract 4 Hours Chart.
Nymex Natural Gas (NG)
Further rise in Natural gas is still in favor with 4.837 support intact. Sustained trading above 5.318 will confirm that rise from 2.409 has resumed and should target 61.8% projection of 2.409 to 5.318 from 4.157 at 5.955 next. On the downside, through, a break below 4.837 support will indicate that recent consolidation is still in progress inside and another fall should be seen towards lower side of recent range near to 4.157. But after all, we'd expect downside to be contained there and bring an eventual upside breakout.
In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005 and might have completed at 2.409 already. Rise from 2.409 should not be completed yet and we would continue to anticipate an upside breakout of the recent range of 4.157/5.138 eventually. Above 5.318 will target 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. Nevertheless, break of 4.157 support will dampen this bullish case and turn outlook mixed again.....Nymex Natural Gas Continuous Contract 4 Hours Chart.
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Monday, December 14, 2009
Phil Flynn: Dubious Dubai
Dubai gets a bailout and the risk appetite tries to come back but oil is still being held back by a load of supply. Supply gluts put oil back into a rut on signs that OPEC is cheating more each day. OPEC compliance to production targets fell to just 58% which is the worst score for the cartel since the financial crisis began. The biggest cheaters were Iran and Angola but also, believe it or not, Nigeria's production has come back much faster than expected after the country was plagued with rebel attacks on its infrastructure.
The reasons for the cheating on production quotas within OPEC are varied. There is the greed angle but part of it is there are those who actually want to purchase the oil. Oh sure it is easy to comply with your production targets when there are no buyers for your oil but not so much when you can actually find some buyers.....Read the entire article.
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Where is Crude Oil Headed on Tuesday?
CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed tomorrow.
Crude Oil Closes Lower, Setting The Stage For Continued Lower Prices
Crude oil closed lower on Monday and below the 75% retracement level of this fall's rally crossing at 70.23 as it extended the decline off October's high. The mid range close sets the stage for a steady to lower opening on Tuesday.
If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 75.68 are needed to confirm that a short term low has been posted.
First resistance is the 10 day moving average crossing at 73.39
Second resistance is the 20 day moving average crossing at 75.68
First support is today's low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16
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Natural gas closed higher on Monday as it extends this month's rally. The mid range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.
If January extends this month's rally, the 62% retracement level of this fall's decline crossing at 5.565 is the next upside target. Closes below the 20 day moving average crossing at 4.895 would temper the near term friendly outlook in the market.
First resistance is today's high crossing at 5.409
Second resistance is the 62% retracement level of this fall's decline crossing at 5.565
First support is the 10 day moving average crossing at 4.911
Second support is the 20 day moving average crossing at 4.895
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The U.S. Dollar closed lower due to profit taking on Monday as it consolidated some of last week's rally. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.
If March extends its current rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.75 would temper the near term friendly outlook in the Dollar.
First resistance is last Friday's high crossing at 77.12
Second resistance is November's high crossing at 77.27
First support is the 10 day moving average crossing at 76.04
Second support is the 20 day moving average crossing at 75.75
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If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 75.68 are needed to confirm that a short term low has been posted.
First resistance is the 10 day moving average crossing at 73.39
Second resistance is the 20 day moving average crossing at 75.68
First support is today's low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16
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Natural gas closed higher on Monday as it extends this month's rally. The mid range close sets the stage for a steady to higher opening on Tuesday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.
If January extends this month's rally, the 62% retracement level of this fall's decline crossing at 5.565 is the next upside target. Closes below the 20 day moving average crossing at 4.895 would temper the near term friendly outlook in the market.
First resistance is today's high crossing at 5.409
Second resistance is the 62% retracement level of this fall's decline crossing at 5.565
First support is the 10 day moving average crossing at 4.911
Second support is the 20 day moving average crossing at 4.895
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The U.S. Dollar closed lower due to profit taking on Monday as it consolidated some of last week's rally. The low range close sets the stage for a steady to lower opening on Tuesday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term.
If March extends its current rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.75 would temper the near term friendly outlook in the Dollar.
First resistance is last Friday's high crossing at 77.12
Second resistance is November's high crossing at 77.27
First support is the 10 day moving average crossing at 76.04
Second support is the 20 day moving average crossing at 75.75
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Oil Is Little Changed Amid Speculation of Weak Demand Recovery
Crude oil was little changed near a two month low amid speculation that demand will be slow to recover. Oil fell as much as 1.8 percent after reports showed declining industrial output in Europe and the smallest improvement this year in consumer confidence in Japan, the world’s third largest oil consumer. Equities rallied and the dollar weakened from a two month high, supporting prices. “You won’t have a truly healthy crude market and be able to argue for crude going above $80 until you see the developed market, North America, Europe and Asia, turn around,” said Roger Read, an analyst with Natixis Bleichroeder in Houston. He forecast oil would trade in a $60 to $80 range for the next few months.
Crude oil for January delivery rose 5 cents to $69.92 a barrel at 10:36 a.m. on the New York Mercantile Exchange. Oil has risen 57 percent this year. Earlier, futures touched $68.59, the lowest since Oct. 5. European industrial output fell for the first time in six months in October, led by a slump in consumer goods. Employment declined in the third quarter. The Tankan business confidence index in Japan showed large companies planned deeper spending cuts to protect earnings under threat from the yen, which climbed to a 14 month high against the dollar in November.....Read the entire article.
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ExxonMobil to Buy XTO for $41 Billion
Fox Business Networks's Shibani Joshi on ExxonMobil's acquisition of XTO Energy.
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Cardium Oil Play Valuations Setting Up Big Year for M&A in 2010
The new Cardium oil play in Alberta is rapidly approaching the stature of Saskatchewan’s famous Bakken play, and this is very good news for investors in Canada’s junior oil and gas sector. The four year old Bakken play has created huge shareholder wealth for investors, as companies like Crescent Point Energy and Petrobank bought out junior after junior after junior to increase their land base and production profile.
