Showing posts from August, 2009

Insider / Corp. Selling At a Record


Nymex Defers NG Position Limit Rule Change

The New York Mercantile Exchange, Inc. (“NYMEX”) is deferring the implementation of amendments to Rules 9A.27, Expiration Month Position Limit, and 9A.27A, Expiration Position Accountability Levels previously announced in Special Executive Report (“SER”) S-4888 dated June 5, 2009. The effective date of implementation of such amendments is being deferred in order to ensure a cross market uniform application. NYMEX will issue notice of a revised effective date for establishment of expiration position limits for certain of its natural gas financially settled contracts once such date for establishment of comparable changes to other financially settled natural gas contracts across the market-at-large is made available. Please note that the genesis of the NYMEX amendments cited in SER S-4888 stems from a request by the Commodity Futures Trading Commission (“CFTC”) to apply expiration limits in lieu of the pre-existing expiration accountability levels to certain NYMEX financially s

SP Wedge Update

While the SP could continue to fracture another abc and creep up the wedge resistance line, it is clearly running out of steam. Each successive leg up is smaller than the preceding leg with RSI 's diverging. The C leg is equal to .618 of the A leg at 1044, currently it's at .60, pretty close. With a wedge formation deep pullbacks and overlaps are expected, so it will take an overlap of 975 to confirm the completion of the C leg up. Getting back below the .618 retrace, and perhaps psychologically important 1000, will be a pretty good indicator however that it is imminent. Again on the hourly chart RSI 's are diverging.

Shanghai Composite Crushed

This evening the Chinese Market is getting slammed. Perhaps it has to do with the Japanese election results , or perhaps with China's fear of runaway inflation and a desire to reign in bank lending growth. Pls see China odds and ends . The Shanghai Composite index is down 5.4 % at 2700, new lows . It looks like the last structure up begins at 2071 and runs to 3471. A retrace of .618 is at 2600, and if the move down exceeds that, the risk of a much more extensive collapse goes way up. Of course that might pose a problem for the commodity bubble.

Natural Gas E.I.A. Highlights

Playing catch up this weekend "Working gas in storage exceeds historical levels by significant margins for this time of year in each of the three regions, with inventories in the Producing region exceeding the 5-year average by 271 Bcf and last year’s levels by 306 Bcf." "Working gas stocks appear likely to exceed the previous all-time record in the history of the weekly series of 3,565 Bcf reported in the Natural Gas Monthly at the end of October 2007." And this transportation note; " # A variety of interstate pipeline companies have started reducing service flexibility, citing high storage injection activity despite high inventory levels. Tennessee Gas Pipeline Company on Wednesday, August 26, issued a system-wide alert notifying customers that their actual daily flow rate must not exceed 2 percent above scheduled quantities or 500 decatherms (Dths), whichever is greater. A penalty of $0.2198 per Dth in excess of these levels applies to physical quanti

Counting Waves

I will be shifting focus from counting Elliott Waves to counting Atlantic waves this afternoon. Expect my contributions to Analyze This to be minimal over the next few days. In the meantime, the important feature is the Big Picture; WTI, Rbob, and Heat have either made major tops or are very nearly at a major top. The WTI and Rbob corrections, have both taken roughly 8 mo.s to to correct the 5 mo. impulse wave down. The Heating Oil reversed that relationship, correcting for 5 mo. vs. the 8 mo. sell off. Most of these markets are in wedge or triangle formations, mimicking the SP's perhaps (or vice versa). While there may be more permutations ahead, the proximity to .382 retracement targets in both WTI and Rbob limits upside potential, at 76.33 and 2.20 respectively. Risk to the downside is however significant. Another impulse wave down whether a "C" or 3 can be expected to take out the lows made last year. BUT even if we get a "B" wave back down, a .618

WTI Update

Following fresh highs 74.97, the WTI was sold down from the target zone. Pls see WTI Heads for Fresh Highs in Final Move . Since this mornings 1.60 drop it's bounced 50% in a classic abc. New lows on the day are likely setting it up for a test of 72.00, an overlap and .382 retrace of the move up from 67.46 Click on Chart to enlarge.

China odds and ends

chinese 12 months lending From Grant’s Interest Rate Observer; China’s lending spree (lending has doubled over a span of a few quarters!): “The Shanghai A-share market jumped by 65% in the first half, to a level that fixes its value at 31 times trailing net income, up from 12.8 times at the October lows. Chinese M-2 was 25.7% larger in May than it was a year before. “Since 2005, China has generated 73% of the global growth in oil consumption and 77% of the global growth in coal consumption.”

