Thursday, September 29, 2011

Crude Oil Short Covering and the Wave Count

Last Fridays (expected) short covering has continued well beyond the minimal, having exceeded 84.01 AND the 50% retrace of the entire move down from 90.61 at 83.87. The .618 retrace of that move down awaits overhead at 85.46
 Additionally the c= .764 of a @ 85.49.
 click to enlarge
This extended short covering in both time and price is characteristic of this market ( equities as well),
and it has been seen in all the Elliott degrees; the B wave up off the 32.40 low, and all the legs since the May 3 high.
Active Mo. Daily
 click to enlarge
Again note the cluster of resistance around 85.45, including the .382 retrace of the last leg down at 85.24....could this be a c wave in the consolidation beginning Aug.9?

This very difficult to count Elliott pattern is reflecting global central bank and government efforts to stimulate the economy and support markets worldwide, naturally. Nevertheless the overall action as seen above over the last 5 mo.s is lower.
Labeling the waves is difficult, the time spent moving up or sideways, and the overlaps of previous lows tends to take away from the easy counting of an impulse wave down as might be expected of a C wave of super cycle degree.
I am still going with that count ...WTI in C down...given the significance of the 114 B wave high.

An alternative COULD be that the 114 was -A- of B and WTI is chopping down in -B- of B (the time spent in B vs. the 4.5 mo.s of the A wave down argues against however.) .
Either way downside risk is extremely high.....a -B- of B could easily produce a double bottom around 32.40, as part of a "flat" correction.

click to enlarge

The .618 retrace of  32.40 to 114 shows up around 64.50 as does an equal leg Fib. extension.
These measuring tools are now on everyone's desktop and simple to use. No doubt the 65 area is
begging to be tested.

As these area's of consolidation (buying) get taken out it is important to remember that there is huge spec LONG Open Interest...still. See below post. The short open interest is relatively light and the move up since last Thur. will have reduced those shorts further in this weeks COT report.

Saturday, September 24, 2011

Speaking of Open Interest

from Zero Hedge,
 Bullish Dollar Sentiment Surges By Most In Years, As CFTC-Based Rumors Of Euro Demise Are Not Exaggerated
 "the euro is now massively oversold explaining why even the smallest of rumors initiates a furious short covering squeeze. And yes, the next bubble is now not in silver, not in gold, but in the dollar. The first sign of moderation of European stress, or a Hilsenrath piece on the next round of QE by the Chairsatan, and watch the DXY and the various USD pair collapse (and gold surge). "

No doubt.

But. A little context PLEASE.
click to enlarge
The above chart is from June 21 but still illustrates the increasing size of the open interest swings.
Very possible that spec longs in the USD increase to some new extreme of 40,000++.
We ARE in an extreme global sovereign event.

But while we are here ....Friday night's WTI spec. O. I.

 and context,
Do you think it overshoots on the short side too?

Friday, September 23, 2011

Friday Short Covering

On the run today, but the end of week short covering showed up nice and early this morning. After all it's been a very generous week.
My guess is there will be further to go on this move down. Yet to see an extension anywhere since the May 4 highs, so one is overdue.
If there is enough retrace by the close, say .382 / 50% , probably a good opp. at the respective Fibonacci levels to position prior to the week end .

Active Mo. Hourly
click to enlarge
Either way it's going to make for a pretty negative look on the weekly charts - this will be the low settle for this move down and for a year.

Thursday, September 22, 2011

Big Surprise

Not by the Fed. If only. There were rumors of course, setting the stage for the disappointment, and as it turns out, it was a perfect sell the news announcement.

The Big Surprise seems to be handed to the oil specs... last Fri.s COT report shows specs added to net longs to 229,695  vs. 50, 148 short. Too bad.

 Doesn't look that bad?  Put it in context..

 This is a couple mo.s old but look at the explosion in spec longs mid 2010.....lots of liquidation to go.

If you are a regular reader you know that this move down is no big surprise in fact it's exactly what was expected
driven by the USD .

Monday, September 19, 2011

Crude Oil Big Picture

Since May 3rd post  Crude Trend Line 
Crudewire has seen the likely price direction of WTI as moving significantly lower in an Elliott  C wave of at least Super Cycle degree. 
Active Mo. Weekly

click to enlarge
 The evidence so far bears that out .
 The move up off 32.40 to 114.87, has a distinct abc corrective look, and the labeling and Fibonacci relationships can be found at WTI Update from May 4.
The move down from 114.87 has, at it's lows of 75.71, retraced 89% of the last "c" wave of B. That is too deep a retrace not to confirm that THAT structure is complete and there is an extreme likely hood of 70.76 eventually being overlapped as the C wave down continues.

