Analyze This

Yes the speed and scale of Dubai's CRE collapse is impressive, as was it's development. Unfortunetly the Emirate is not unique. Other impressive miracles of CRE development come to mind. Who would deny the China miracle? And while a little long in the tooth, Ireland , Spain,  Greece, and the EU wannabe's of eastern Europe were all miracles rather recently. And lest we forget our own little CRE issue , From Calculated Risk,... $430 Billion in CRE Losses? " Banks are projected to lose $430 billion on commercial real estate loans in the next two to three years [said] Stan Mullin, an associate with California Real Estate Receiverships in Newport Beach ... Highlight’s of Mullin’s talk: •$1.4 trillion in commercial loans are coming due in the next five years. •That’s equal to the same amount that came due in the last 15 years. •Lenders could take massive losses on their real estate portfolios from 2010-2013. "And of course this is why the FDIC released the

Nov. 30 (Bloomberg) ......"New production in Qatar, which has the world’s third- largest gas reserves, is a legacy of decisions made years ago. As gas tripled between 2002 and 2008 and Qatar increased investments, the nation avoided locking in prices for about half of its new LNG in anticipation of further gains, according to consultant Wood Mackenzie Ltd. Instead, the global recession caused prices to collapse 25 percent last year. “Qatar has had to supply the U.S., even though the returns are absolutely awful, because it is the sink for cargoes that can’t go anywhere else,” said Tony Regan , a consultant with Singapore-based Tri-Zen International Ltd. and a former executive in Royal Dutch Shell Plc’s LNG business. “It’s the worst possible moment to increase production, because the world is in recession and prices are so low.” and As the world’s most efficient producer, Qatar can profit at lower prices. The nation can pump 1 million Btu for as little as 15 cents, compare

Basically this move up represents a re exploration of the spot month range 5.35 down to 4.12, and is probably "b" of "B". It would not be at all surprising to see the Jan contract make new lows under 4.55, but hold or just barely exceed the 4.16 low made by the Dec contract. If the "c" were to equal "a", from 5.29 say, that targets something like 4.09.  At that point another try  at 5.35 would be likely as "C" up.

Probably safe to say that the in short term lower lows are likely. The break below the support trend line marks a 3rd wave of some degree, and this abc up to 74.90 is a little 4th, so expect at least one more 5h to new lows. If it is equal to .618 of 1 thru 3 target 71.38, and the .618 retrace of 65.05 to 82 is at 71.53. However, there is likely another 5th of slightly larger degree that could be made, so after a bounce 5=1 at just under 70.00.

Terrific coverage over at Zero Hedge,    Building Desert Sand Castles in the Sky  Surely these problems were not entirely unguessable, especially to those on site. It would explain the early am UDX spikes (subsequently canceled by ICE) over the last few weeks. Just for starters, I came across mention that Dubai had 58 Airbus A380's on order at roughly 320 mil each.  Hmm, 18.5 bil there. Considering the price America pays for it's gasoline dependence, the likely stabilizing attempts by the US Treas. and Fed, directly or indirectly, of the markets, European banks and Dubai,  is this mornings ironic Yuk.

click on chart to enlarge The short term Elliott Wave count requires the Euro to hold the overlap of wave 1 at 1.4999 to keep the labeling as an impulse wave 3 up. Please note that the Fib .618 retrace at 1.4986, is just under that level. It is possible I suppose, that we are seeing some kind of intermediate term B wave structure up from 1.4624, but given the huge size and maturity of the Euro/USD  trade etc , any intermediate term down leg has serious risk potential to gain momentum. In other words the Euro needs to hold here. Long term the Euro topped out  July08 at 1.6038 and moved down in 5 waves to 1.2329 a year ago October .  That .3709 long term move down  is retraced .78 at 1.5222. A failure by the Euro from here projects to a minimum 1.2856 as C=.618 f A. And of course the C=A at 1.1435.