Morning Yuk

Check out the body language on the woman behind Ben in the last scene.

SP Trigger Points

The SP finally broke high above the resistence at 1015 Friday, roughly the .382 retrace for the whole move down. Now it needs to hold above that point and continue to make new highs for it to prove to be a classic breakout. In my view it's more likely a false break and slight "throw over" the wedge resistance line. Please note that the 1015 point is now a 50% retrace of the last leg up from 996. A bull certainly would not want to see the SP get back below 1015 but especially 1000, the .76 retracement of that leg . It would confirm a failure of the break out and represent a serious reversal in momentum likely insuring a test of 975. For starters. The C will =.618 of A at 1044. It MIGHT make it. Pls note the RSI divergence.

WTI Wedge

Usually a bearish formation.

Game Theory Trading

from Zero Hedge; a great piece ...."Since QE wasn't extended, the last POMO date scheduled as of now is in early September. With rates this high, equities in a rising wedge rallying on no volume, the USD almost back to 2008 lows and commodities having outpaced equities since their bottom, a massive decline in equities and commodities starting in August-Septemeber seems to be the play. An October crash scenario repeat of last year is far from being out of the question. Meanwhile, bonds should surge, rates should tank, the USD and JPY should fly, and the EUR, AUD, GBP, and CAD should drop like a rock."

Euro Update

A possible count. Many are looking for a diagonal triangle 5th wave to complete the move. For Eur and USD. That would translate into slightly higher highs prior to a crap out. Of course markets rarely are that well behaved. Still looking around for current USD sentiment numbers . Gotta be off the charts.

Natural Gas: Are We There Yet?

click on chart to enlarge The NG chart has an UPDATED Elliott count reflecting an extension in the 5th wave. Hate it when that happens. It is however, not uncommon and probably results from the extreme sentiment in a final move. There is some hourly RSI divergence but sentiment can get more extreme AND this market has some serious negative fundamentals. Is the count down complete? The Long Term target IS 1.95 as C=A. BUT the probability that C down from 15.78 IS nearing completion is high, and NG IS in it's seasonal window for a low. Additionally, in the CFTC COT O.I. report as of 08/20, spec shorts were 268,673 + 19,850, vs spec longs 93,346 -1457. Not sure how this is reconciled against the UNG long position but it's a huge position representing 35.5 % of all shorts and nearly as large as the commercial longs at 322,981. NG can have a short term bounce at anytime and the maturity of the move down makes it tough to be short. Any rally would NOT be confirmed until it ove

More On Those Crude Inventories

From FT Energy Source, Those mysterious falling crude oil imports August 20, 2009 10:24am by Kate Mackenzie Crude oil prices shot up yesterday after the Department of Energy published its weekly storage estimates, showing inventories had fallen by 8.4m barrels - much more than expected. The market consensus forecast was for a decline of only 1.3m - so what explains this? Underlying demand didn’t seem to improve much: refinery utilisation was up 0.5 per cent to 84 per cent, but that is still historically poor. A big component was a fall in crude imports to 8.4m - down 15 per cent. Theories included delays to shipments or even diversion of shipments to take advantage of the historically high premium for Brent crude over West Texas Intermediate. But as Stephen Schork points out, the week-on-week fall in the level of crude imports was the sixth-highest recorded since February 2002 . And this time, there is no clear story: Of the five larger pullbacks, the largest, February 06, 200

Dresdner/Commerzbank blames oil speculators

Well worth a on title. "The significant rise in the oil price seen in the first half of the year is due in large part to a recovery in investment by financial investors. If their influence is reduced by the CFTC’s actions and sanity prevails, the oil price will fall. We expect some of these measures to be decided very soon, particularly bearing in mind that the political pressure and the desire to combat excessive speculation in the commodities markets, particularly energy markets, is growing strongly not just in the USA but also in government circles in Europe. As most investors bet on rising prices, their departure would undoubtedly tend to depress prices. Therefore we now expect the WTI oil price to fall to USD 50 per barrel in Q4 2009, rather than USD 70 as we previously thought. December WTI futures are currently quoted at around USD 75 per barrel. We have also lowered our forecast of the average WTI oil price in 2010 from USD 75 to just USD 55 per barrel. Bes


The NOT "too big to fail". Too bad.

