Friday, February 26, 2010

Housing Disaster

This week saw a number of housing related headlines;   Economists surprised as new-home sales fall to lowest level in nearly 50 years ,    AIA: Architecture Billings Show Significant DeclineUPDATE 1-US January existing home sales unexpectedly plunge
I am not any kind of Real Estate expert. And every one of my friends and family is exposed to this sector in a big way and will be horribly hurt by continued deterioration, but that is what looks like must happen.
It used to be said that Real Estate is a long trending and slow to turn market. Probably still true.
Check out these charts:
 
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Note that house prices are 3 years into a new trend following a 38 year move up. 

About 3 years ago I used to talk about what a very slow motion train wreck we were witnessing. And really it did take years for it to be even noticed by most of the participants. Now everyone is aware that the wreck has occurred, but just because you become aware of something does not mean it's over. It's still a very slow motion wreck, most of the cars have yet to land and are still up in the air.
I've attended many real estate sheriff sale auctions over the last 2 yr.s. The notable and increasing feature is that almost 90% of foreclosed properties listed for that weeks auction never come up for bid. They are either bought back by the bank or adjourned per plaintiff request, and pushed back. The banks are going long a depreciating asset that has cost associated with it. In a big way.
Maybe they will be right this time.
But with unemployment, credit contraction, the Alt A and Option ARMS resets, CRE disaster and serious systemic sovereign problems in Europe and Japan;
I wouldn't bet on it.



OPEC Output Reaches 14-Month High on Saudi Gain, Survey Shows

The 11 countries with quotas, all except Iraq, pumped 26.785 million barrels a day, 1.94 million above their target. Compliance with output quotas slid to 54 percent in February from 57 percent in January. All members exceeded their production limits.

click on title for more.

Rbob Ramp Redoux

One of my favorite conspiracy theory's is that Rbob is used by TPTB and Goldman Sachs etc to manipulate markets. I notice it leads the way lately, followed by crude, and often subsequently generates a commodity lead equities rally. Not bad for a relatively small market....on a snow day.
From the most recent COT report;

Crude O.I. .
Total: 1,301,624
                                     Long                Short
Money Managers        165,827           45,356
Swaps Dealers            279,712           120,643


RBOB O.I.
Total: 255,823


Money Managers         55,163               6,484
Swaps Dealers              41,989                  764

Eventually somebodies got to burn the stuff.
click to enlarge

Thursday, February 25, 2010

WTI Big Picture and Outlook

The Big Picture;
click to sharpen
Wow, WTI is darn near the highs for the last 12 mo.s ...and at $84.00 it was a 161% rally from the 32.40 low. HHMMMM familiar number.
Whether you think we had a 5 wave count up or a triple series of ABC's ( as I do), it looks complete.
The bulls expect a pullback to some Fib level, and the .382 and 50% retraces will put WTI roughly into levels of previous support. That potential support will most likely only be temporary. All initial Elliott 5 wave count's are followed by at least one more leg in the same direction, either a C wave or 3. The 147 to 32.40 leg was a 5 down.
It is possible, if the move up is a 5, that the pullback just starting will turn out as "b" , which can retrace the entire move up or even make a down and under irregular low.   However, given the probable triple ABC structure, and amount of time spent going up, the odds  favor the leg we have begun down to be related to the $147 to $32.40 move. 
What might that leg down look like?
In the intermediate term, say 3 mo.s, the aforementioned fib support and the very impressive ability of WTI to attract spec buying, might keep it in the ranges seen over the last 8 mo.'s $65 to $80 and then $58 to $75, albeit working lower. Perhaps it shapes up as 1,2,-1-,-2-  forming the right shoulder of a head and shoulders pattern.
But take a look at the velocity of that first move down from 147 to 32.40. If this leg is related to that one it could accelerate rapidly as the fib retraces are taken out. Naturally a lot will depend on global equities, the Euro etc and how effective the gaming of that is.
 
click to sharpen
Longer term eventual targets of another leg or two down ... $27 as C=50% of A , $22.20 as a gross 85% pullback from $147, $18.18 as C=A in % terms , and $13.55 as C=.618 of A, in nominal terms. 
Those numbers also correspond to the range of the 4th wave of lesser degree ( super cycle)  traded within for 20 years.




