Thursday, June 30, 2011

Gasoline Demand Dumps

US DOE released April data yesterday, showing a sharp revision to April gasoline demand compared to the preliminary estimates;  down 3.7% YoY. or about 300,000 bpd, vs previous estimates of down 0.4%.
That is the lowest demand for gasoline in the month of April since 2002.

Demand for petroleum products in April down -437,000 bpd versus a year ago, or -2.7% and is the lowest demand for a month of April since 1997.

Demand for distillate was revised down to 0.5% below a year ago, at 3.689 million bpd. 

Crude throughput averaged 14.302 million bpd, down 818,000  from a year ago, the lowest for April since 1996.

The US Highway Administration had shown that Vehicles-Miles of Travel had dropped by -2.4% in April versus a year ago.

No doubt the downward revisions reflect demand destruction but is it a result of the price surge in early February, bad weather in April, or some other dynamic like consumer confidence declines?  April is a little on the early side for the typical lagged response to higher prices, and if that is yet to come down the statistical pipe there may be further surprises in store.
 


Tuesday, June 28, 2011

Neckline Backtest

WTI, Brent and Rbob are currently consolidating their respective Head and Shoulder neckline breaks, as could be expected.
From the Thur Jun 23 post, Brent/ Gasoline Neckline Breaks Etc.
"Word of caution; retesting the neckline ( and chopping above and around it) is common."
WTI  Active Mo. Daily
 click to enlarge

The degree of success or failure of those backtests should be watched very closely. Most likely it'll be a mixed story, but needless to say, if all three contracts have settles below  the necklines, rejecting the attempted rally, that will be very negative.
 The wave count on the move down from the Jun 1 high can be seen as possibly having 5 complete, on the other hand it has yet to have any extension, so potentially that could develop here in the (5)th, esp if it fails at the neckline.
Hourly
click to enlarge
Certainly the hourly RSI is no longer oversold.

 Brent Active Mo Daily

Rbob Active Mo. Daily
click to enlarge
Rbob doesn't  look like it's going to quite make the backtest of the neckline on the active month or August chart, though the July contract has successfully exceeded it's neckline on the settle
here.

Active Mo. Hourly
click to enlarge
Rbob DOES look overdone on the upside and the RSI is hot. It can be seen as having an  abc structure up from the lows.
The July/ August  differential is great enough to pose some challenges on the strict spot chart, i.e.
Bulls wouldn't want it below 2.80 on today's July contract but that spot chart level is JUST under the August close.



Thursday, June 23, 2011

Brent/ Gasoline Neckline Breaks Etc.

As discussed in the Tues. June 21 post For the Bears 
Brent and Rbob were within easy spittin' range of some important technical points being taken out.
Today obviously we saw that. Take a look at the damage done in the Brent.

Active Mo. Daily
click to enlarge
The first and most obvious damage is Brent's settle below the long term head and shoulders neckline AND the trendline that has defined the uptrend for the last year.
These lows also happen to produce fresh lows for the last 4 mo.s, as well as breaking below the 6 week old consolidation.
Additionally if you more closely examine the move down from the June 13 high of 119 you will note that this leg now exceeds the c =.618 of a, leaving the bulls c=a at 102.20 as the next most likely support. And really, there ain't a whole lot of price action between here and there.
 
Word of caution; retesting the neckline ( and chopping above and around it) is common.

Rbob was a similar story, it took out the neckline and .382 retrace, but found support at the c= .618 of a, and the daily trendline .
Active Mo. daily
 click to enlarge
Clearly fresh lows below the above mentioned support will be very negative.