More Bubblenomics

Also came across this on Zero Hedge: "Yet most interesting, is that the Fed may have well already entered the CDS arena. Recent TIC data (not Tradable Insurance Credits, but the Treasury International Capital variety) indicate that beginning in March the Fed started getting involved in derivatives classified as " Other Contracts By Risk Type ", to the tune of over $1.3 trillion dollars! Perhaps before the Fed decides to wholeheartedly dominate CDS trading in addition to every other component of the financial system, the can clarify what exactly is the nature of these various "other" derivatives. Granted, while trillion is the new million, US taxpayers may be quite curious to know why since the start of QE the fed has been involved with not only Credit, but Equity and All Other types of this new form of derivative contract." As the Head of AIG's Cap Mkt.s used to say " Ahh well, what are you going to do?"


China's Credit Bubbleicious Trade Balance Pain. "Recent German economic data has been interpreted as indicative of a renaissance in the Eurozone's primary economy. Aside from the fact that Germany is ill prepared to handle its so-called " second credit crisis wave " (the ECB having much less free reign over printing wheelbarrows worth of Euros may have something to do with this), looking purely at GDP components one would note that a primary function of this anticipated growth comes primarily from a mathematical contribution resulting from an increase in net exports. Yet the real wild card is China, where estimates for export decline approach the 20% mark, after a prior year increase of 20%. This is a huge hit to the Chinese economy and is the primary reason for the $1.1 trillion in increased lending, whose primary purpose is to spur replacement demand with traditional export partners reeling." from Zero Hedge. What is becoming obvious is that the hug

Ntural Gas and ETF's

LONDON (MarketWatch) -- Barclays said it's temporarily suspended any further issuances of the iPath Dow Jones-AIG natural gas subindex total return exchange-traded notes ( GAZ 14.02 , +0.05 , +0.36% ) . This suspension may cause fluctuations in the trading value of such Notes. Barclays added the move may affect other commodity-linked iPath ETNs in light of current market dynamics and ongoing regulatory review. Additionally UNG is making fresh lows on volume spikes. One can only wonder if this is the flush. Keep an eye on Open Interest.

WTI Heads for Fresh Highs in Final Move

The WTI has been moving up in a series of unlikely moves best counted as abc's. The most recent series began 7/12. It is composed of a series of abc's of lesser degree, the first went from 59.25 to 69.00 (followed by a .64 retrace), the second went from 62.75 on 7/28 to 72.80, roughly EQUAL to the first series. I believe WTI is cranking out the 3rd seies of abc'c , and if this current one is roughly equal to either of the first 2 than it puts the target at 74.85 to 75.35. Additionally the internal a=c of lesser degree targets 74.88. There are only 3 series of abc's of similar degree allowed in Elliott Theory. Not to mention the Long Term .382 retrace point at 76.30. All in all not much bang left for your buck in the long trade. Risk is HIGH to the downside. This move up from 32.50 IS corrective.


It's the "Dog Days of August" and my attention is split between the pool , the kids , and the screen. Guess who wins And this is of course not uncommon, making August a treacherous month. But the action yesterday begs the question: Will slightly less crude inventories save the world financial system? (esp considering it might all have been about a few cargoes not getting counted). Shanghai, Hong Kong rebound on commodity stocks by V. Phani Kumar HONG KONG (MarketWatch) -- Chinese stocks in Shanghai and Hong Kong rebounded strongly Thursday, with metals and energy producers leading a broad-based advance, riding on the back of higher commodity prices." We now truly have the tail wagging the dog .This phenomenon is one I have been observing for a while. No doubt I am not alone. Could somebody be trying to blow a commodity bubble? Hmmmm? (imagine Jon Stewart). In any case, the prints were made so what now? The SP, while at a 71% retrace, is within norms for

Nat Gas Bottoming?

Contrary to rumor I am not ALWAYS a bear. This is a POSSIBLE wave count. Given the advanced development of the bear market, since the 15.78 high in 2005, a greater than usual degree of caution regarding possible reversals is in order. Aug is traditionally the seasonal low, and everybody I know has been bearish. Note the hourly RSI divergence. Of course penetrating the trendline will raise the first red flags , and starting to put in higher highs, overlapping the 4th wave at 3.235 for instance, will add upside momentum. Of course the the overall economy, SP's, and the rest of the energy market may continue to drag this thing lower and probably will. BUT.

Rbob Update

It's easy to see the 5 waves down from the failure, and the abc back for a classic 2 wave. Where might a 3 carry Rbob? It will equal 1.618 of 1 at 1.70. Of course, if it can get back over 2.023 something else is going on and we haven't seen the highs.