The same thing is now starting to happen in Alberta’s Cardium play. And valuations (read: stock prices) are getting much richer, much faster than what happened in the Bakken. As an example, TSX listed Result Energy is a Cardium focused play that was just taken over and re-capitalized by the management team from TriStar Oil and Gas, a Bakken play that itself was bought out in August 2009.
Brett Herman and his TriStar team announced several acquisitions immediately, and one Canadian analyst estimated they paid $275,000 per flowing barrel for them. As comparison, the average Canadian listed junior trades at about $60,000, the intermediates at $71,000, and if it’s a natural gas weighted producer, it can be as low as $30,000. Even the leading juniors in the more profitable Bakken play – Painted Pony Explorations would be a good example of this – trade at $140,000 per flowing barrel.....Read the entire article.
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Crude Oil Continues Lower as World Markets Rebound on Dubai Bailout
Crude oil was lower overnight as it extends this month's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.
If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 75.67 are needed to confirm that a short term low has been posted.
Monday's pivot point, our line in the sand is 70.18
First resistance is the 10 day moving average crossing at 73.37
Second resistance is the 20 day moving average crossing at 75.67
First support is the overnight low crossing at 68.59
Second support is the 87% retracement level of this fall's rally crossing at 68.16
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Natural gas was higher overnight as it extends last week's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term. If January extends last week's rally, the 62% retracement level of the October-December decline crossing at 5.565 is the next upside target.
Closes below the 20 day moving average crossing at 4.896 would temper the near term bullish outlook in the market.
Natural gas pivot for Monday is 5.22
First resistance is last Friday's high crossing at 5.375
Second resistance is the 62% retracement level of the October-December decline crossing at 5.565
First support is the 20 day moving average crossing at 4.896
Second support is this month's low crossing at 4.432
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The U.S. Dollar was lower due to profit taking overnight as it consolidates some of last Friday's rally. Stochastics and the RSI are overbought and are turning neutral hinting that a short term top might be in or is near.
If March extends last week's rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.76 would temper the near term bullish outlook in the market.
First resistance is last Friday's high crossing at 77.12
Second resistance is November's high crossing at 77.27
First support is the 10 day moving average crossing at 76.05
Second support is the 20 day moving average crossing at 75.76
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Sunday, December 13, 2009
What’s Next for Stocks, Gold, Silver, Oil & Natural Gas?
The past three weeks have been interesting to watch as the Dow (DIA ETF) has broadened causing traders to be shaken in and out of positions. Commodities have been under pressure as the US dollar has risen. Below are some charts of these investments and what I think could happen in the next couple weeks.
DIA – Exchange Traded Fund
As you can see the broadening formation is bearish as it results in a short term pullback. This type of price action is what frustrates breakout and novice traders. As traders jump into positions once the previous high is broken, they hope for a rally. Instead the market briefly moves higher then reverses and moves down to penetrate the previous pivot low. This is where breakout traders place their stops and as the market knows this, it obliges by moving below this level to shake out these traders before it rallies again.
That being said, it looks like stocks could make a new high this week, just enough to suck in more short term breakout traders before rolling over once again to test a deeper support level. A pullback to the $99-100 level would make for a great buy point.
GLD – Gold Exchange Traded Fund
The strengthening dollar is putting pressure on precious metals with gold testing the first support level. Depending on what the dollar does in the coming days we could see gold test the second support level.
In my opinion gold can test the second support level without triggering any major sell signals for traders and investors. The trend will still be up and it is important to know the horizontal support level is more important than a trend line support level.
SLV – Exchange Traded Fund
Silver is in the same boat at gold. Only time will tell if we get a bounce or a further test lower. Either way, the underlying trend is still up and we will be able trade it.
USO – Oil Exchange Traded Fund
Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short term bounce here to the $37, 38 or 40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play.
This is a high risk type of play which I am not taking part in. But I do find it fun to track plays like this for educational reasons.
UNG – Natural Gas Exchange Traded Fund
The natural gas fund is a touchy topic with so many traders. I get emails every day asking why I trade UNG because of the contango and the fact that so many people have lost money with it; they don’t want to touch it again. My answer is very simple, it works perfectly fine for short term trading which lasts 1-20 days. “If it works, Don’t Fix It”.
I do agree UNG is tougher than other ETFs to trade, but it still makes money and that is what our goal is.
Anyways natural gas has found some support and is bouncing around. We could see it trend sideways or up until a test of our blue resistance trend line is reached. From there we can asses the situation for a possible trade.
The underlying trend is down on the monthly and weekly charts so do not get too excited about going long anytime soon.
ETF Trading Conclusion:
Overall the market feels a little top heavy and the price action on the charts are saying the same thing. My short term indicators are telling me the Dow (DIA fund) is over bought and ready for a couple days of selling. With any luck we will see a test of support which will flush out most short term traders this week, then a nice low volume rally going into Christmas. On the other hand, the market has been holding up well and prices could continue to drift higher from here. If that is the case we simply continue to hold our current long positions and enjoy the ride.
Silver and gold are testing support levels and if the market continues to rally here, I figure precious metals will follow. But if we see stocks pull back and test support, then we will most likely see the metals pull back further also.
Crude oil has formed a scary looking chart as it flushes out traders on this recent drop. My general rule for spec plays is to buy when the chart looks scary, but is trading at multiple support levels. It is very difficult to buy at these levels but as my good buddy David Banister from ActiveTradingPartners.com always says, “Buy when they Cry, Sell when it’s Loud”. Meaning buy when everyone is panicking out of their positions, and sell when everyone is buying into the move usually seen by high volume levels and much higher prices.
Natural Gas is jumping around like crazy. We continue to wait for a tradable price pattern to form in conjunction with a support or resistance level to help put the odds more on our side.
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DIA – Exchange Traded Fund
As you can see the broadening formation is bearish as it results in a short term pullback. This type of price action is what frustrates breakout and novice traders. As traders jump into positions once the previous high is broken, they hope for a rally. Instead the market briefly moves higher then reverses and moves down to penetrate the previous pivot low. This is where breakout traders place their stops and as the market knows this, it obliges by moving below this level to shake out these traders before it rallies again.
