Showing posts from January, 2011

Watching Egypt

 The price of Crude Oil  skyrocketed Friday as all eyes were turned to the drama in Egypt. My experience has been that the THREAT of supply disruption is responsible for price spikes. In the actual event oil always finds it's way to the market. The overthrow of the Shah of Iran may have spiked oil to $40 but it sold off from 1980 to 1986, from $40 to $9.75, despite the 1980 to 1988 Iran-Iraq War. The 1st Gulf War saw it's highest price point, $40, in Oct of 1990, (note it did not exceed the 1980 high) well before military action by the  United States, and it came off those highs rather quickly, eventually falling to $12.50 in '93 .  So during these periods of major armed conflict in the richest oil producing areas, prices actually came DOWN. The Iraq War began in Mar of '03, WTI peaked at $41 in the last week of Feb. prior to the start of hostilities and promptly fell to $26, where it basically stayed for the next 6 mo. (The subsequent price rally to historic highs o


The looked for X wave down, see Natural Gas Wave Count extended past the 50% retrace of the "y", and currently stands at .68. It MAY be complete.  Active Mo. Daily click to enlarge However as stated previously, the structure up could well turn out to be a double zig zag, which allows for a much deeper move down. I DO think another zig zag up is likely, for a "z" wave. This is because there is a clear historic low at 2.40 and Natty hasn't spent enough time or price working up from there. The move up is structured in abc, x's, unfortunately, making it a tough flat trade. Active Mo. Hourly   The 'x' wave down now has an abc structure. There is no RSI divergence as yet. 5 min. click to enlarge So is the X wave done? NG needs to hold here and take out the 4.35 level.

WTI Alternate Counts

WTI has trended down very consistently over the last 2 weeks.  March Hourly click to enlarge This is the update on the Elliott count from the chart in the previous post, Crude Oil Breaks Trend. Note the most oversold point on the RSI is  at the wave labeled -3-.  That is usually a characteristic of 3rd waves. The extension occurs in the -5-, as there wasn't one in the -3-. And -5- = -1- through -3-. As it happens this is a very bearish count implying a 3 down is imminent, and the moment of recognition occurring on new lows under 85.11. Downside targets for a 3  would be Fibonacci multiples of the 1, so lets say 1.6 for a target of 76.48. Frankly I think we would have to see a move down in the SP and Euro for that right now. Plus the 2 wave in the above count is shallow ( might be expected in a long overdue supercycle C wave down though). The alternate count ; click to enlarge Here the extension occurs in the  -3- . Basically this allows for a deeper retrace of the move down,

Heating Oil on Fire

HO's on fire and dragging the rest of the complex up with it. Imagine how WTI and Rbob would be trading if the Euro/ SP and HO were coming off. The big picture; Active Mo. Weekly click to enlarge A few very important things jump out on this chart; the 50% retrace of the A is just overhead at 2.71 and the . the c=.618 of the a  at 2.70 . These charts are slightly different from a strict spot mo. chart so at the 2.70 level HO will have retraced 52% of the actual spot month  move down, still within a rough 50% zone. This move up looks like B wave and acts like a B wave ; it's choppy, hard to count, and taking forever. Expect the C wave down to begin any moment. It should look a lot like the A after all the permutations of the B.

Natural Gas X Wave

Natural has retraced 50% (roughly) of the preceding abc up, the Y, as expected. Please see Natural Gas Wave Count  Active Mo Daily  click to enlarge As stated in the last NG post,  " I am thinking NG ends up with 3 series of abc's for the "z", but not without an intervening "x" down... The last "x" wave  shown on the daily active mo. chart retraced 50% of the "w". A similar retrace of the "y" targets 4.35. (the ultimate high print on Sun evening was 10 cents higher making the 50% 4.45) Of course this may unfold as merely a double zig zag up , with the next move down an X wave of greater degree allowing anything down to 3.28 really." It has bounced but so far the move down has unfolded as 5 waves and it's too early to tell if the bounce is anything but a corrective 2 or b. If we have an "x" wave at the 4.39 point, and eventually get another abc up for "z", it will equal .618 of "y" at

Crude Oil Breaks Trend

Or does it? Please see below. Active Mo. Daily  click to enlarge Certainly looks like the usual trend measures have been taken out in the above chart. Not quite yet in the March contract. click to enlarge As expected WTI has broken down , see Crude Oil Outlook   ,   WTI - Bubble in the making? and Crude Oil Update Taking out the 87.25 suspport level rather definitively this morning. It will be interesting to see if it can close below it.  Typically this market reverses after taking out significant overlaps, but it's diverged from typical behavior lately, like correlating with the euro. Note that none of the longs since Dec ! are positive and the spec open interest has been growing and quite high. Shorter term; could be we have a 1 down with 5 subwaves complete. Still early though.