SP Resumes Downtrend

The retest of the 990 breakdown point has failed. That was also a .382 retrace of the 1st leg down. The pullback to this mornings low MAY turn out to be an X wave , but in any event it is now clear that new lows will be coming, probably sooner rather than later. The next SP leg will equal the 1st at 950, an interesting tech point as well , see chart. It is important to point out the potential for a 3 wave however to extend, and that it is commonly a multiple of the 1st wave, 1.1618 for instance.

China Trembles

The Shanghai Composite came off another 4.3% bringing it to a total gross pullback of 20.3%, official bear territory. That puts it at a 40% retrace of the leg up beginning from the Nov. lows of 1706. For a very long time now China has been a key determinant in price direction for oil. The correlation I've seen for Chinese GDP and Energy Demand is .8 Additionally there have been stories regarding recent stockpiling as a consequence of the stimulus . Commodities May Correct in H2:2009 Due to Excessive Chinese Stockpiling But Rise in 2010 as the Global Economy Starts a Growth Recovery Any fundamental analyst care to comment? Naturally the sell off is helping the USD as well.

Crude and Gasoline Inventory Charts


WTI /SP Update

SP looks to be retesting the 990 failure point , also a .382 retrace. There are E Wave counts out there that prefer another zag up from here . I am leaning more towards the top is in . Based upon the wave count I have ( a series of abc x's) this can roll over now. Additionally there is the well known history of vicious sell offs during Sept, usually culminating in an Oct. low and the August Effect, SP Pivot Pattern . Of course the Fed has been busy so you never know. Sometimes if you "put the boot in" early it's you that pays. Anyway this looks like a .618 retrace of the last little (3) down, and so would expect a series of lower lows to complete that 5 count down.

Morning Yuk

from Bloomberg (again) Producer Prices in U.S. Decline More Than Forecast "Wholesale prices in the U.S. fell more than forecast in July as energy costs receded, capping the biggest 12-month drop on record and showing inflation will not be an immediate concern for Federal Reserve policy makers (italics mine)..... Compared with a year earlier, companies paid 6.8 percent less for goods, the biggest decrease since records began in 1948..... and, "A record amount of excess capacity will prevent production bottlenecks from developing ....." WHEW had me worried. And this as well.. Aug. 18 (Bloomberg) -- The U.K. inflation rate unexpectedly held at 1.8 percent in July as the cost of computer games, DVDs and alcohol rose, a sign the economy is staving off deflation as the recession eases . What can I say I'm right there with ya.

Euro; Ugly but Well Behaved.

I am not even going to try and label the last leg down. BUT ya gotta love the .382 retrace. So I'm going with "new lows imminent".

WTI is NOT Oversold. Is This the Next Leg?

WTI gets an abc retrace of .382 , and RSI's are no longer diverging . Notice the classic return to the 4 th wave of lesser degree , mentioned in WTI Oversold Short Term . On the downside, an overlap of the "b" , which also corresponds to the .382 retrace of the bounce up from yesterdays lows, will put the boot in. That will confirm new lows are on the way, either from here, or following another leg of this corrective structure. Certainly WTI overlapping 62.78 will confirm a longer term top at 72.88 (or 72.22) and fib retrace points of the whole rally, 32.40 to 73.38 , will be looked to for support. The .382 retrace is 57.73, a 50% retrace comes in at 52.48 and .618 at 47.81.

Natural Gas Lows. Now What?

The Natural Gas made new lows today at 3.117. This was accompanied by Daily and Hourly RSI divergence. The Long Term C=A down from 15.78 targets 1.95 and there aint much generating support between here and there. The Big Picture on the economy and SP's are no doubt going to be the decider...But a few things to note. The RSI divergence. The probability that this leg IS the last one down within the C wave from 13.70 and this leg HAS made new lows. The CFTC Commitment of Traders still has an enormous number of spec shorts with 248,822 O.I. The press is talking about UNG and the roll. And nobody is worried about hurricanes. The move down from 4.09 isn't easy to count, probably it will grind down for now, but it's a tough short. If you've read the preceding NG comments you know I've been a bear, BUT risk is probably greater to the upside for now.