That being said, it looks like stocks could make a new high this week, just enough to suck in more short term breakout traders before rolling over once again to test a deeper support level. A pullback to the $99-100 level would make for a great buy point.
GLD – Gold Exchange Traded Fund
The strengthening dollar is putting pressure on precious metals with gold testing the first support level. Depending on what the dollar does in the coming days we could see gold test the second support level.
In my opinion gold can test the second support level without triggering any major sell signals for traders and investors. The trend will still be up and it is important to know the horizontal support level is more important than a trend line support level.
SLV – Exchange Traded Fund
Silver is in the same boat at gold. Only time will tell if we get a bounce or a further test lower. Either way, the underlying trend is still up and we will be able trade it.
USO – Oil Exchange Traded Fund
Oil broke down out of its bull flag last week and is currently testing both trend line support and horizontal support levels. We could see a short term bounce here to the $37, 38 or 40 levels. Taking money off the table at each resistance level and raising your stop is an important money management strategy I use for this type of play.
This is a high risk type of play which I am not taking part in. But I do find it fun to track plays like this for educational reasons.
UNG – Natural Gas Exchange Traded Fund
The natural gas fund is a touchy topic with so many traders. I get emails every day asking why I trade UNG because of the contango and the fact that so many people have lost money with it; they don’t want to touch it again. My answer is very simple, it works perfectly fine for short term trading which lasts 1-20 days. “If it works, Don’t Fix It”.
I do agree UNG is tougher than other ETFs to trade, but it still makes money and that is what our goal is.
Anyways natural gas has found some support and is bouncing around. We could see it trend sideways or up until a test of our blue resistance trend line is reached. From there we can asses the situation for a possible trade.
The underlying trend is down on the monthly and weekly charts so do not get too excited about going long anytime soon.
ETF Trading Conclusion:
Overall the market feels a little top heavy and the price action on the charts are saying the same thing. My short term indicators are telling me the Dow (DIA fund) is over bought and ready for a couple days of selling. With any luck we will see a test of support which will flush out most short term traders this week, then a nice low volume rally going into Christmas. On the other hand, the market has been holding up well and prices could continue to drift higher from here. If that is the case we simply continue to hold our current long positions and enjoy the ride.
Silver and gold are testing support levels and if the market continues to rally here, I figure precious metals will follow. But if we see stocks pull back and test support, then we will most likely see the metals pull back further also.
Crude oil has formed a scary looking chart as it flushes out traders on this recent drop. My general rule for spec plays is to buy when the chart looks scary, but is trading at multiple support levels. It is very difficult to buy at these levels but as my good buddy David Banister from ActiveTradingPartners.com always says, “Buy when they Cry, Sell when it’s Loud”. Meaning buy when everyone is panicking out of their positions, and sell when everyone is buying into the move usually seen by high volume levels and much higher prices.
Natural Gas is jumping around like crazy. We continue to wait for a tradable price pattern to form in conjunction with a support or resistance level to help put the odds more on our side.
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Crude Oil Weekly Technical Outlook
Crude oil dived further last week and closed below 70 level at 69.87. Break of the medium term trend line support serves as another indication of medium term reversal. Initial bias will remain on the downside this week for 65.05 support first. On the upside, above 71.50 minor resistance will turn intraday bias neutral and bring recovery. But upside should be limited well below 79.04 resistance and bring fall resumption.
In the bigger picture, we're favoring the case that medium term rise from 33.2 has completed at 82.0 with bearish divergence condition in daily MACD. The break of medium term trend line support last week affirms this case and should pave the way to 58.32 cluster support (50% retracement of 33.2 to 82 at 57.60) for confirmation. As noted before, rise from 33.2 is treated as part of the correction pattern that started at 147.27. Firmed break of 58.32 support will argue that the down trend from 147.27 might be resuming for another low below 33.2. On the upside, break of 79.04 is needed to invalidate this view, otherwise, outlook will remain bearish.
In the long term picture, there is no change in the view that fall from 147.27 is part of the correction to the five wave sequence from 98 low of 10.65. While the rebound from 33.2 is strong and might continue, there is no solid evidence that suggest fall 147.27 is completed and we're still preferring the case that rebound from 33.2 is merely a corrective rise only. Having said that strong resistance should be seen between 76.77/90.24 fibo resistance zone and bring reversal for another low below 33.2 before completing the whole correction from 147.27.....
Nymex Crude Oil Continuous Contract 4 Hours Chart .
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Saturday, December 12, 2009
Where is Crude Oil Headed Next Week?
CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed next week.
Friday, December 11, 2009
Crude Oil Falls Hard, Bears Continue to Hold the Near Term Advantage
Crude oil closed lower on Friday and below the 75% retracement level of this fall's rally crossing at 70.23 as it extended the decline off October's high. The low range close sets the stage for a steady to lower opening on Monday. If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 76.05 are needed to confirm that a short term low has been posted. First resistance is the 10 day moving average crossing at 74.16. Second resistance is the 20 day moving average crossing at 76.05. First support is today's low crossing at 69.46. Second support is the 87% retracement level of this fall's rally crossing at 68.16.
Natural gas closed lower due to profit taking on Friday as it consolidated some of this week's rally. The low range close sets the stage for a steady to lower opening on Monday. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near term. If January extends this week's rally, the 62% retracement level of this fall's decline crossing at 5.565 is the next upside target. Closes below the 20 day moving average crossing at 4.866 would temper the near term friendly outlook in the market. First resistance is today's high crossing at 5.375. Second resistance is the 62% retracement level of this fall's decline crossing at 5.565. First support is the 20 day moving average crossing at 4.866. Second support is the 10 day moving average crossing at 4.859.
The U.S. Dollar closed sharply higher on Friday as it extended this week's rally. The high range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near term. If March extends its current rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.68 would temper the near term friendly outlook in the Dollar. First resistance is today's high crossing at 77.12. Second resistance is November's high crossing at 77.27. First support is the 10 day moving average crossing at 75.89. Second support is the 20 day moving average crossing at 75.68.