Natty Double Bottom

Moments ago NG made a double bottom on  the spot month chart at 4.745. Still thinking it's probably a 'b" wave (even if it's down and under) with a "c" up still to go. Can it fill that gap up at 5.04?
The bigger picture still points to lower lows  for this B down.

SP Support?

SP's pretty much have to hold the 50% retrace of the rally up off the recent  lows of 1040. That number is 1077 basis Mar futures. And if you were trying to count the move up off the lows as an impulse wave, overlapping what might be "1" around 1077 eliminates this move lower as " 4".  SO taking out 1077 advances the bear case.

Wednesday, February 24, 2010

Euro Creeps Sideways

The Euro is NOT in an impulse wave up, rather a classic sideways consolidation. There is shallow support trend line crossing under at around 1.3525. Taking that out and it likely tests the important support at 1.34, the .618 retrace of the whole move up from last years lows. See what it does with that.

UNG














The above depicts an 85% retrace of the initial impulse wave up off the lows.
It looks like a "b" or 2 down.

Coming to a Theatre Near You

From Bloomberg;
Greek Police, Protesters Clash in Nationwide Strike (Update2) 
"Half a million civil servants, who held a one-day strike on Feb. 10, today joined forces with GSEE, which represents 2 million workers, after EU warnings that Papandreou’s government needs to bring in new taxes and make more spending cuts if it fails to rein in the largest budget gap of all 27 EU member states.
Air-traffic controllers, customs and tax officials, train drivers, doctors at state-run hospitals and school teachers walked off the job to protest government spending cuts that will freeze salaries and hiring and cut bonuses. Journalists also joined the strike, creating a media blackout....
Greek bonds have slumped, driving up borrowing costs, as investors fear that government plans outlined so far will fail to reduce the gap this year to 8.7 percent of GDP from 12.7 percent. Papandreou’s government needs to sell 53 billion euros ($72 billion) of debt this year, the equivalent of 20 percent of gross domestic product....
“We haven’t yet seen anything of the fiscal contraction that Greece has to go through if it wants to avoid a sovereign default,” Fredrik Erixon, director of the Brussels-based European Centre for International Political Economy, said in a phone interview. “The main problem is that the Greek government and the prime minister himself have not yet realized the depth of the mess.”
Almost 500 international and domestic flights have been canceled today, a spokeswoman for Athens International Airport, Greece’s biggest, said by telephone. The Athens metro, which carries 650,000 commuters to work each morning, isn’t running nor are the capital’s trams. Passenger ferries and other vessels will remain docked until the end of the strike....

So imagine you are living in Greece and you have a little (or a lot) of money...reportedly it's fleeing at a dramatic rate,
Greeks Scramble To Pull Out €8 Billion From Local Banks As Greece Responds With Money Control Measures What would you do?
Now if you are living any of the other problematic countries...Italy, Portugal, Spain,  Ireland, Belgium, Austria, ...well anywhere in Europe, the Greek news has to be front and center.
What would you do?

NG Targets

Mar.
 
click to enlarge
Natural Gas has a 5 count down from a pretty significant consolidation to give us an "a". This contract is not going to NOT have another leg down. Everything is in ABC's, so expect a little abc up, retracing say... Fib point .382 to close that gap, followed by another leg down to give us "c" .
If it unfolds that way the C = A at 4.25 ..also the 50% retrace of the spot 2.40 to 6.11.

WTI

The recent move down from 80.80 has yet to look convincingly like an impulse wave, esp. the earlier action off the highs.
Apr.
 click to enlarge
Yet in context of the high risk of continued world deflation and short term risk of USD melt up, this is not a buy. I won't even start on fundamentals.
The WTI contract has been in an UGLY pattern for over 6 months. Sharp moves overlapping previous moves, and then reversing. 
click to enlarge
Back in July when I first started writing Crudewire,  I wrote,     
"That is an UGLY chart. Ugly because it likely foretells more of the same. Sharp moves that overlap previous highs or lows followed by a reversal." This is exactly what I meant.
I am really looking forward to a change of this pattern and seeing some organized trending impulse waves. 