"In Europe, the FTSE 100 index of leading British shares was down 116.65 points, or 2.2 percent, at 5,248.16, having been out of action earlier for over three hours because of technical problems. Germany's DAX fell 129.45 points, or 2.2 percent, to 5,673.57 while the CAC-40 in France was 85.17 points, or 2.2 percent, lower at 3,723.99. Earlier in Asia, the Shanghai index tanked 119.19 points, or 3.6 percent, to close at 3,170.98, its biggest one-day fall since August 31, while Hong Kong's Hang Seng shed 1.8 percent to 22,210.41."

From Bloomberg, The combined capacity of ships hired to store oil products expanded more than fivefold since April, according to data from Simpson Spence & Young Ltd., the world’s second-largest shipbroker. About two-thirds of those cargoes are in Europe, and additional carriers are also holding crude.

On the Natural gas spot chart the move down from the highs of 5.35 to recent lows at 4.155 is retraced .618 at 4.89 While on the Jan contract even a modest .382 retrace of the leg down from it's 6.26 high to it's all time low of 4.56 is at 5.21  click on chart to enlarge And generally speaking there has also been a tendency for sellers to show up any time NG gets over 5.00 and as can be seen the 5.09 level is going to be resist.

Wonder how long that can last for?

The one thing that can be said with assurance about WTI is that it has not been in an impulse wave. The inevitable conclusion is that this move down is a correction, and at some point will resolve with a break to new highs. And while there is no reason this choppy series of abc's down has to be finished yet, it is certainly near the support trendline. It is interesting to note the Euro is nearer the recent top of it's range rather than the bottom.

From Mish: Deflation Returns To Japan; Black Hole Madness In U.S. " While the Fed appears split over its exit strategy, even arch-hawk Richard Fisher of the Dallas Fed said the sheer scale of excess plant will curb prices and wages for a long time. Capacity use in manufacturing is near a post-war low of 67.6pc." From Reuters  Recession shows shortcomings in U.S. economic data The most likely culprit is the so-called "birth-death" model, which the Labor Department uses to estimate how many companies were created or destroyed...... Government data has difficulty gauging the health of smaller firms because there are simply too many of them, leaving officials to rely on surveys and models that are hit and miss. Jan Hatzius, an economist at Goldman Sachs in New York, thinks that is distorting not only the employment data, but also figures for retail sales, durable goods and even the biggest economic indicator of all -- gross domestic product. "

From Zero Hedge Were You Affected By Today's ICE DXY Order Cancellation? Let Us Know  Due to numerous external inquiries and complaints, we would like to solicit reader input from those traders who were impacted by the ICE's cancellation of 12,000 DXY contracts voided on November 3rd (8,000) and also today on November 20th (4,000). As a reader submits: "We are interested in forcing them to disclose who (i.e. firms, maker makers, etc.). participated in these cancelled trades, at what price and volume, and request WHY these trades were cancelled." How long can this blatant AND probably illegal manipulation continue?  I suppose this is the " new normal". Not so free markets, ok , but cancelling trades because they don't fit the gov's playbook ?  Whoa man , can we write into that script that I am 28 yr.s old , good looking and have inherited vast wealth?     

Normally not crazy about this pattern: frequently they are seen but not heard, that is they turn out to be 4th waves or consolidations, and even when they break down rarely meet the target. HOWEVER, this is gold, and the crowd will certainly read this popular pattern. Lately there has been A LOT of attention on gold as a weak USD play, as has CRUDE.

And it's all about the Euro. As posted yesterday: "Normally a declining wedge as seen on the hourly chart would be bullish. On the other hand there is a very easily identified Head and Shoulders pattern on the daily chart, and the trade is very crowded." See below.

                         click on chart to enlarge Interesting point on these charts. Normally a declining wedge as seen on the hourly chart would be bullish. On the other hand there is a very easily identified Head and Shoulders pattern on the daily chart, and the trade is very crowded.