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When Will Real Oil Demand Growth Appear?
How do you know when the economic recovery really begins? It is when real oil demand growth appears? Not just artificial demand growth being propped up with smoke and mirrors but demand growth that comes with solid economic activity and global growth. Growth that hopefully will be ignited by the low prices that will come when we start to remove the life supports to the economic system and global currency exchange rates start to normalize. Oil demand growth will be the thermometer that will take the economy's temperature and tell us that we are indeed getting healthy.
Believe it or not these are some of the same sentiments that are being expressed by the International Energy Agency. Well at least partly. Today the advisor to 24 consuming nations said while increasing it oil consumption forecast globally by 1.5 million barrels per day to 86.3 million barrels that demand from major consumers may herald an economic recovery. Of course while I agree that things are getting better I still wonder whether this oil demand growth is solid enough to grow on its own. Can it continue to grow without the massive stimulus and will it continue when demand goes away.
The IEA says that oil demand will increase a little bit mainly due to demand growth in China. Yet at the same time the growth out of China is as mysterious as the country.....Read the entire article.
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Oil Rises After Report Shows Record Runs at Chinese Refineries
Oil rose for the first time in eight days after China said the country’s refineries processed a record amount of crude last month. Refining volume in China, the world’s second largest energy consumer, climbed 21 percent from a year earlier to 33.4 million metric tons, or 8.1 million barrels a day, according to government statistics. China’s industrial production grew more than estimated in November. “This is the fastest growth in Chinese oil demand since 2004,” Amrita Sen, a London based oil analyst at Barclays Capital, said by phone. “China has really surprised to the upside this year.”
Crude oil for January delivery rose as much as 66 cents, or 0.9 percent, to $71.20 a barrel in electronic trading on the New York Mercantile Exchange. It was at $71.03 a barrel at 1:31 p.m. London time. Oil prices have fallen 8 percent since the beginning of this month and dropped 3 percent on Dec. 9, when a U.S. government report showed U.S. gasoline inventories rose to the highest level since April. Futures are up 59 percent this year. “China’s oil imports just don’t stop growing,” Frank Schallenberger, head of commodities research at Landesbank Baden-Wuerttemberg, said by phone from Stuttgart. “China will sell more cars than the U.S. this year, and that is pushing up gasoline demand”.....Read the entire article.
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Crude Oil Higher Overnight, Today's Close Becomes Critical for the Bull's
Crude oil was higher due to short covering overnight as it consolidates some of this week's decline. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near term.
If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 76.11 are needed to confirm that a short term low has been posted.
Friday's pivot point, our line in the sand is 70.58
First resistance is the 10 day moving average crossing at 74.28
Second resistance is the 20 day moving average crossing at 76.11
First support is Thursday's low crossing at 69.81
Second support is the 87% retracement level of this fall's rally crossing at 68.16
Is The S&P 500 Getting Ready to Skyrocket or Collapse?
Natural gas was lower due to profit taking overnight as it consolidates some of this week's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.
If January extends this week's rally, the 62% retracement level of the October-December decline crossing at 5.565 is the next upside target. Closes below the 20 day moving average crossing at 4.873 would temper the near term bullish outlook in the market.
Natural gas pivot for Friday is 5.161
First resistance is Thursday's high crossing at 5.347
Second resistance is the 62% retracement level of the October-December decline crossing at 5.565
First support is the 20 day moving average crossing at 4.873
Second support is this month's low crossing at 4.432
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The U.S. Dollar was lower due to profit taking overnight as it consolidates some of Tuesday's rally. Stochastics and the RSI are overbought and are turning neutral hinting that a short term top might be in or is near.
If March extends this week's rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.64 would temper the near term bullish outlook in the market.
First resistance is Wednesday's high crossing at 76.66
Second resistance is November's high crossing at 77.27
First support is the 10 day moving average crossing at 75.83
Second support is the 20 day moving average crossing at 75.64
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Crude Oil and Natural Gas Technical Outlook For Friday Morning
Nymex Crude Oil (CL)
Crude oil is still struggling around 70/71 level for the moment and at this point, further fall is still in favor with 73.87 minor resistance intact. As noted before, whole decline from 82.0 is still in progress and should now be targeting 65.05 support. On the upside, above 73.87 will turn bias neutral and bring consolidations. But upside should be limited below 79.04 resistance and bring fall resumption.
In the bigger picture, the break of trend line support (now at 71.86) affirms that case that medium term rebound from 33.2 has completed earlier at 82.00 already. Further decline is now expected to 58.32 cluster support (50% retracement of 33.2 to 82 at 57.60) for confirmation. Firm break there will target a retest of 33.2 low next. On the upside, break of 79.04 resistance is needed to invalidate this bearish view. Otherwise, outlook will remain bearish in case of recovery.....Nymex Crude Oil Continuous Contract 4 Hours Chart.
Nymex Natural Gas (NG)
Natural gas surges sharply to as high as 5.347 after brief retreat. Break of 5.318 resistance indicates that rise from 2.409 is resuming and should now be targeting 61.8% projection of 2.409 to 5.318 from 4.157 at 5.955 next. on the downside, break of 4.837 support will argue that recent consolidation is still in progress and some more sideway trading would be seen again.
In the bigger picture, medium term fall from 13.69 is treated as part of the long term consolidation pattern that started at 15.78 back in 2005 and might have completed at 2.409 already. Rise from 2.409 should not be completed yet and we would continue to anticipate an upside break out of the recent range of 4.157/5.138 eventually. Above 5.318 will target 38.2% retracement of 13.694 to 2.409 at 6.72 and beyond. Nevertheless, break of 4.157 support will dampen this bullish case and turn outlook mixed again.....Nymex Natural Gas Continuous Contract 4 Hours Chart.
