Wednesday, October 10, 2018

Small Caps Big Pullback

It's only been a little more than a month since the Russell 2000 highs, and it's lost a lot of value since then, 7.4% as of Tue morn.
Daily Bars 
click to enlarge

It is in oversold territory, as well as hitting the Fib .382 retrace and 4th of a lesser degree support.
This suggests risk of a short term pause or bounce here. 

However given the Elliott Wave Count discussed in the previous post, medium and long term risk of a very serious nature is growing as evidenced by the deep sell off in this index.

Those familiar with Wave Theory will know the implications of a Grand Super Cycle top; a long term decline of relatively equal significance as the Cycle High lasting many decades. Since the Theory posits that markets reflect aggregate societal mood and functionality, a decline of this import would eventually threaten society.
Now the GSC HAS lasted 80 years, so you may have some time before the walking dead come for you, but 
You can hear the crazies howling for blood tonight on your TV.

Happy Halloween 

Monday, September 24, 2018

Top of the Pops; Ring Ring

A little review (context is all).

Starting with the consensus Elliott wave count on an SP500  going back to 1930, we have been in the 5th wave up of the Grand Super Cycle V wave since the 2009 low. Big Q then is; are we there yet?
                                                                    log scale
                            click to enlarge                            

Waves I thru III increased by a factor of 25.16,  and wave V has increased from the '82 low, by a factor of 25.75 at the 2947 high.

The wave count on the rally up off the 2009 lows;
10 yr chart
click to enlarge
Of note is the near equivalence of wave III and V around 1130 pts
The weekly bar also has negative divergence on the RSI vs the Jan '18 spike.

3 yr. chart

The 5 of V is 344 pts, vs. 1 of V at 310 pt.s

click to enlarge
Note the daily RSI negative divergence. 
We are now in the 5th of the V of the Grand Super Cycle 5th Wave. ( I botched the degree labeling on these but point remains).

With a significant pullback, say 5% or 147 pt.s putting the SP under 2800, risk to the downside from this extremely elevated and mature move, is essentially incalculable. Do you look to the 4th wave of lesser degree as a target? That would be 80. Too extreme? OK how bout a pullback to the 4th wave of 2 lesser degree's? That' the 2009 low of 666. Maybe just to down to the 4th of 3 lesser degrees, or 1815 from 02/08/2016, 1135 SP pt's for a 38% drop.                                                                                                                                                                                                                                                                                                                                                         

Thursday, August 16, 2018

Natural Gas Poised for Breakout

These are front month continuation charts.
20 yr.

Thats a base.

5 yr.
The 2.50 level is proving itself as well as being the .61 retrace.

Now look at the Jan at 3.165. If nothing else the winter curve will force the continuation charts into an upside breakout.

Tuesday, July 3, 2018

High Enough Yet?

WTI looks overbought after the last 2 weeks surge. The previous post of June 6,

A Little Pop for Summer? , stated the risk appeared to be to the upside for the next couple weeks from an oversold condition.

That is no longer the case.
1 Month
click to enlarge

Note the repeated RSI negative divergence on the hourly bars.

Some kind of retrace to consolidate the last 11.50 move should be expected going forward. 

Short/ medium term risk is now to the downside.

There has been some lightening up by the specs but still plenty of of net length in WTI.

5 Yr.s
click to enlarge

Now it could be that WTI is on it's way to test the all time highs, after all that $26 low looked pretty

definitive and there is a lot of geopolitical risk etc. If that is the case, then bulls will not want to see

that trend line above taken out.

And the June lows cannot be overlapped in that scenario.

Wednesday, June 6, 2018

A Little Pop for Summer?

WTI has admirably traced out a post Memorial Day swan dive, which used to be more of a feature in the bad ol days than it is now. In any case, it has come off sharply enough to begin looking oversold on a medium term basis.
1 Month
 click to enlarge
Note the RSI positive divergence.

Together with the Rbob reaching a 50% pullback, risk is to the upside for the next week or so.