After moving up off the lows from last week in an apparent 5 wave structure, Natty is nearing the .618 retrace of that move. It could be expected to have AT LEAST another wave up..... c=a @4.90. The .382 retrace of the DEC contract move down is at 4.92, the .618 retrace of Spot Mo. move down is at 4.93 The low last week at 4.29 was a .36 retrace of the spot month 2.40 to 5.35 move. It IS possible that this structure up could be the beginning of another leg up that takes that 5.35 high out. The .236 retrace of 15.78 to 2.40 is at 6.76. First NG has 4.95 to clear.

March 28th, 2007 - Ben Bernanke: "At this juncture . . . the impact on the broader economy and financial markets of the problems in the subprime markets seems likely to be contained," April 30, 2007 - Dow Jones @ 13,063 May 17th, 2007 - Bernanke: "While rising delinquencies and foreclosures will continue to weigh heavily on the housing market this year, it will not cripple the U.S." June 20th, 2007 - Bernanke: (the subprime fallout) ``will not affect the economy overall.''  October 15th, 2007 - Bernanke: "It is not the responsibility of the Federal Reserve - nor would it be appropriate - to protect lenders and investors from the consequences of their financial decisions."  (One of my personal favorites) December 31, 2007 - Dow Jones @ 13,265 February 29th, 2008 - Bernanke: "I expect there will be some failures. I don't anticipate any serious problems of that sort among the large internationally active banks that make up a ver

The SP and the Dow are now within 1% of the 50% retrace of the entire move down. Perhaps there is one more tiny new high , perhaps not. The whole world is aware of the USD carry trade, the Central Bank / Investment Bank  market manipulation vs.  real economic distress. Very hard to get long at this juncture. Take a look at the Yen and Euro charts click on chart to enlarge Both of these currencies look to be very vulnerable to a sell off. Which brings me back to the carry trade and equities ; between USD short covering risk aqnd the 50% retrace on equities, how do you do anything but sell,  especially given the historic downside risk of a 3 or C down of Super Cycle degree?                                Crude looks like it's in a corrective move down. The last month of sideways trading is NOT an impulse wave down .   While a retest of 82 or  new highs just over at the 83 resist would normally be expected, the above carry trade story makes it VERY difficult to get on that tr

Nov. 17 (Bloomberg) -- Colonial Pipeline Co., which operates the largest pipeline linking U.S. Gulf Coast refiners and East Coast markets, will limit shipments of gasoline because orders exceeded the company’s ability to deliver fuel on time. The Alpharetta, Georgia-based company issued the requirement, known as an allocation, in a bulletin to shippers for the 67th cycle. The restriction applies to shipments on Colonial pipelines running north of Collins, Mississippi. Companies will be able to ship a pro-rated portion of their original nomination, based on their shipping history over the past year, according to Colonial." The  67th cycle is the first cycle for Nymex delivery in December.

Note the 50% retrace and potential overlap of wave 1 by wave 4 in the above chart at 77.89. As mentioned previously,  the .382 retrace of 65.05 to 82.00 is just under the current lows at 75.53. The "c" = "a" down hits at 75.06. The WTI and products have decoupled slightly from the USD and SP, but the Retail Sales numbers at 8:30 will be important. Expectations are for + .9% vs Sept. - 1.5%.   Given the surprise pullback in consumer sentiment last week, worse than expected consumer credit (down for 8th straight mo. last week and by 50% more than expected) and big time drop in DOE implied demand for products , could be room for a surprise in retail sales.  The economists haven't been doing so well lately.                  

Physical Natural Gas for delivery Nov 14 thru Nov 16, 2009 declined steeply Friday (the 13th). At virtually every delivery point, prices were down between .70 cents and .90 cents, for a decline of almost 50% over the last 10 days. The reported lows on the day ranged between 1.95 in the West and  2.55 in the East. It  is probably safe to say that the degree of the spot differential and the consistency of it, reflects the scarcity and expense of storage. With temperatures continued to be forecast above average for most of the country for the next couple weeks ( and months) the front month contango can easily widen.  It will be interesting to observe the curve going forward.