There has been a host of negative news out, both directly and indirectly related to the oil market.
The list is impressive.
 Saudi Arabia going it's own way on production. (Is there a cartel in the wake of that?)
The continuing soap opera of the Eurozone dysfunction.
US domestic economic woes from housing to employment (for starters).
Not to mention Federal and state budget deficits and the paralysis demonstrated by all involved.
The inflation problems in emerging countries and the increasing efforts to clamp down on that ( China comes to mind).
All in all almost too much, and at a certain point the news is out and discounted.
But Brent is NOT at any kind of low, or oversold point. Neither the weekly , daily or hourly 14 RSI is showing any positive divergence (at least on my charts).
So it appears rather that the market is finally overcoming a massive orgy of bullish sentiment, see May 8 post CFTC C.O.T., Heating Oil Fundamentals, etc.

Current
Large Spec Net Long Crude
A long way to go.
And Brent perhaps even more so.










Wednesday, June 22, 2011

Crude Oil Update

Take a look at the textbook reversal  at the .382 Fib retrace  , 4th of lesser degree, and 200 sma.

Active Mo.Hourly
click to enlarge
Overlapping 93.24 will likely signal the resumption of the downtrend and a test of 91.52. 
Nearer by the .618 retrace of the last little leg up from 93.24 ought to be an early tell.

Tuesday, June 21, 2011

For the Bears

Rbob on the active month chart, just put in new lows below the May 17 low, and took out the consolidation support. The July contract has yet to put in new lows, but the Aug has.
Note the .382 retrace is just under here at 2.7950. If it can take that out the trendline will be tested.
Rbob Active Mo. Daily
click to enlarge
Also the Head and Shoulders neckline appears to be penetrated, and the measured target there is roughly 2.25.
Not exactly bullish. 
Crude had a little bounce the last 24 hr.s ( see For the Bulls) and this was the best products could do?

HO Active Mo. Daily
 Click to enlarge
While HO has not yet made new lows the trendline HAS been taken out.
Note the consolidation lows roughly coincident with the .382 retrace point.
 Sure looks encouraging for the bears here.

The Brent chart shares more technical similarities with the products than WTI...
Active Mo. Daily
click to enlarge
Like the Rbob, it has a Head and Shoulders pattern. In this case the trendline is converging upon the neckline and a break has a measured target of roughly 90. Ouch.





Friday, June 17, 2011

For the Bulls

It's been a rough 6 weeks or so for the bulls, with the July contract basically unchanged for 2011.
But there is good news for those of a bullish cast of mind; WTI has a pretty significant cluster of  support not far under todays low, at roughly 91.00

 Active Mo. Weekly
click to enlarge
The 50% retrace as shown above, and "c=.618 of a" come in there at 90.89 and 91.03 respectively.
Daily
click to enlarge
Note the positive RSI divergence.
So from a bullish perspective if you think this move down is merely corrective, this is a good buying opportunity.

As has been outlined on countless occasions on this blog I believe the 114.80 high is B wave top for this rally and WTI has started it's C wave down. Pls see WTI Update  from May 4 for a detailed discussion.
On the downside penetrating the 91 area would represent another milestone in confirming the count, and bad news for the bulls.

Thursday, June 16, 2011

Natural Gas retraces .618

Right...did  I hear someone say a falling knife?
The natty has a Fib .618 retrace of the last leg up at the aft. lows of 4.423

 Active Mo. Daily
 click to enlarge
Thinking if its a 2 or b down ,  .618 is a decent candidate for a reversal.
Of course there is not a shred of evidence of that happening yet.

Long Term Crude Oil Targets

 As WTI breaks down from the month long consolidation it's been in, putting fresh lows in under 94.63 yesterday, a review of Elliott Wave measured targets might be useful.
As seen below breaking the trendline and overlapping the 83.80 level will both serve as moments of recognition for the market.... recognition that the structure up labeled B is well and truly complete.

 Active Mo. Weekly
 click to enlarge

So where is the C wave headed?
 From the May 8 post Crude Oil Targets

 "Longer Term targets for the C wave;
The A wave is a 5 count down and the B wave is noticeably below the high and was a complex series of abc structures. So as unlikely as it may seem,  the most common outcome is that the C wave is  going to consist of 5 waves, and carry below the termination of A at 32.40, for a simple zig zag, 5-3-5 structure.
 