6 Month
click to enlarge
BTW the Rbob 1 month / hourly bar chart also has positive divergence on the RSI.

Wednesday, September 27, 2017

Crude Oil Update

WTI has  a long history of affinity for Fibonacci retracement levels.

It just touched the .618 retrace of this years move down.

1 yr. chart
click to enlarge

There is also the little issue of seasonality.

click to enlarge

And Hedge Funds have been piling in over the last 3 weeks. John Kemp of Reuters reports they are net long an additional 112 mml bbl wti= Brent on both Nymex and ICE.

So on the downside taking out the Fib .618 retrace of the move up and break out to the upside around 51.15 will help sharpen things up. 

The risk of trading futures and options can be substantial. Trading foreign exchange and energy derivatives carry a high degree of risk, and may not be suitable for all investors. 
The above is merely an abstract theoretical discussion mostly for my own entertainment, not trading advice or a recommendation.

Friday, August 25, 2017

Harvey vs. Ike

In Sept 2008 Ike made landfall in N. Galveston as a Cat 2 with sustained winds of 110 mph, a 950 mbar, and a surge topping the seawall of 17".

Unfortunately the odds of a catastrophic surge, exceeding the damage caused by Ike, occurring in the the Corpus Christi/ Galveston Bay area currently appear to be very high. A 25 ft. surge could float tanks spilling up to 90 mm gal and damage refinery infrastructure not to mention the environmental costs.


 Hurricane Ike came ashore at the point where Galveston Bay connects with the Gulf of Mexico, meaning that the worst of the hurricane storm surge (the “dirty” side of the storm) affected the less developed areas east of Galveston Bay. Nonetheless, although the peak surge was only 12 to 14 feet above mean sea level in Galveston Bay (compared to east of Galveston Bay, where a surge as high as 17 feet occurred) For the most part, the industrial complex on the west side of Galveston Bay escaped serious damage due to the location of Ike’s landfall; most of the surge came ashore east of the bay. If the storm’s winds had been about 15 percent larger, with landfall further to the south (as the original forecast projected), it is estimated that the resulting storm surge would have reached 25 feet or higher in the Houston Ship Channel (about 12 feet higher than the actual surge during Hurricane Ike).

Figure 2: Hurricane Ike +15 percent wind speed, landfall at San Luis Pass with modeled water levels

click to enlarge

It is difficult to imagine or overstate the extent of the economic loss and environmental damage associated with the storm as depicted in Figure 2. The area in the middle of the graphic illustrates lower flood levels within the Texas City hurricane levee system, which, along with the Galveston seawall, would have been overtopped by Ike and an additional 15 percent wind speed had the storm made landfall at that location. The storm depicted in Figure 1 generated over $25 billion in damage with a surge of 12 to 14 feet. With a 25-foot surge, more than 2,000 oil and chemical storage tanks along the Houston Ship Channel would be inundated, and water would flood much of the production areas in most refineries and chemical plants. Some areas would be more than 10 feet under water. Work completed for the SSPEED Center indicates that a 22-foot surge would cause a spill of approximately 59 million gallons of crude oil and other chemical substances, and a 24-foot surge would cause approximately 90 million gallons of these substances to be emptied into adjacent neighborhoods and Galveston Bay (SSPEED Center, HGAPS report, 66). 

The damage caused by such an event would be devastating and could easily become the worst environmental disaster in U.S. history. The crude oil and hazardous substances stored on the Houston Ship Channel would be released into the Galveston Bay system, one of the country’s most productive fish and shellfish nurseries. Many of the flooded chemical plants and refineries would require extensive repairs to compressors, pumps, flanges, and other exposed equipment, and there would be vast damage to pipes and process units. A relatively shallow flood during Hurricane Ike shut down the Invista facility in Orange, Texas, for approximately three months, for example. The economic damage to the industrial complex from a 24-foot surge has been estimated by SSPEED Center to range from $37 billion to $73 billion, estimates that do not include damage to the natural resources in Galveston Bay (SSPEED Center, HGAPS report, 69).

Harvey forecast track;

And finally;