Monday, February 22, 2010

Greece NOT Unique Confirmed

 From Zero Hedge, 

The Chairman Of Goldman Sachs Bank, And Former FRBNY President, Says Many European Countries Used Comparable Debt-Hiding Swap Transactions

In a speech before the UK Treasury Select Committee the Chairman of Goldman Sachs Bank, Gerald Corrigan, who also happens to be a former New York Fed President (and people still wonder where Tim Geithner will end up) noted that it is not Goldman who is at fault in the whole Greek swap fiasco but Eurostat, "which was consulted on the transaction at the time it was entered into and which offered no objection." What is troubling is Corrigan's revelation that "Goldman Sachs was by no means the only bank involved with countries in these types of transactions...These transactions were not limited to Goldman Sachs and Greece." Just whose debt numbers will be put under the microscope next?

 see Feb 18 Crudewire's

  Greece NOT Unique

SP Alt. Counts

Most of the Elliott Wave counts I've seen have the SP 666 as a complete " 1 " down from 1580. However note the .618 retrace depicted below is for the subwave 1439 to 666.

click to sharpen
The correction up is also approx equal to the measured down move in time. The correction is unlikely to be a 4th due to it's significant retrace in price and time, but it could be. It's character does suggest it is a 2 wave but perhaps of lesser degree than most have labeled. Won't make much difference short or intermediate term.

Natural Gas Count

click to enlarge
The extension of this move down from 5.16 and the cleanly structured wave count , with almost no overlaps, clearly identifies it as a resumption of the down move. At 5.91 the wave labeled -3- is 1.78 of -1-.  A -4-th  wave to either the .382 or .50 retrace could be looked for from here. 
Longer term,  the initial wave out of the previous corrective structure looks incomplete here, suggesting lower lows prior to any extended consolidations. That eventual  " a " will likely followed by another "c" down, easily measuring to 4.50.

Sunday, February 21, 2010

Friday, February 19, 2010

Natural Gas Outlook

The choppy b wave down is unfolding as expected and the first potential targets are within sight. But first a review of the bigger picture for a little context..
                                       click to sharpen















The ABC depicted above took almost 4 years to complete. The 2.40 low was an 85% Fib pullback from the 15.78 high. Note the recurring appearance of a mirrored pattern following a spike high, as seen in the 1995 to 1999 period, and more recently since 2005. It is highly likely that the 2,40 low completed a long term structure down from 15.78















The current abc up from 2.40 also appears to be complete, hence the expectation of a pullback as seen in any of the last few months posts. The very truncated nature of that abc up relative to the decline, in both time and price , suggests that it was of lesser degree and additional structures to the upside will be forthcoming, rather than lower lows under 2.40. So far the choppy overlapping move down from 6.11 is totally consistent with that interpretation.
So where does it reverse from and start the next move up?
Corrective "b" or X waves are very tricky, but the first possible targets are now in sight. The 50% retrace of the 2.40 to 6.11 move up is at 4.26.  Is it possible that this b wave down from 6.11 is complete here, at 5.00 a 30% retrace of the spot chart? Not likely, it would be unusually shallow. It IS possible that todays 5.00 print is an irregular  b wave low and the consolidation experienced over the last month is yet to complete and has another chop up to say 5.50ish prior to hitting te lower targets.
In any case when it does start to get to the 4.50 level it will be time to eye up the calls.

Euro .618 Support

The .618 retrace of the long term B wave up from 1.2324 to 1.5140  is at 1.34. That is no doubt providing support here. A settle under that level would obviously be a very negative development  and go a long way toward confirming the lower C wave targets of 1.28 and 1.14.
 
click to enlarge
Short term, the rally off the 1.3440 level looks corrective. Overlapping 1.3654, yest.'s high would raise a red flag re a longer lasting correction to the upside.

Thursday, February 18, 2010

Rbob Ramp


 
click to enlarge
Note that the 4th wave of lesser degree is just overhead as well as the .618 retrace of the whole move down off the highs. The trendline is the long term support over the last 5 mo.s . Naturally a reversal with new lows under that would be really damaging.
Who's buying this stuff? I guess they don't read unemployment stats. or the Telegraph...