Summary Working gas in storage was 3,813 Bcf as of Friday, November 6, 2009, according to EIA estimates. This represents a net increase of 25 Bcf from the previous week. Stocks were 350 Bcf higher than last year at this time and 409 Bcf above the 5-year average of 3,404 Bcf. In the East Region, stocks were 118 Bcf above the 5-year average following net injections of 8 Bcf. Stocks in the Producing Region were 223 Bcf above the 5-year average of 976 Bcf after a net injection of 10 Bcf. Stocks in the West Region were 67 Bcf above the 5-year average after a net addition of 7 Bcf. At 3,813 Bcf, total working gas is above the 5-year historical range. +25 bcf vs. expectated +15/+20 and of course at record capacity.  Given the NOAA weather forcast storage capacity will likely be tested over the next week or two. Watch the cash discount. Red is above avg. 8-14 days

The trend certainly has been the shorts friend. And despite getting rather long in the tooth,so far there is no evidence of a reversal. In fact the Dec contract is making contract lows this morning. There is some 14 day RSI divergence on the daily chart but it's not repeated and it's early. Downside potential targets are the .382 retrace on the spot chart of the entire move up from 2.40 to 5.35 at 4.23,  the 50% retrace at 3.88 and the .618 retrace of same at 3.53.

The DOE inventories released last night gave crude a push to new lows. The subsequent bounce  failed to exceed the 50%  retrace of yesterdays move and is likely complete. The count on the chart below suggests new lows on the move to complete 5 of "c" . The .382 retrace of 65.05 to 82.00 is just under the current lows at 75.53. The "c" = "a" down hits at 75.06 as mentioned yesterday.

STOCKS (MILLION BARRELS) 10/30/09 11/06/09 Crude Oil 335.9 337.7 East Coast (PADD I) 13.3 11.4 Midwest (PADD II) 78.1 80.2 Cushing, Oklahoma 25.5 27.0 Gulf Coast (PADD III) 173.6 174.4 Rocky Mountain (PADD IV) 15.9 16.1 West Coast (PADD V)  54.9 55.6 Note Cushings build of 1.5   Refineries operated at 79.9 percent of capacity.  Total motor gasoline inventories increased by 2.5  million barrels,and are above the upper limit of the average range.Both finished gasoline inventories and blending components increased last week.   Distillate fuel inventories increased by 0.3 million barrels, and are above the upper boundary  of the average range for this time of year.   Over the last four weeks, motor gasoline deman has averaged 8.9 million barrels per day, down by 1.0 percent from the same perio

Chart speaks for itself.   Crudewire Oct 12,   "The Japanese Yen is also at a significant juncture. After correcting up vs. USD in an ABC structure lasting TEN  years, the Yen topped out Jan09 and came off in a clean 5 waves to April 09. Since then it's gained against the USD in a series of abc's that has taken it nearly back to last Dec.'s highs.  Call that waves 1 down  and 2 back up (or a and b). If the Yen is beginning a 3 wave down after finishing a TEN yr. move up , the downside  potential gets really intresting; for instance the move down in the mid 90's was from 125 to 68 , so IF this leg is a 3 or C down AND it equals A you're talking about it losing half it's value vs USD.  Hard to imagine right now.  But then the unimaginable seems to be happening more frequently." More recently awareness around the blogosphere re Japans fundamental sovereign debt problem has started to increase.     See Mish's Budget Deficits Soar Out of Control

How long can WTI chop around for? Usually this type of pattern is resolved by a resumption of the trend, in this case to new highs, but if it is in a B wave or X wave down that is correcting the move up from 32.50 to 82.00, choppy abc's with overlaps might be expected. So quite a while is the answer. In the meantime  "c" = "a " at  75.06.