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Thursday, December 10, 2009
A Seasonal Look At Gold And Oil
Over the course of the past three months, gold has taken the lead from the crude oil market is a normal autumn seasonal pattern. Granted, Oil held up longer than usual and gold rallied longer, but the seasonal trends are still playing.
Let’s look at the gold market first, as it has been front and center. A lot of investors shun gold but a hard look at the commodity market shows that it is one of the lesser volatile commodities. As far as a bubble goes, gold is nowhere near the price appreciations seen in other commodities like copper, sugar, cocoa, orange juice and a host of others.
We can see that price highs are made in the Jan/February time frame on average, but in bull market legs, have been known to extend into the spring. The gold chart below shows that the mid February timeframe established the winter high, made a temporary low at the beginning of May and a secondary low in the July time frame.
On the other end of the spectrum, the September thru December time period is usually where the best appreciation is witnessed. For the most part, this is how gold behaved this year with the exception that the end of September and early November lows were only mild corrections as the bull leg was strong enough to make these seasonal pullbacks just dips on the chart.
In my August 19th Gold and Oil commentary, I made a case for a bull market rally in gold and targeted the ideal time to begin would be September. Two weeks after that update, gold launched into its best run in quite a while and has become a headline item even in the mainstream press. But what is the outlook going forward ?
Gold has now reached a timeframe where a December pullback is in effect. If things play out a temporary bottom should be seen in mid December or early January and another gold leg up would develop into the early winter. That has been the norm of late. Over the past three years, February has been a pivotal month for price peaks in gold. The seasonal chart above shows that January/February price highs can be important. The stronger the rally, the longer the seasonal extends. The 2007 price peak did not come until the month of May, exceeding the February price peak.
So where are we now in the rally?
First off we can see that the fall rally began right on time at the very beginning of September. We entered the September timeframe with gold just below the 950 area. Seasonal pullbacks occurred at months end in September and October. But the beginning of November bought on a major escalation in price once the 1070 area was taken out on the upside. Here’s what I had to say in our August 19th report regarding gold:
“Moves above the 975-985 area would greatly favor an upside breakout and moves above the 1075-1100 would be indicative that the next leg of the gold market has begun.”
From a price perspective gold has support at the 1100 dollar area (plus or minus 25 dollars) and at the bottom of our price channel at the 980-1050 area. All technical indicators confirm of gold’s pullback and if the seasonal tendencies continue to play out, gold should provide one more rally as we work our way into the winter months. The 50 day moving average has not been touched since late August and is due for a visit. This is where we get our first number of 1100 (plus or minus 20 dollars).
The lower black channel line is another area of interest on this chart. It has provided price support in each pullback during the 2009 season and is another area where a potential low might develop. We can see it provided the lows in May, July, Aug, and September. This confirms the importance of this channel line. Just under that channel is the 200 day moving average, a level that provided major support during the April timeframe this year. It currently stands at the 979 area. Coincidentally, it was near this area that the latest leg of this rally began. While that area seems far away we need to keep in mind that the current gold rally began over 13 months ago at the $680 price level. A medium term correction after a $540 dollar move wound be a reasonable expectation as well.
There are a few ways one could play it. First, if your short term oriented or looking for a spot to hop on board, the first area we mentioned, the 1075-1125 area (ideally the 50 day moving average) offers a potential opportunity for gold’s price to turn and would be ideal for a short term play and as it turns out, would put price right near the middle of the channel lines. For those looking to enter, one option is to take the first nibble at this first price area, and a secondary position could be taken should gold make it to the bottom of the channel line near the 1000 area. This would give gold two key areas to bottom in and would be less of a risk using this scale in method for new entrants who have been eager to participate.
The second area of interest is the 200 day moving average and the lower black price channel line on the gold chart above. If we add a plus or minus $25 dollars to this area, we would come up with the 950-1000 area where a potential gold bottom could form. Using the example above, this is where one might contemplate a secondary position.
From a technical perspective both of the areas we’ve mentioned is an important price point on the chart using various methods of calculations for price retracement and support areas. If one is trying to build an entry plan into this market the above EXAMPLE is an excellent way for one to plan and execute a simple entry strategy that has more than one entry point as part of the overall plan. I am not advocating you use the above example, but that you have a plan of your own rather than just enter anywhere on an emotional whim.
In order to be successful in the markets there is really only two things one needs to know. How to enter a market and when to exit one is the bottom line when the scores are tallied. If you have an entry plan, and an exit strategy, your chances of success will be much greater.
Gold Outlook
The 13 month old bull market in gold has an incredible $540 dollar run behind it a short time. This is significant when you consider that for all of history, gold was under $700 at one point last October. The best part of the seasonal run on average is behind us. But that is on average. In bull markets, gold has the tendency to run higher in the mid winter to early spring timeframe. The bullish fundamentals and news of nations and central banks buying gold, the short supply in the physical markets, the rumors of physical shortages at the exchanges, the debasement of paper currencies via the printing press, and the “LOSS OF CONFIDENCE” in world government provides a powerful incentive for potential price increases in gold.
What could derail the train?
It seems there is only one thing that has been able to affect the price of gold to the downside and that is the potential of a mass debt default. This observation is based solely on the fact that the 2008 global meltdown had a direct impact to the price of gold and so far, it seems that the Dubai situation has also coincided with a downdraft. That is not to say that investors wouldn’t flock to gold this time either. They very well might. Suffice to say that should further escalation begin to surface in the debt area, one should be aware of the potential implications for gold. On the bullish side, one can say this. Gold has been the only major financial instrument to make NEW highs since the last debt default.
On the upside.....
From a pure chart perspective in this report, the upper channel line on the gold chart at the 1250 area is an area where we should expect a significant resistance area. Should all the bullish fundamentals come into play and the perfect storm develops for gold, then the breakout above the 1250 area will be even more powerful than the one we saw when gold broke above the 1070 area recently and should provide another leg up into mid winter and or early spring.
On the downside.....