Greece NOT Unique

The recent hidden swaps that turned up in the Greek portfolio (lol) reminded me a lot of Enron. Or was it B of A? Could of been Citi.  Anyway back in the Enron days I knew that this method of hiding losses could not be unique to Enron. In fact, if Wall Street was pushing such an approach, they themselves had to be well into it just to compete. I mean why just rake in fees on such a creative solution when you could employ it to "free up" capital yourself. Not that you had to of course..
So once again the thought occurs ..Greece probably NOT UNIQUE ......   see  Dubai Not Unique
(from Nov. 30).  I mean why help out just one struggling nation when so many others are equally in need.
Zero Hedge published a rumor several days ago that AIG had sold CDS on Greek debt and that it well may be still in force. HMMMM wonder who bought that? We know who's gonna pay.

Natural Gas Chop

Directionally, this level will very likely be seen again in the next week, so take your pick, it's a free bet. Almost all of the Natural Gas posts of Jan. or Feb. call for a choppy sideways drift down characteristic of a B wave, with  an eventual target that is a Fib retrace of the 2.40 to 6.11 move. So far that has been the case and looks to continue. So another chop up cannot be ruled out shorter term.
 Mar.

However, even a very shallow .382 retrace on the spot mo. chart targets 4.69, and  a B wave pullback is more likely to be 50% or 62% . That targets 4.26 and 3.81 respectively.

Wednesday, February 17, 2010

Euro Elliott Count


 
click to enlarge.
At the moment the short term is the most important count; The c=a , and the very shallow .0307 pt b wave, are strong indicators that the Euro has been consolidating NOT reversing. And it's a weak looking downward sloping consolidation. It does NOT look like the precursor to a wedge. There is a HIGH risk of at least one more leg down. And prob more.
If the intermediate term Elliott count of the above consolidation turns out to be (2) it will have taken quite a lot
of time relative to the (1). Just like the -2- and the 2. Whew. Because the time relationships are unusual the   intermediate term labeling is open at the moment.
Most important is the Long Term count, the Euro is in a C wave down from the B highs of 1.5140, and that has a long way to go. 

 
                  click to sharpen

See  
Where Is the Euro       published Nov.26 2009
"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."

Tuesday, February 16, 2010

Natural Gas Update


 
click to enlarge
This sub wave  labeling may still turn out a little differently....However;
the corrective choppy move up from the 5.06 lows has taken long enough that the whole thing appears to be an abc structure, correcting the fist abc down. That spot month  6.11 to 5.06 move of 1.05 will be equaled at 4.50 if todays high completed the abc structure up. That is just under the Mar contract low of 4.56, and would be consistent with a B wave of larger degree.

Goldman Says "Something Brewing" in China on Currency; What's Really Brewing Is "Trouble"

The commercial property space under construction in China at the end of November was the equivalent of 6,800 Burj Khalifas -- the 160-story Dubai skyscraper that’s the world’s tallest.

Great summary.

WTI Hits 50% Retrace.


 
Must be all that Gasoline demand out there. Maybe their crankin' up the runs. Or somebody's diversifying out of Euro's into WTI ??
Or maybe GS ate another customer.

In any case the 50% retrace of $84 to $69.50 (the spot mo. move down)  is at 76.70.



SP Update.

click to enlarge
It may be that the wave labeled -2- ,  could be the 2. Either case, it's clearly a choppy, corrective move over a holiday, and risk of it's being followed by a 3 down is HIGH.

Rbob Sale ?

click to enlarge


Monday, February 15, 2010

Euro Update

There has been some publicity around the Short O.I. in the Euro. There is a link on Zero Hedge to some decent charts, however while there is a correlation the lags are SO variable, trading it would be suicide. Additionally, in this extraordinary period, we must be seeing a general increase in FX flows anyway.