On this chart at least.   Euro failed to make a new high after putting in 5 waves up. Shorter term 1.50 looks like decent resistance as .618 retrace and a round number. On the downside putting in new lows and overlapping 1.4936 should bring the sellers back out, esp after NOT making a serious new    high.                                                                                                                                                              

From the FT's Energy Source blog: November 11, 2009 2:11pm by Kate Mackenzie We’ve heard a lot about how OECD oil demand has peaked and was hit particularly hard by the recession, with most forecasts of growth coming solely from the developing world. Stil, it’s stark to see how steep this year’s plunge has been. From Opec’s latest Monthly Oil Market Report: The oil producers’ cartel tends to be restrained in its demand forecasts anyway, but it’s sounding particularly gloomy about the prospects for some of this lost demand ever coming back: Moreover, even if the expected economic recovery materializes, it remains to be seen whether demand would be able to return to pre-crisis levels. Energy policies and behavioural changes are bound to have some impact on consumption and this will gradually feed into overall demand patterns, especially in key sectors such as transportation. However, it is still premature to assess the full effect of these changes. Great chart....200

Natty has had a pretty good sized move down in the Dec contract, not unexpectedly. As mentioned many times late Sep and early Oct: "Over 5.12 and 5.57 looms large.That represents a significant cluster of resistance. Given the near record inventories, and the seasonal tendency for an intermediate term pullback from Oct on, the downside risk following the next leg up will be HIGH. Additionally there is the potential for the pullback to last several months into the seasonal early winter low. If for instance that were to be a not uncommon 50% pullback on the spot chart to roughly 4.00, that would represent some real pain for holders of the Feb. contract." Didn't quite get to 5.57 which also is not surprising. The .382 retrace on the spot chart is at 4.23, actually a rather modest pullback from 5.35 , but note that would be a new low for the Dec. contract. That is probably the story of the next few weeks, if not months: reconciling  the two charts. Given the above mention

Brussels warning on fair value shake-up By Rachel Sanderson in London and Nikki Tait in Brussels Published: November 11 2009 00:05 | Last updated: November 11 2009 00:05 Brussels has warned that a radical overhaul of rules on how banks value their assets could lead to greater volatility in their accounts, undermining broader financial stability....... The IASB reforms will allow more flexibility in determining which bank assets must be marked to market and which can be valued according to so-called amortised cost accounting, which smooths out market volatility. But Commission officials believe the overhaul does not go far enough to limit the use of fair value accounting . Analysts say some European banks with large investment banking activities would be hit disproportionately. In the letter to the IASB, Jörgen Holmquist, director general of Internal Markets at the European Commission, said more assets might be marked to market under the new system than even under existing rule

WASHINGTON (MarketWatch) - Outstanding consumer debt fell at a 7.2% annual rate in September, the eighth consecutive decline, the Federal Reserve reported Friday. Consumer credit fell by $14.8 billion to $2.46 trillion in September, down 4.7% compared with a year ago. Outstanding credit can fall if consumers pay off balances, or if lenders write off bad loans. The decline in September was led by another huge drop in revolving debt, such as credit cards, which fell $9.9 billion to $889 billion, or a 13.3% annual rate. and From the Bureau of Labor Statistics: The unemployment rate rose from 9.8 to 10.2 percent in October, and nonfarm payroll employment continued to decline (-190,000), the U.S. Bureau of Labor Statistics reported today. The largest job losses over the month were in construction, manufacturing, and retail trade. Between the trend and the upcoming January revisions to job losses expect Q1 of 2010 to see 12% unemployment. Given consumer credit retrenchment, actual jo

The USD .78 retrace is at 75.55 and should hold there if the count is to remain the same , that it's made it's low. A double bottom would not be a surprise. The BIG PICTURE is however that this trade is very very crowded and advanced. The SP 500 chart shows nothing to encourage bulls. The move up off the lows does not appear in anyway to be anything other than corrective and it is no longer oversold. Resistance is 1065 the 50% retrace as well as a previous high. Risk of a 3rd wave down is HIGH. WTI is showing the most likelyhood of attaining a new high. It's had a very corrective appearing structure on the downside over the last 10 days with lots of spikes and overlaps. From the last WTI post,     WTI Leads and Retraces .78 "The thrust up from 65.05 can also be counted as not being complete and still shy of a 5th wave. The 5=1 (of this move from 65.05) is at 83.37, ADDITIONALLY if the thrust up is seen a 5th wave out of a triangle ending at 65.05 it would equ