Natural Gas Wave Count

Active Mo. Daily click to enlarge Note the repeated negative 14 RSI divergence.  So far it looks like a double zig zag completed. The second series of abc's, "y",  is equal to .618 of "w". I am thinking NG ends up with 3 series of abc's for the "z", but not without an intervening "x" down. Here's the Feb contract;  click to enlarge Here the "y" ="w". Feb. Hourly click to enlarge  There is some minor negative divergence on 14 RSI. Taking out the .618 retrace on this at 4.53 will indicate additional weakness , and the .618 retrace of the "y" structure is at 4.23. The last x wave  shown on the daily active mo. chart retraced 50% of the "w". A similar retrace of the "y" targets 4.35. Of course this may unfold as merely a double zig zag up, with the next move down an X wave of greater degree allowing anything down to 3.28 really.

Crude Oil Update

First WTI Active Mo. Hourly  click to enlarge Structured in abc's, sure looks like it's complete, with a series of 3 abc's labeled w,y,z.  The spot month  failed to exceed the Jan 5th 92.58. Implications and downside targets are discussed in Crude Oil Outlook , from Jan. 5. Daily Right on daily bar support. Brent Active Mo. Weekly click to enlarge Almost .618 but not quite.  On this chart it's a .606 retrace. Good enough. Recent talk of a squeeze in the press might be a coincident indicator of it all being done. Daily  click to enlarge  I believe this is all structured in abc's as well, including the "y". Bottom line here is the long awaited C wave is likely under way. As I update this post at 10:30, the daily support line on the WTI is being taken out. Rbob is well under. On the downside, it'll probably take out previous lows, ie 88.45 on Mar WTI, and reverse as usual. Any bounce will likely be contained by the 50% retrace (from wherever

How bout that Stock Market?

9th inning on the rally; Daily click to enlarge Note the RSI negative divergence.  The labeling reflects a series of abc structures that mimics a  5 wave impulse wave "look". Either way the move up from July looks very complete with 'z" or "5" = "w" or "1" just overhead at 1297.5  The important thing IS the big picture...all the choppy action makes for a high potential of mislabeling at the  sub wave level. The wedge shown here certainly COULD eke out another new high, but it aint gonna be by much. On the Dow it's "z" or "5" =  .618 of "y" or "3"  Enjoy

Rbob Retraces .618

Rbob Active Mo. Weekly 3 click to enlarge Note the 14 RSI negative divergence and .618 retrace of the entire move down. On the actual spot month chart that .618 retrace is at 2.543. Current highs of 2.50 produce a .605 retrace of the spot mo. Rbob is definitely in the ballpark now for the completion of the correction up from the .7850 low of 2008. Rbob active mo Daily click to enlarge Again note the 14 RSI divergence. There is some measured -c- =  -a- resistance at 2.53, not far from the spot mo/. 2.54 .618 retrace. If the Rbob tries for another high the wedge resist line also will cut around that point. So we've got serious Fibonacci resistance, tired RSI, very high spec open interest (see previous post) and an ending wedge formation. Any approach toward 2.543/2.54 should be taken advantage of. To the downside the 2.23 level represents a cluster of fib support and taking that out would confirm that THIS latest structure up from the Aug. lows is done. Kaput.

Rbob Fundamentals and Stuff

Recent highs in the Rbob motivated a troll through the ether for some sort of explanation; turning up lots of interesting charts, not much in the way of concrete answers leaving speculation and a weak USD as the default cause. First lets start with the EIA inventory's from last Wed. (I know very old news but still kinda relevant.)  click to enlarge Not exactly tight. And the Crack is high, esp for this time of year, so have to imagine runs will stay high.                                                                  321 Crack Spread  Demand HAS picked up a bit, but in general the trend still has some catching up to do according to the following pieces out this last week;   from the NY Times OpEd pages , Peak Travel?  Brookings Institute, The Road…Less Traveled: An Analysis of Vehicle Miles Traveled Trends in the U.S. and Adam Millard-Ball and Lee Schipper of Stanford University, ARE WE REACHING ”PEAK TRAVEL”? TRENDS IN PASSENGER TRANSPORT IN INDUSTRIALIZED COUNTRIES

WTI - Bubble in the making?