There is a potential  intermediate term (alternate) count of ABC down for the Euro, as labeled below.
 
click to enlarge
The alternate count C has exceeded the A, by about 10%. Not enough to rule it out yet.The .618 retrace of the whole B wave of larger degree  up from 1.23 is at 1.3400. Not there yet. 
And the so far the move up off the lows looks choppy and corrective..not an impulse wave.

Ought to get interesting soon.


Friday, February 12, 2010

Natural Gas Update

 
 What can be expected of a b wave within a B wave. 
Lots of chop. See any of the last month's Natural Gas posts.

Natural Gas Inventories ETC.













                                       click to enlarge

Summary
Working gas in storage was 2,215 Bcf as of Friday, February 5, 2010, according to EIA estimates. This represents a net decline of 191 Bcf from the previous week. Stocks were 172 Bcf higher than last year at this time and 114 Bcf above the 5-year average of 2,101 Bcf. In the East Region, stocks were 1 Bcf above the 5-year average following net withdrawals of 116 Bcf. Stocks in the Producing Region were 54 Bcf above the 5-year average of 682 Bcf after a net withdrawal of 60 Bcf. Stocks in the West Region were 60 Bcf above the 5-year average after a net drawdown of 15 Bcf. At 2,215 Bcf, total working gas is within the 5-year historical range.

Heating Oil Revisited

 
click to enlarge
A slightly cleaner wave count than crude. Probable  -3- of 3 beginning, confirmed by an overlap of 1.8250.  Elliott Wave and Fib wave 3 targets 1.7301 as 3=1, and 1.5278 as 3=1.618 of 1.

SP Fibonacci Targets.

As an addendum to the previous post I am simply putting up some Elliot Wave and Fibonacci targets.
Mar Daily Bar
click to enlarge
This is a count that a lot of people have. It obviously depicts a -3- of 3 about to begin. If correct, a Fibonacci multiple of the 1st wave could be expected as complacency is overcome and the "moment of recognition" occurs. The 1st wave was 88 points, 1.618 of that or 142 for a wave 3 targets 959, 2 times 88 targets 935 and 2.618 targets 871.

Thursday, February 11, 2010

SP Toast

 
click to enlarge
A very choppy .618 retrace of the clear 5 wave leg down. There are other ways to label the sub waves of the -2- but even then only a minor push thru the .618 retrace would be expected to something like 1078.65.
Longer term the risk of an acceleration to significant new lows is HIGH.
Tune in tomorrow for targets

WTI Short Term Update

One more little wrinkle in the corrective count up. 
Note the (c) = (a) at 75.75 and short term RSI divergence.

OPEC Compliance With Cuts Fell to 58% in January, IEA Reports

Feb. 11 (Bloomberg) -- OPEC’s compliance with record supply cuts announced in 2008 slipped to 58 percent in January, from 61 percent the previous month, according to the International Energy Agency.
The 11 members of the Organization of Petroleum Exporting Countries bound by production quotas raised output by 135,000 barrels a day to 26.62 million a day last month, the Paris-based IEA said in a monthly report today. That means OPEC exceeded its collective target by about 1.8 million barrels a day. See    Crudewire.com Named Most Accurate Forecaster for 2...

Natty Update

Wow, just paid my heating bill. Turning THAT down.
The below chart reflects what could be expected and has often been surmised here, that NG is in a period of choppy consolidation with a downward bias , eating up a lot of time. See
Natural Gas

WTI Correction Done

Mar 30 min bar
click to enlarge
It may turn out that the above count is mislabeled and the -1- should be the 1, and the -2- should be 2. It is clear however that the correction up from the lows is choppy and does not look like an impulse wave. In fact it is easy to count three series of abc's, labeled w,y,z. Elliott Theory only allows a series of 3 abc's of similar degree. Note RSI divegence.
There is now high risk that WTI  this is about to begin a 3 down. 
Bullish alternative is some sort of abc down holding the lows followed by another choppy corrective move up. That is a less likely scenario following the above structure.

Wednesday, February 10, 2010

Another SP Look


 
  click to enlarge
The choppy corrective bounce we are in is either a -2- of 3 , in which case it stalls somewhere around here, or turns out to be a 2 wave, as shown,  and carries a little higher. If a 2 then taking out the trend line and retracing 50% say @ 1094 or .618 @ 1107 might be expected. In any case, the bounce so far is NOT an impulse wave up. The important thing is NOT to be long during a 3 down .