Note that there is a cluster of support around that 70.76 area: the C= .382 of A @ 70.88 ...

A "C" wave that is .382 of the A wave would be very truncated and frankly unlikely.

So it is likely that the support in the 7077 area will be taken out.
As new lows are made under 70.76 attention will turn to the next levels of support/ previous 67.15 low from May 24 2010, and the .618 retrace of the B wave at 64.46... the mid 60's area.
However, in my view, a C wave of this degree will MOST LIKELY be at least .618 of the A for a minimum target of 44.

Bounces should be taken advantage of...
And we just had a big one....

Active Mo. Daily
click to enlarge
Note that at the recent 90.60 high there was slight negative divergence on the 14 RSI (not shown).
The rising support trendline was penetrated today.
The 50% retrace of the choppy corrective structure at 83.15 is also horizontal support. 
Taking the 81.41 .618 retrace level out ought to mark an acceleration down that will also take out the 75.71 low.

Labeling  to follow...

Friday, September 16, 2011

In Case You Were Wondering

In today's Washington Post, an Op Ed by Bernie Sanders, Senator from Vermont; 
What Wall Street doesn’t want us to know about oil prices

Sanders objects to Wall Street holding the vast majority of the positions during the 2008 spike to 140 for WTI crude. 

And the pertinent data refered to in the piece;

Percentage of US oil market by type - NYMEX and OTC long
and short positions combined (not net) Investment banks 54 pct
Commodity trading houses 15 pct
Hedge funds or investment houses 09 pct
Producers 07 pct
Oil major trading arms 03 pct
National Oil Companies (of consuming countries) 02 pct
Airlines 02 pct
Shipping 02 pct
Refiners 01 pct
Total 95 pct 

Wednesday, September 14, 2011

Natural Gas- Seasonal Low ?

Could Natty finally be showing signs of life? Is there a hint of overcoming the relentless sideways action defining this market? I mean 79 of the last 81 weeks the front mo. has traded between 3.80 and 4.80.....
There might be...first of all the recent low of 3.78 occurred on Aug. 30 ...right in line with the historic 20 yr. average seasonal low, of Aug.15. The avg. gain of the rally into the early winter seasonal high is 115%.

Natural Gas pricing is highly weather sensitive, and is insulated from geopolitical and currency risk.
So first of all the weather;

NOAA Climate Prediction  Nov. Dec. Jan (made mid Aug.)

 click to enlarge
 Looks like a toss up.

Gas in storage going into Winter is not overwhelming, and not causing panic as in years past when storage capacity was actually an issue. Compare current levels with 2 yrs ago.

From Sept.9 EIA 
click to enlarge

From Baker Hughs Sept. 9 Rig Count;

 Given the historic tendency to rally from Aug. 30 to Nov. 20, 115% (based on avg of 20 yr.s), how are the spec.s positioned? Is everybody already long?

 From Reuters;
 click to enlarge
Nope. Obviously very short.

Lets go to the Wave Count;
Active Mo. Weekly
 click to enlarge
RSI MACD etc are all neutral on the weekly, so not included.
The most important and striking feature is the .618 Fibonacci retrace of the -A-, acting as support at 3.81. That support has shown up time after time, both exactly at 3.81 ie Mar 29 2010, and at later multiple times with some wiggle room down to around 3.75... The very difficult to count action over the last year is characteristic of a -B- wave structure, and an .618 retrace of the -A- is an ideal potential reversal point.  
The other striking feature is the low made on Aug. 30 2009,  exactly 2 yr.s ago, and the 154% rally that followed, for an -A- wave (of  $3.71).  If the -B- wave did indeed finish up at 3.79 on Aug.30, the -C- = -A- ,   at 7.50. And for the very optimistic, -C- = -A- in percent terms at 9.62.
Even if the -C- = .618 of -A- it targets 6.08.
 Active Mo. Daily
click to enlarge
Note the positive divergence on the RSI. And the c=a on the structure down from 4.98 to 3.78.
There is basing action evident with slightly higher lows. This chart looks like the USD chart did back on Sept 1.  from Signs of Life

                                        USD Daily

 We know what happened there.

So a little more upside momo taking out the 4.25 area and we might get a seasonal rally here..


Slightly overdone, note the negative divergence on the RSI. Good news is there is a 5 wave structure up from the Sept 12 low of 3.82.  However at this point a pullback to the 4th of lesser degree around 3.95 would be expected .

So I am bullish on NG over the next couple mo.s , in contrast to my completely
bearish expectations for crude oil, equities, etc.
It is possible that the spec short positions currently open in NG are forced to close in the event of a collapse in the other markets, resulting in a contra move up, or it could be weather related. In any event Natural Gas has truly gone it's own way now for a couple of years and shows little indication of  ending that now.