 The A = 114.60, so C will equal A at  23 cents. Now that seems a little unlikely ( the symmetry there is interesting though).
The A wave came off 78% from the highs, so in percent terms C= A at 25.26

The C wave =  .78 of the A  at 25.41
The C = .76 of the A at  27.70
The C= .618 of A at 43.98.
The above 43.98 = a 76% retrace of the 10 to 147 final move up in the previous structure as well. "
 
Personally I like splitting the the difference between 25.26 and 27.70 for 26.48.
 
If the C down last as long as the A wave (5.5 mo.s ) it should bottom around mid Oct.
 
This ABC down from 147 is presumably correcting for the 5 waves up from roughly 1930  or 1917, both lows were sub 1.00 or near enough it makes little difference.
Important thing here is the very long term nature of these moves. 
The 4th wave of lesser degree was from 1980 to 1999, when WTI range traded between 41 and 9.75.-
19 years! 
It's possible that the correction we.are in now last as long or longer, but given the predisposition of Central Banks to print in response to deflation, it seems unlikely that it drags along the bottom for long.
 
So the good news is that from the targeted lows, some serious rally potential will exist. Perhaps another abc up for a B wave of greater degree will develop. It is also possible, though  less likely, that the 147 high was -1- of 5 of 5 and that this ABC collapse will be the -2- to be followed by a monster increase in the price (as the USD completely collapses or we run out or both). 
 Just for fun;  the hypothetical -1- wave of 137 x 1.618 = 221 , targeting 248.15 from 26.48.

 




Eur/USD

OK  the Euro just hit c=a at this mornings lows, and is bouncing....a little. Needless to say taking out this mornings lows, at 1.4039 negates the c=a idea and will presage a retest of the 1.3963 low of May 23.
Hourly
click to enlarge
The jury's still out, but given the volume and breadth across all markets yesterday, gotta think the lows will be taken out ...the question is how much consolidation prior to doing it we see beforehand. The .618 retrace at 1.4296 should certainly contain it at this stage of the game, and I would not be surprised if it's shallow.
There should be some serious running for the exits at the overlap of 1.3963.

Naturally the USD will be making new highs at that point.

Wednesday, June 15, 2011

Crude Oil retraced .618

Here we go.
From Mondays Crude Oil ,
"It looks like another 5 waves down is complete (something the count needed) and very short term a little bounce from here is to be expected. The 50% retrace should contain it."


Turns out it was .618 retrace rather than 50%. Really for a 2 wave .618 is common, the 50% is during a 3 wave, my mistake. So that supports the 1,2, -1-,-2-, (1), (2)  interpretation.
60 min

New lows under 96.11 ought to get it going. That would be the (3) of -3- of 3 of C..
For the bulls, it might be that this current move lower turns out to be the (b) of (2), but exceeding this mornings highs will prove very difficult and would be limited to say 101.

Fundamentals and Stuff

Last night's API's ;
Crude down 3 million bbls             vs. expectations of down 1.5

(Cushing down 1.7 million)
Gasoline up 1.1 million bbls           vs expectations of up 1 million
Distillate down .426                        vs expectations of up 1 million

Reuters Global Oil Forum has a number of analyst reports quoted this morning (they do an excellent job of that)
Lawerence Eagles of JP Morgan is bullish products based on Chinese stock draws and demand.

 Goldman Sachs ;
"The recent collapse of the WTI-Brent spread raises something of a puzzle in that the usual suspects, the logistical issues surrounding the WTI delivery point in Cushing, Oklahoma, are not to blame."
"Consequently, the recent decline in the LLS-Brent spread suggests that the arb between the US Gulf Coast and Europe has flipped, and the market is now directing light-sweet crude oil away from the US Gulf Coast and toward Europe and Asia."