Today there was a brief discussion on Reuters re potential for a "bubble"  forming in Crude , " One of the key indicators of a financial bubble is that price rises (or in the case of a crash/inverse bubble price declines) accelerate towards the peak (trough)...... the question is whether we are seeing the emergence of a bubble in oil" Accompanying chart ; Brent click to enlarge Looking at the Brent chart, the blow off top of '08 and the wave acceleration from 1999 is a classic.  Here's another chart (WTI) using a slightly different time frame that illustrates a classic retracement rather than a  bubble in the making. Weekly click to enlarge Note the acceleration phase during the -3- of 3 subwave, in Oct of '08.  Also classic. The subsequent rally has all the characteristics of a corrective retrace; one of which is to spend time in the price area that the acceleration occurred in. You might say it's done that;  1.5 years! P

Crude Update

click to enlarge It is possible that the point labeled "2" is merely "a" of "2", but  in either case the short term outlook would be for a "3" down. Taking out this last nights highs at 89.98 would force a reevaluation on the short term count of course.

Wave 3 ?

Looks like it 's right at the point of recognition. click to enlarge Fresh lows under 87.85 ought to kick it off. Note all Fib extensions get WTI below the Dec 15 low of 86.83. That will wipe out all of the December gains. Of course since crude retraced .618 of the 1 down, if the next leg down is a Fib 1.618 of the 1, it targets the 83.60 level seen as 100% extension in above chart. This has to contribute to to the Crude downside; Euro Daily  No doubt  all noticed the fresh daily lows on the Euro today, but where's the next support?

Not Goldilocks

So much positive news has been priced into the commodity/ crude oil space, that we are now at the " any news is bad news " point. A healthy improvement in payrolls = strong USD weaker Crude, a disappointing number =  a constrained consumer and retail products demand destruction. Unemployment 9.4% NFP 103 ouch

Crude Oil Outlook

WTI has spent the last 6 mo.s overcoming repeated sell offs to gain new highs at 92.58 , retracing 52% of the 2008 plunge of  $114 . That  move up very likely completes the -C- of B, or the entire correction up from 32.40.  click to enlarge Using the actual spot month low of 32.40 as the pivot point; -C- = .62 of -A- at 92.58. It also was roughly equivalent in time; 7 mo.s vs. 6 mo.s.  If the above count is correct and the B wave is complete, the outlook is for the C wave down to be underway. That will be a major decline that has some relationship in price and time to the A wave. The A wave was a Fib. 78% PULLBACK from the 147 high. An equal move in PERCENT targets 20.37. If the C wave = .62 of the A in nominal terms it targets 21.90.  And the C= 50% of the A at 35.58 roughly a double bottom. So 35 or 20. The A wave down was very very abrupt taking only 5 mo.s vs the 24 months up of the B wave. My guess is the C wave takes something in between...splitting the difference wiill be 13 mo

Crude gains 5% in 2010 ! (Almost)

Thats right, looking strictly at the February '11 contract, Jan 4th 2010 printed 88.35 and today's high of 92.58 gives it a grand total gain of just under 5% for the year. WOW. With all the excitement re the commodity space you can be forgiven for thinking it might have been a little different figure. It did move around some in the meantime.. Feb 2011 Daily  click to enlarge Note the $11.65  nosedive into the Feb. 8th low.  The contract has yet to exceed the $93.87 high of May 3rd Of course rolling spot month longs through the 2010 period would have produced even more feeble returns as holders of USO discovered; DOWN 2.5 %  on year.   USO Weekly

Think This is Discounted?

From the Telegraph; European debt markets 'face second credit crisis' "Banks alone must refinance about €400bn (£343bn) of debt in the first half of the year, but add in the more than €500bn European governments must replace over the same period, as well as further hundreds of billions of euros of mortgage-backed debt maturing and there is the potential for chaos in the credit markets."...and "Mr Amore predicts a rush to sell assets, much like that which kicked off the first credit crunch in the summer of 2007. However, many fund managers and other large institutional investors are looking to reduce their exposure to bonds, leading to warnings that there will not be enough demand to buy all the debt banks and governments will need to sell." I suppose the ECB will pick up that paper...which I guess must mean they are going to be printing Euro's. Maybe China will buy it...but then who's going to buy our debt? Oh yeah I forg