Things looking ugly for the UNG

FT Energy Source By Izabella Kaminska "Last week, prominent oil-industry financier Matt Simmons, CEO of Simmons & Company International, weighed in on the UNG/commodity exchange-traded-fund (ETF) debate by posting the following missive to a handful of recipients: How on earth can a tiny firm amass 30% of nat. gas contracts, with funding jumping from $727 million to $4.5 billion in three months as nat. gas prices tank? Why would so many little investors plunge into buying natural gas contract exposure when every new article over past three months predicted gas gluts and prices soon to plunge to $1 to $2 dollars? Simmons’ email includes some pretty frothy allegations, which we are not minded to repeat here. But his core point is undeniably valid, especially when demand for this particular ETF still remains high despite torrid fundamentals for nat gas. " Interesting summary

WTI Oversold Short Term

First thing to note is the fib .76 support at 65.10. Additionally there is repeated short term divergence on the hourly RSI. So if this is merely "c'" of a correction down from 72.84, this is where it needs to reverse. Even if this is the beginning of a much larger move down there is a good chance WTI consolidates a bit here. It's easy to count 5 waves down from 72.22. The .382 retrace of the move down from 72.22 would put it at 67.92 , also in the area of the 4 th of lesser degree. Longer term WTI (and everything else ) is likely determined by the fate of the SP and macro economics. However, not being the shy type, there is a very good chance that we are beginning the third wave down in the equities, corresponding to a so called "W" shaped recession and the next wave of Real Estate problems. Pls see Mish's Brace for a Wave of Foreclosures, the Dam is About to Break Certainly WTI overlapping 62.78 will confirm a longer term top at 72.88 (o

Monday Morning Lows

The Weekend Trade returns. And then some. SP's of course driving most everything, so is this a correction lower or the beginning of an impulse wave down? It has taken out 990 as an early indication , BUT so far it still "looks" like an abc down. The last little leg down from Fri.s high probably is complete , so using the Fibonacci retracement .618 of the last leg down, at 997, as a key, containment under the 50% , 993, would be preferable, under 990 and it's a display of weakness. Just what you would expect of an impulse wave. Natural Gas made new lows this morning under the spot 3.155 low in April. Nothing MORE is required , although it will probably get some. A cluster of potential long term support exists between 3.04 an 2.97. More to come on that . WTI does not quite look like it's completed the current leg down, ( finally looking like an IMPULSE wave) but it's certainly close. A correction up to the 4 th of a lesser degree , 68 ish , would n

A Detailed Look At The Stratified U.S. Consumer , from Zero Hedge

In order to finance the burgeoning budget deficit, Obama and his advisors will inevitably be forced to raise taxes, either across the board (contrary to Obama's campaign promises but in line with recent disclosures by the White House), or progressively. The latter is the most worrying, as it seems inevitable that be it to help finance the budget deficit or Obama's healthcare reform action, it is precisely the topmost wealthy decile will be the portion of population impacted the most, and one can argue, that one that has the highest marginal power to determine consumption. And as the consumpion function above indicates, a progressive increase in tax rates, effectively reducing disposable (or after tax) income for the wealthiest will undo virtually all the benefits from both an increase in the stock market, as well as the unprecedented purchasing of MBS and agencies by the Fed in order to prevent a collapse in housing prices across the board.

Deflation vs Inflation , Updated Charts from the St. Louis Fed

The last chart says it all. Thanks to Nathan's Economic Edge

SP Review Post Consumer Sentiment

Consumer Sentiment falls unexpectedly to 63.2 from 66, economists expected 69..... no comment. The 990 level is an overlap of the last abc up, and the 50% retrace of the last 2 abc's up. The .382 retrace of the last 3 abc's up is at 988.5. This last significant move up from 865 to 1016 looks like an impulse wave from a distance, but on closer examination of the hourly bar chart, counts as a series of abc, x's. That raises the possibility of the entire bear market rally from 666 being completed. So penetration of early support at 990 will be an important indicator of an impulse wave down beginning. After so many months it will be refreshing to see one. On the other hand, perhaps the 990 holds and turns out to be the "c" of consolidation. The 50% retrace up from here, 1004, will be a warning sign this is not the beginning of a primary wave down but simply the pause prior to another new high. This is my less likely scenario because we made the .382 retrace of 15

Natural Gas Decline Pauses...until next time.

The low yesterday at 3.31 is holding for now, as natty consolidates yest.s move down in a choppy manner. So far it has been contained by the .382 retrace. Of note is the July 29 spot month low at 3.29, labeled B within this intermediate term structure. Taking that level out will erode the potential basing scenario and increase the risk of 3.22 and 3.155 lows also being exceeded. On the upside NG would have to retrace more than .38 of the most recent leg down at 3.60 to get any attention.