We’ve already pointed out the two key areas to watch (near the 50 and 200 day averages and the upper and lower black channel lines on the chart). Odds would favor that one of these two areas will provide a meaningful or at least a trading bottom for gold. A rally back up from the 50 day moving average that fails to exceed the upper black channel line at the 1250 area would leave the door open for more consolidation in gold’s price over the coming month. Failures at the 50 day average might provide impetus for a test of the lower boundaries of the channel.
The bottom line.....
From a seasonal standpoint, odds favor one more push up into mid winter. We feel the key area to watch price action is at the upper end of this channel line. A failure to move above the upper black channel line would provide the peak for this current leg and a correction into the spring would unfold. A move above this line would suggest the next bull move is underway and would prolong the gold rally into a later timeframe in 2010. We feel that the 1250-1325 is the most important price area over the next few months. Short termers should pay attention to the 50 day and longer term investors at the 200 day average and the lower black channel line. For seasonal players, some profits out of GOLD and INTO CRUDE OIL during the FEB/March timeframe is usually the ideal time for crude to take over the lead in price appreciation. And with that said, let’s look at the crude oil market.
In the seasonal chart below, we can see that the main area where crude oil usually bottoms is the FEB/MARCH time frame on Average. I suspect that all the calls for $100 dollar oil over the past few months has been temporarily delayed due to the seasonal tendencies of the crude oil market. Indeed, the current downdraft is playing right along with these aspects. We can see that coming up, there usually is a slight bounce in December to January, and from there, a major low into late winter. In a bull market, crude can and does sometimes bottom in December and the pullback in winter can at times provide a higher low. Purchases at the seasonal bottom have two key liquidation times on average, April/June and/or October/November.
The weakest part of the cycle as we can see is the October thru February timeframe, a timeframe we have now entered. (months are below this chart…contract month above.)
In the Crude oil market, the seasonal tendencies are much more pronounced and to some extent, the timeframes are more consistent.
The chart below of crude shows some interesting seasonal highlights from last year. First and most important is the seasonal low in December, the January bounce, and the final low at the end of February and beginning of March. This was a perfect seasonal move. From there an April move began to pullback, but the bullish action ran it higher into June and crude peaked very late. The seasonal chart calling for a July low was a very short 4 to 6 week affair. However, it did produce the seasonal July low right on time. From that point we rallied right to the end of October and peaked at the 82 dollar area right on the seasonal date for a turn. Since then we have dropped all the way to the 69 dollar area.
The end of December approaches and an initial low is due soon in crude. A look at the chart shows the 65-70 dollar area is a key spot where the 200 day moving average and the current daily trend channel lie. On the technical side, RSI is near the oversold area, and Williams %R is nearing that area as well. A longer term support area is the fat red line just above the 55 area on the chart. Odds suggest that a rally attempt should develop from this 65-70 dollar area. SHOULD OIL MOVE BELOW the 200 day average at$ 65, then the potential for a move below 60 towards the red support line will be a potential area for a late winter bottom.
Look for December or March to provide the lows in crude. March is a great time to trim a few gold profits and funnel them into the crude oil market.
These are interesting times for commodity investors and it is important to be looking at all aspects of the markets. Seasonals are so often overlooked, yet they provide a guideline for what to expect and when to expect it. At our website, we are following the seasonal trends of gold and oil always analyzing the price charts looking for low risk set-up trades and/or entries for our subscribers. We invite you to visit our site and have a look.
John Winston
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Let’s look at the gold market first, as it has been front and center. A lot of investors shun gold but a hard look at the commodity market shows that it is one of the lesser volatile commodities. As far as a bubble goes, gold is nowhere near the price appreciations seen in other commodities like copper, sugar, cocoa, orange juice and a host of others.
We can see that price highs are made in the Jan/February time frame on average, but in bull market legs, have been known to extend into the spring. The gold chart below shows that the mid February timeframe established the winter high, made a temporary low at the beginning of May and a secondary low in the July time frame.
On the other end of the spectrum, the September thru December time period is usually where the best appreciation is witnessed. For the most part, this is how gold behaved this year with the exception that the end of September and early November lows were only mild corrections as the bull leg was strong enough to make these seasonal pullbacks just dips on the chart.
In my August 19th Gold and Oil commentary, I made a case for a bull market rally in gold and targeted the ideal time to begin would be September. Two weeks after that update, gold launched into its best run in quite a while and has become a headline item even in the mainstream press. But what is the outlook going forward ?
Gold has now reached a timeframe where a December pullback is in effect. If things play out a temporary bottom should be seen in mid December or early January and another gold leg up would develop into the early winter. That has been the norm of late. Over the past three years, February has been a pivotal month for price peaks in gold. The seasonal chart above shows that January/February price highs can be important. The stronger the rally, the longer the seasonal extends. The 2007 price peak did not come until the month of May, exceeding the February price peak.
So where are we now in the rally?
First off we can see that the fall rally began right on time at the very beginning of September. We entered the September timeframe with gold just below the 950 area. Seasonal pullbacks occurred at months end in September and October. But the beginning of November bought on a major escalation in price once the 1070 area was taken out on the upside. Here’s what I had to say in our August 19th report regarding gold:
“Moves above the 975-985 area would greatly favor an upside breakout and moves above the 1075-1100 would be indicative that the next leg of the gold market has begun.”
From a price perspective gold has support at the 1100 dollar area (plus or minus 25 dollars) and at the bottom of our price channel at the 980-1050 area. All technical indicators confirm of gold’s pullback and if the seasonal tendencies continue to play out, gold should provide one more rally as we work our way into the winter months. The 50 day moving average has not been touched since late August and is due for a visit. This is where we get our first number of 1100 (plus or minus 20 dollars).
The lower black channel line is another area of interest on this chart. It has provided price support in each pullback during the 2009 season and is another area where a potential low might develop. We can see it provided the lows in May, July, Aug, and September. This confirms the importance of this channel line. Just under that channel is the 200 day moving average, a level that provided major support during the April timeframe this year. It currently stands at the 979 area. Coincidentally, it was near this area that the latest leg of this rally began. While that area seems far away we need to keep in mind that the current gold rally began over 13 months ago at the $680 price level. A medium term correction after a $540 dollar move wound be a reasonable expectation as well.