Nov. 4 (Bloomberg) -- Crude oil, which has risen 80 percent this year, is causing the U.S. dollar to weaken, driving metals and other commodities higher, according to Jeffrey Currie, head of commodity research at Goldman Sachs Group Inc. While oil has risen, the U.S. currency has weakened, leading to speculation that the dollar’s depreciation is driving investors to buy oil as an inflation hedge, thereby pushing up the price of crude. “I would argue the other way,” Currie said in an interview yesterday in London. “I would argue that higher oil prices drive the dollar down and then the weaker dollar drives the metals and soft commodities up.” I've been noticing the phenomenon myself as I'm sure many of you have . First the Rbob (or HO), then WTI , then the Euro. Then everything else. Of course in a consumer driven economy, that runs into trouble at some point.

A typical FOMC day in my experience, is for the mkt to be quiet up until mid/late morning when it starts a modest rally into the announcement. On the announcement it gets a spike, usually up, immediately followed by a reversal. The SP can be seen as having a 5 wave down from 1100 to 1028, for 1 down of larger degree. If the fed provides a pop, 1065 is the 50% retrace as well as a previous high. Risk of a 3rd wave down is HIGH. Note the RSI is no longer oversold. On the daily charts it is back in neutral territory.

The USD ripped up very early Tuesday morning, looking like a 3 wave, touching 77.50 , before immediately selling off. It has ALMOST retraced the whole move up that took place Mon. night. Is that thrust the C of an ABC correction up, or the "-5-" of the 1st leg up? We are roughly at the 50% pullback point of the USD move up from 75 and previous support at 76.25, the .618 pullback is at 75.95. A 2 wave back can be deep. Either way, not an easy call. So far the move down off the highs does have the look of a 5 count, an (a) if it's a corrective move down. Obviously getting back above the 77.50 level would be a huge event. From Sunday Nov.1 "the next leg up will probably be a multiple of the 1st wave, and consistent with a 3rd wave, a moment of recognition. There is a cluster of resistance at the 77.50 level: previous 4th of a lesser degree, previous low, a .382 retrace of the last leg down from 81.35, and roughly a 3 =1 up. So 77.50 is big, and no doubt a lot o

The Value Investor goes off the rails: pays $100 per share for Burlington Northern. That would be about 13% off the all time highs. Warren Buffet is such a great guy, no doubt he's making a strategic public bet to encourage the rest of us. I'm just not sure that's the way markets work. Good Luck though.

Surprise.                                                               click on chart to enlarge New lows under 76.56 and WTI is likely in a 3 wave of some degree, it's a little early to label. Check out that 76.56 level on the way up.

The USD ...it's all been said, we all know the trade.  From Oct.19   Banks Doubled Down: Super Long Assets /Short USD     "The USD  may make new lows. Barely, like 75.00 It looks like the final stages of a -5- wave  down from 77.50 to complete a (5) wave wedge of greater degree down from 79.50 to complete a 5  for C. Whew." Exactly. And the USD has now got a 5 count up, for a 1, and at least the first part of the 2 wave back down out of the way. See  USD Ain't Dead Yet   click on chart to enlarge   While there MAY be another day or so of further consolidation for the USD, there is a STRONG probability we are going to see a 3rd wave up . Repeat: STRONG probability we are going to see a 3rd wave up . Given  negative dollar sentiment, last seen at 96% , USD carry trade, and central banks short the USD,  see How The Federal Reserve Bailed Out The World the next leg up will probably be a multiple of the 1st wave, and consistent with a 3rd wave, a moment of recogni