Olivier Jakob of Petromatrix on the Goldman Roll,
"We are not sure at all if there is a direct causality here, but we just observe that the Brent premium to WTI exploded during the roll of the indices. The rolls ended on Monday and Brent started to lose some of its premium to WTI on Tuesday. Is this the beginning of a reversal? Unfortunately, we cannot be sure of that because we are not fully clear on the type of flows that were behind the surge these past few days," Jakob says.
Barcap on WTI/Brent;  
"Brent extends gains toward our targets at $120.95 and then $121.80 while WTI consolidates above support near $95.00. We look for the WTI/Brent spread to extend widening toward our target near -$24 before easing toward the $19 area. Medium term: Bullish."
Pru Bach thinks Brent is overvalued and the WTI./ Brent overdone.

Presumably consumer demand for high priced products will not decline significantly enough to affect these scenarios.

This mornings relative resilience of WTI in the face of Euro weakness (making new lows for the month) perhaps reflects some profit taking by the WTI/ Brent shorts but  how long can that last?

Monday, June 13, 2011

Crude Oil

 It looks like another 5 waves down is complete (something the count needed) and very short term a little bounce from here is to be expected. The 50% retrace should contain it.
Hourly
click to enlarge
Note the slight positive divergence on the 14 RSI, and support from the previous low.
That test of the previous low makes it unlikely that the move down was corrective. 
AND taking out the days lows will be VERY negative, signalling the start of the -3- of 3 down.
See WTI Wave Count and
Crude Count Update from last week.
Active Mo. Daily
 click to enlarge

And, not to beat a dead horse BUT, almost all longs since the Feb 18 massive day up (establishing new highs for the rally) will be in the red with new lows.

PS Brent bumping up against the Fib .618 retrace.


Also looks like a gap filled ( if the chart is correct).









Sunday, June 12, 2011

More Natty

Zero Hedge posted; 
Goldman Goes Short Nat Gas


" In addition to the transient nature of the demand support from weather and nuclear outages, we expect the underlying balance to soften in response to the higher  prices, as production growth is further incentivized and price-induced coal-to-gas substitution diminishes. Accordingly, we recommend going short the October 2011 NYMEX Natural Gas contract, at an initial price of $4.84/mmBtu." Translation: Goldman is now buying nat gas."

 Hmmm maybe.
Though the long term trend down is arguably showing evidence of a reversal after a lengthy basing period.
NGV11 Weekly
click to enlarge

Something different in the very interesting Open Interest this week as well; 

Maybe that spec net positive Open Interest is an anomaly, but on the other hand, it's been a long time coming. See the Mar. 9 post
Natural Gas Update
 Daily

Very short term it would be expected that NG would have to re explore the area traversed by the
Freak Out! last Thur.  In the Oct contract, that was 5.00 to 4.50, and that action was so fast the time needed to spend within that range may well be extended.
Additionally as noted elsewhere on this blog, I am generally quite bearish on commodities etc. and a sharp sell off there could well pull Natural along.
But....
For now see pullbacks toward 4.50 as buying opps. 
And after some consolidation, new highs over 5.00 would raise some serious red flags for the bears.


Thursday, June 9, 2011

Natural Gas Freak Out

Algos gone wild?

From putting everyone to sleep as it moved sideways toward an apex of 4.20 sometime next Nov.. .....
( cue up the tune  Freak Out! here)
Natty overlapped the previous high of the X wave at 4.88 , reversed and dropped 50 cents ( retracing .60 of the preceding 2 week move up) all in less than 5 min.! And then retaking most of that fall in the next 30 min! 
5 min.
click to enlarge

Daily

The upshot of overlapping the wave labeled X, is that it advances the probability of the move up being longer term and carrying above the 2010 high of 6.11 . 
From previous post June 2,
"I believe the low on May 20 of 4.077 was the end of the 18 month choppy, complex B wave down.
The next series of abc's will equal the 1st series up @ 7.80 (roughly).
The 50% retrace of the 13.70 to 2.40 C wave is @ 8.10.
The .382 retrace of 15.78 to 2.40 is @ 7.48"
Active Mo. Weekly
click to enlarge

Very short term NG probably needs to chop around a little before putting in fresh highs over 4.92.
It is possible that this mornings move up is minor b wave with a minor c down still to come. Given the recent range even if truncated c= .382 of the "a" , that could still be a drop to 4.75. It will be interesting to see what it does at 4.82.
 5 min.