There are a few ways one could play it. First, if your short term oriented or looking for a spot to hop on board, the first area we mentioned, the 1075-1125 area (ideally the 50 day moving average) offers a potential opportunity for gold’s price to turn and would be ideal for a short term play and as it turns out, would put price right near the middle of the channel lines. For those looking to enter, one option is to take the first nibble at this first price area, and a secondary position could be taken should gold make it to the bottom of the channel line near the 1000 area. This would give gold two key areas to bottom in and would be less of a risk using this scale in method for new entrants who have been eager to participate.
The second area of interest is the 200 day moving average and the lower black price channel line on the gold chart above. If we add a plus or minus $25 dollars to this area, we would come up with the 950-1000 area where a potential gold bottom could form. Using the example above, this is where one might contemplate a secondary position.
From a technical perspective both of the areas we’ve mentioned is an important price point on the chart using various methods of calculations for price retracement and support areas. If one is trying to build an entry plan into this market the above EXAMPLE is an excellent way for one to plan and execute a simple entry strategy that has more than one entry point as part of the overall plan. I am not advocating you use the above example, but that you have a plan of your own rather than just enter anywhere on an emotional whim.
In order to be successful in the markets there is really only two things one needs to know. How to enter a market and when to exit one is the bottom line when the scores are tallied. If you have an entry plan, and an exit strategy, your chances of success will be much greater.
Gold Outlook
The 13 month old bull market in gold has an incredible $540 dollar run behind it a short time. This is significant when you consider that for all of history, gold was under $700 at one point last October. The best part of the seasonal run on average is behind us. But that is on average. In bull markets, gold has the tendency to run higher in the mid winter to early spring timeframe. The bullish fundamentals and news of nations and central banks buying gold, the short supply in the physical markets, the rumors of physical shortages at the exchanges, the debasement of paper currencies via the printing press, and the “LOSS OF CONFIDENCE” in world government provides a powerful incentive for potential price increases in gold.
What could derail the train?
It seems there is only one thing that has been able to affect the price of gold to the downside and that is the potential of a mass debt default. This observation is based solely on the fact that the 2008 global meltdown had a direct impact to the price of gold and so far, it seems that the Dubai situation has also coincided with a downdraft. That is not to say that investors wouldn’t flock to gold this time either. They very well might. Suffice to say that should further escalation begin to surface in the debt area, one should be aware of the potential implications for gold. On the bullish side, one can say this. Gold has been the only major financial instrument to make NEW highs since the last debt default.
On the upside.....
From a pure chart perspective in this report, the upper channel line on the gold chart at the 1250 area is an area where we should expect a significant resistance area. Should all the bullish fundamentals come into play and the perfect storm develops for gold, then the breakout above the 1250 area will be even more powerful than the one we saw when gold broke above the 1070 area recently and should provide another leg up into mid winter and or early spring.
On the downside.....
We’ve already pointed out the two key areas to watch (near the 50 and 200 day averages and the upper and lower black channel lines on the chart). Odds would favor that one of these two areas will provide a meaningful or at least a trading bottom for gold. A rally back up from the 50 day moving average that fails to exceed the upper black channel line at the 1250 area would leave the door open for more consolidation in gold’s price over the coming month. Failures at the 50 day average might provide impetus for a test of the lower boundaries of the channel.
The bottom line.....
From a seasonal standpoint, odds favor one more push up into mid winter. We feel the key area to watch price action is at the upper end of this channel line. A failure to move above the upper black channel line would provide the peak for this current leg and a correction into the spring would unfold. A move above this line would suggest the next bull move is underway and would prolong the gold rally into a later timeframe in 2010. We feel that the 1250-1325 is the most important price area over the next few months. Short termers should pay attention to the 50 day and longer term investors at the 200 day average and the lower black channel line. For seasonal players, some profits out of GOLD and INTO CRUDE OIL during the FEB/March timeframe is usually the ideal time for crude to take over the lead in price appreciation. And with that said, let’s look at the crude oil market.
In the seasonal chart below, we can see that the main area where crude oil usually bottoms is the FEB/MARCH time frame on Average. I suspect that all the calls for $100 dollar oil over the past few months has been temporarily delayed due to the seasonal tendencies of the crude oil market. Indeed, the current downdraft is playing right along with these aspects. We can see that coming up, there usually is a slight bounce in December to January, and from there, a major low into late winter. In a bull market, crude can and does sometimes bottom in December and the pullback in winter can at times provide a higher low. Purchases at the seasonal bottom have two key liquidation times on average, April/June and/or October/November.
The weakest part of the cycle as we can see is the October thru February timeframe, a timeframe we have now entered. (months are below this chart…contract month above.)
In the Crude oil market, the seasonal tendencies are much more pronounced and to some extent, the timeframes are more consistent.
The chart below of crude shows some interesting seasonal highlights from last year. First and most important is the seasonal low in December, the January bounce, and the final low at the end of February and beginning of March. This was a perfect seasonal move. From there an April move began to pullback, but the bullish action ran it higher into June and crude peaked very late. The seasonal chart calling for a July low was a very short 4 to 6 week affair. However, it did produce the seasonal July low right on time. From that point we rallied right to the end of October and peaked at the 82 dollar area right on the seasonal date for a turn. Since then we have dropped all the way to the 69 dollar area.
The end of December approaches and an initial low is due soon in crude. A look at the chart shows the 65-70 dollar area is a key spot where the 200 day moving average and the current daily trend channel lie. On the technical side, RSI is near the oversold area, and Williams %R is nearing that area as well. A longer term support area is the fat red line just above the 55 area on the chart. Odds suggest that a rally attempt should develop from this 65-70 dollar area. SHOULD OIL MOVE BELOW the 200 day average at$ 65, then the potential for a move below 60 towards the red support line will be a potential area for a late winter bottom.
Look for December or March to provide the lows in crude. March is a great time to trim a few gold profits and funnel them into the crude oil market.