Natural Gas Update

More abc's to come ....this time on the downside. A little head and shoulders measuring targets 4.90ish.

WTI Update

 
Wave -3- of 3 still in the cards, feels like the calm before the storm. The -2- looks choppy compared to the impulse 5 waves down of -1-. Note the near c=a in the above count.
And of course the retrace to the area of the previous 4th of lesser degree.
NOT a place to buy.

Tuesday, February 9, 2010

WTI Downside Risk

 
click to enlarge.
All these charts have very similar counts..probable 3 of 3 soon . And that implies some serious downside acceleration risk and volatility increase (at least while in the 3 ). Buckle Up.

Euro Update, 3 of 3 to begin?

 
click to enlarge
The current count implies that (3) of -3- of 3 is about to begin. Politicians not withstanding. Of course if it overlaps 1.4020 it negates the count as depicted...
While a 2 wave CAN have a deep retrace,  this should be relatively shallow if the 3 of 3 is correct.

Natural Gas Short Term

 
click to enlarge
Notice the Fib retrace points are for the last leg down only. That leg may be a (3) of -1- but it's too early to label with confidence. The bounce looks choppy and the 50% at 5.515 would have to be exceeded to start rethinking expectations of lower lows. Minimal downside target, 5.30 as .618 of (1) thru (3).

China Buys Oil (USO that is)

China Becomes Oil ETF’s No. 4 Holder, Buys SPDR Gold Trust
By Christian Schmollinger and Kyoungwha Kim
Feb. 9 (Bloomberg) -- China Investment Corp., the nation’s sovereign wealth fund, joined Goldman Sachs Group and Morgan Stanley & Co. in investing in the U.S. Oil Fund, an exchange- traded crude-futures fund.
China Investment became the fourth-largest holder in the Oil Fund by buying 2 million shares, equal to 3.48 percent of the outstanding units, with a value of $78.6 million, according to a Securities and Exchange Commission 13-F filing posted on Feb. 5. It also took a 1.45 million share stake, or 0.4 percent of the total, in the SPDR Gold Trust worth $155.6 million.
Chinese miners and oil companies have bought up zinc mines in Australia, oil reserves in Nigeria, and gold deposits in the Philippines to feed the country’s demand for raw materials to fuel its economic growth. The $300 billion sovereign wealth fund pumped about $10 billion into commodity-related concerns in the second half of 2009.
“It looks like they are aware of their market power in commodity markets and want to hedge against the impact their buying has on commodity prices,” said Timothy Condon, chief Asian economist with ING Groep NV in Singapore. “I think the reserves, via the CIC, will be used to hedge the risk of a cutoff of key raw material supplies by buying stakes in commodity producers.”

So the stake is equivalent to a supertanker cargo, whats the deal? Goldman and Morgan too? This can't have been much much fun as an outright, esp with the roll eating away at it. It might be interesting as one leg of a spread structure, but why pay USO to do that for you?
 
 The charts are fun. The above chart is a 2 year chart, below a 5 day.

 



 

  

Monday, February 8, 2010

Natural Gas Update

OK it's cold .  NG got it's X wave back up,  62 cents so far, not bad. The choppy action up is consistent with a corrective move. Overlapping 5.38 ought to put the boot in.
 
click to enlarge
The first series of abc's down was 1.05 from 6.11 to 5.06. The next move down will be equal to it at 4.63, and the Mar contract low is 4.55.

Heating Oil

This is representative of the complex, in terms of wave count. There are differences but not long term.
 The most important take away is the clear 5 waves down ending in Mar of 09, followed by the double zig-zag correction up.
Note the MACD is just beginning to roll over and the RSI is not even close to oversold .
 Mar Heat
 
click to enlarge
The sharp pop last Mon and Tue. is the most significant corrective move since the top was put in. That is characteristic of 2 waves. Clearly the count has us already in a 3 down with this little rally running into trouble right at the area of previous support. A 50% retrace of last weeks move down would be a gift.