Wednesday, June 8, 2011

Crude Count Update

The big picture remains unchanged after the Opec surprise,  though the -c- of -2- extended, giving it an expanding triangle -2-. Saw something similar over in the SP last week.
In any event, the -3- of 3 down will take announce itself with an overlap of 97.75 ( much nearer by than 94.63 ) .
The OPEC non agreement vs expectations of a quota increase extended the correction
The announcement by OPEC also can be interpreted as a failure by the cartel with a race to pump bbl.s beginning.......now.
Hourly
click to enlarge
This count needs to see some impulse wave structure to the downside beginning soon, and an overlap of 99.79 will help dispel the idea of an impulse wave up.

WTI Wave Count

In general the count outlined in previous post , Crude Alert, remains intact.

Big picture:
Active Mo. Daily
click to enlarge
If a 3 of C down is beginning it is likely to be a Fibonacci multiple of the 1.
3= 1@ 83.02
3= 1.618 of 1 @ 70.57
3= 2.618 of 1 @ 50. 27  (niice)

Shorter term the move down from the 2 is also starting a -3- of 3;

 Hourly
 click to enlarge
If we assume that the -3- of 3 down will be a Fibonacci multiple of the -1- ( or 4.95) from 99.79 we get;
-3- = -1- @ 94.84 (must hold for the bulls)
-3- = 1.618 of -1- @ 91.79 
-3- = 2.38 of -1- @ 88.00
-3- = 2.618 of -1- @ 86.84
It is very likely that taking out the lows at 94.63 will kick off some serious liquidation so the 91.79 measured target strikes me as too modest given where Crude will be in the count; 
-3- of 3 of C , so leaning toward the lower targets of 88.00 or 86.84.
It's likely that there will be a relabeling of degree with the -1- at 98.47 becoming (1), if there isn't an expansion in this -3- down.





Tuesday, June 7, 2011

SP/ Euro/ Crude Disconnect

Euro Hourly


SP Hourly
If the destruction of the USD is no longer working to inflate equities maybe it's game up.

WTI Hourly
Not working all that well here either.
(Although on a tick by tick basis I have noticed the WTI leading the Euro the past couple days.  Either someone, or more likely some algo, is front running currency orders or gaming the paired trade.) 

Once again, 
If the destruction of the USD is no longer working to inflate equities maybe it's game up.
See how long this lasts and what gives. 
 




Friday, June 3, 2011

SP 500 - Whats going on?

Haven't tackled this topic since the May 3rd post, SP 500- Are we there yet? 
....turns out we were ( see post for the discussion of the corrective B wave rally up).

The structure down since then has contained some difficult overlaps that often characterize corrective moves, in this case an expanding triangle -2-. This type of triangle has obscured the impulse nature of the move down, but is in fact, characteristic of a weak market that makes lower lows even within the corrective wave. The SP is most likely just beginning the -3- of 1 of C down.

 daily
click to enlarge
The -2- wave structure has  -c- = 1.382 of  -a-, and the sub wave's of -b- are (a) = (c).
The high of -c- of  -2- is a .618 retrace of the move off the highs of 1373 to the low of the expanding triangle at -b-. All these Fibonacci relationships support the view of -2- being an expanding triangle.
Taking out the lower support line and previous low of  1290.25 will mark the " moment of recognition" associated with 3rd waves.

30 min
click to enlarge
If the Elliott Wave count on the above 30 min. chart is correct this is NOT the weekend to close out your shorts.
While the (2) wave may have some further upside work to do it is likely very limited. 
Have a nice weekend.