These are interesting times for commodity investors and it is important to be looking at all aspects of the markets. Seasonals are so often overlooked, yet they provide a guideline for what to expect and when to expect it. At our website, we are following the seasonal trends of gold and oil always analyzing the price charts looking for low risk set-up trades and/or entries for our subscribers. We invite you to visit our site and have a look.
John Winston
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Where is Crude Oil Headed on Friday?
CNBC's Sharon Epperson discusses the day's activity in the commodities markets, and looks ahead to where oil is likely headed tomorrow.
Crude Oil Closes Lower, Bears Eye Critical Support Lines
Crude oil closed lower on Thursday as it extended the decline off October's high and spiked below the 75% retracement level of this fall's rally crossing at 70.23. The mid range close sets the stage for a steady to lower opening on Friday.
If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 76.45 are needed to confirm that a short term low has been posted.
First resistance is the 10 day moving average crossing at 74.79
Second resistance is the 20 day moving average crossing at 76.45
First support is today's low crossing at 69.81
Second support is the 87% retracement level of this fall's rally crossing at 68.16
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Natural gas posted a key reversal up on Thursday as it extended this week's rally and spiked above the late November high crossing at 5.590. The high range close sets the stage for a steady to higher opening on Friday. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.
If January extends this week's rally, the 62% retracement level of this fall's decline crossing at 5.565 is the next upside target. Closes below the 20 day moving average crossing at 4.848 would temper the near term friendly outlook in the market.
First resistance is today's high crossing at 5.347
Second resistance is the 62% retracement level at 5.565
First support is the 10 day moving average crossing at 4.865
Second support is the 20 day moving average crossing at 4.848
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The U.S. Dollar closed lower due to profit taking on Thursday as it consolidates some of this week's rally. The mid range close sets the stage for a steady opening on Friday. Stochastics and the RSI are overbought but remain bullish signaling that sideways to higher prices are possible near term.
If March extends its current rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.62 would temper the near term friendly outlook in the Dollar.
First resistance is Wednesday's high crossing at 76.66
Second resistance is November's high crossing at 77.27
First support is the 10 day moving average crossing at 75.74
Second support is the 20 day moving average crossing at 75.62
Is The S&P 500 Getting Ready to Skyrocket or Collapse?
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Oil Falls Below $70 on Stronger Dollar, Ample U.S. Supplies
Crude oil fell below $70 a barrel for the first time in two months as the dollar gained and ample U.S. fuel supplies undermined confidence demand is recovering. Prices have dropped 11 percent in seven days, the longest losing stretch since September 2006, as gasoline supplies climbed to the highest level since April and a stronger dollar curbed investor appetite for commodities. “Prices are still quite high given the fundamentals of the market,” said Michael Lynch, president of Strategic Energy & Economic Research in Winchester, Massachusetts. “We may see a lot of positions cashed in between now and the end of the year. This may lead prices to $60 or even lower.”
Crude oil for January delivery fell 62 cents, or 0.9 percent, to $70.05 a barrel at 1:16 p.m. on the New York Mercantile Exchange. Futures touched $69.81, the lowest since Oct. 8. Prices are up 57 percent this year. Gasoline for January delivery dipped 2.83 cents, or 1.5 percent, to $1.829 a gallon in New York. The contract touched $1.824, the lowest since Oct. 13. Heating oil for January delivery fell 1.04 cents, or 0.5 percent, to $1.8989 a gallon. The dollar traded at $1.4695 per euro, up 0.2 percent from $1.4726 yesterday.
Gasoline stockpiles climbed 2.25 million barrels to 216.3 million last week, the highest since the week ended April 17, an Energy Department report showed yesterday. Supplies of distillate fuel, a category that includes heating oil and diesel, increased 1.62 million barrels to 167.3 million.....Read the entire article.
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Is The S&P 500 Getting Ready to Skyrocket or Collapse?
There’s no doubt about it, for the past four weeks the S&P 500 index has been trapped in a trading range. In our new video we show you a key level to watch this week. If this level is broken, it will be a game changer for this index.
Just click here to watch the video and as always our videos are free to view and there is no registration requirement.
Enjoy the video and let us know what you think by leaving us a comment!
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Ray C. Parrish
President/CEO Crude Oil Trader
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Crude Oil Slightly Higher on Overnight Short Covering
Crude oil was higher due to short covering overnight as it consolidates some of this week's decline. Stochastics and the RSI are oversold but remain bearish signaling that sideways to lower prices are possible near term.
If January extends the decline off October's high, the 87% retracement level of this fall's rally crossing at 68.16 is the next downside target. Closes above the 20 day moving average crossing at 76.48 are needed to confirm that a short term low has been posted.
Thursday's pivot point, our line in the sand is 71.56
First resistance is the 10 day moving average crossing at 74.85
Second resistance is the 20 day moving average crossing at 76.48
First support is Wednesday's low crossing at 70.13
Second support is the 87% retracement level of this fall's rally crossing at 68.16
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Natural gas was higher due to short covering overnight as it consolidates some of Wednesday's key reversal down. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.
If January extends this week's rally, the reaction high crossing at 5.290 is the next upside target. Closes below the 20 day moving average crossing at 4.830 would temper the near term bullish outlook in the market.
Nat gas pivot for Thursday is 4.992
First resistance is Wednesday's high crossing at 5.230
Second resistance is the reaction high crossing at 5.290
First support is the 10 day moving average crossing at 4.830
econd support is the 20 day moving average crossing at 4.830
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The U.S. Dollar was lower due to profit taking overnight as it consolidates some of Tuesday's rally. Stochastics and the RSI remain bullish signaling that sideways to higher prices are possible near term.
If March extends this week's rally, November's high crossing at 77.27 is the next upside target. Closes below the 20 day moving average crossing at 75.62 would temper the near term bullish outlook in the market.
First resistance is Wednesday's high crossing at 76.66
Second resistance is November's high crossing at 77.27
First support is the 10 day moving average crossing at 75.73
Second support is the 20 day moving average crossing at 75.62
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