PS;  it also took out the daily trendline, and settled below it last night.






Crude Alert

The fresh low yesterday at 98.45 went some way toward confirming the count outlined in the previous post, Crude Oil Update
This implies that a -3- of 3 down is imminent , very likely taking out the 94.63 lows of May 6 after completing the current -2- wave we are in.
Hourly
click to enlarge
The -1- down has easily identified 5 waves and the (5) = .618 of (1) thru (3), a common relationship.
 The -a- of  -2- has already retraced 50% of the -1-. In the previous 2 of larger degree we saw the same 50%  retrace, from 94.63 to 104.60 , and that was not exceeded. 

If we assume that the -3- of 3 down will be a Fibonacci multiple of the -1- ( or 4.95) from 100.93 we get;
-3- = -1- @ 95.98 (must hold for the bulls)
-3- = 1.618 of -1- @ 92.93
-3- = 2.38 of -1- @ 89.14 
-3- = 2.618 of -1- @ 87.98
It is very likely that taking out the lows at 94.63 will kick off some serious liquidation so the 92.93 measured target strikes me as too modest given where Crude will be in the count; 
-3- of 3 of C , so leaning toward the lower targets of 89.14 or 87.98.
In fact it's likely that there will be a relabeling of degree with the -1- at 98.47 becoming (1), if there isn't an expansion in this -3- down.

 





 





Thursday, June 2, 2011

Natural Gas Update

Been awhile.
NG is finally taking out the downward sloping trend lines that have defined the market structure for the last 18 months.
daily
click to enlarge

weekly
click to enlarge
I believe the low on May 20 of 4.077 was the end of the 18 month choppy, complex B wave down.
The next series of abc's will equal the 1st series up @ 7.80 (roughly).
The 50% retrace of the 13.70 to 2.40 C wave is @ 8.10.
The .382 retrace of 15.78 to 2.40 is @ 7.48
Hourly
click to enlarge
The natty was hardy damaged by the viscous sell off in crude and the SP's.
Let's see if it can gain momentum on a settle over those trend lines.

Crude Oil Update

That was naaasty yesterday. And, in contrast to the choppy time killing bounce, it was easy to count and trade; exactly how you might expect the beginning of a 3rd wave to announce itself.
The overnight overlap of the previous lows from May 26 and 30, confirms the beginning of a new structure down from the highs of May 31. The next milestone will be the 96.37 low of May 23.
Hourly
click to enlarge
Note the positive divergence on the 14 RSI.  A bounce is to be expected, though it may be of the dead cat variety if it is a (4) wave.
The maximum retrace of the previous 2 of larger degree was 50% .
Daily


The Brent has a slightly cleaner count on the 2 wave;
 Active Mo. Weekly
 click to enlarge
The c=a to complete the B wave up on the above chart.

Daily
click to enlarge

The 2 wave is an easy to count abc retracing 50% of the 1 at the completion of the c wave.
Note the failure to get into the gap.
The next leg down  =  the 1 @ 98.94
and is 1.618 of 1 @ 88


Wednesday, June 1, 2011

API's

 CRUDE STOCKS UP 3.5 MLN BBLS
 GASOLINE STOCKS UP 1.5 MLN BBLS
 DISTILLATE STOCKS OFF 1.4 MLN BBLS
 CRUDE IMPORTS UP 2.2 MLN BPD TO 9.94 MLN BPS

vs expectations of ;
crude down 1.3 mln bbls,
Gasoline UP 800,000 bblsdistillates DOWN 300,000 bbls;

on top of those horrible numbers this morning.
Great chart from John Kemp at Reuters;

 click to enlarge

Thought we would have seen this kind of action to the downside yesterday off the Greek debacle.
Turns out it's domestic fundamentals after all.

Will update the count later tonight on most markets, but the SP has what looks like an expaqnding triangle 2 wave ending late last night, making this the beginning of a 3 down .