CPI Sparks Rally

On March 19, 2012 by TradingDesk

Friday’s CPI report sparked a dollar sell-off, the rationale being that since 80% of the inflation was caused by gasoline prices – which the FED considers transitory and discounts in its analysis – that monetary easing was more likely to come this year. The weaker dollar started pushing energy prices higher early on, and then several headlines raising new concerns about conflict with Iran pushed products up 6-7 cents.

Global equity markets are slipping this morning after another weak housing report from China. Apple’s announcement that they’ve authorized a stock buy-back plan, and will issue the company’s first dividend in Q4 was good for a momentary bounce – RBOB gained a penny on the news, proving just how interconnected these markets really are.

Charts continue to show consolidation in crude and products, and with the stock market sitting near fresh 4 year highs, and the Middle East drama not showing signs of cooling off, the bulls seem to remain in control.

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Misleading Headlines Prompt Temporary Energy Selloff

On March 16, 2012 by TradingDesk

Yesterday saw a fast selloff in energy prices following a misleading Reuters headline suggesting that the US was prepared to release crude oil from the Strategic Petroleum Reserve (SPR). Although the details were denied by the State Department, it is clear that energy prices have become a political football and that the automated headline-reading trading programs are still working on their grammar.

Prices are moving higher today, in step with equity markets. The CPI for February increased by .4%, and the labor department said that gasoline prices accounted for over 80 percent of that rise. Technical studies remain confused, but turning over into bearish territory. It will be interesting to see how the record long speculative interest in RBOB handles the first significant round of margin calls today, following yesterday’s sell off. The reaction may say a lot about the strength behind the fast money which has helped push prices up 65 cents so far this year.

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A Quiet Morning So Far…

On March 15, 2012 by TradingDesk

It’s a quiet morning of trading so far, as it seems most Wall Street types are busy trying erase Syracuse from their brackets. Weekly Jobless claims, PPI and NY Fed manufacturing readings released this morning all came in near expectations and haven’t done anything to move markets.

The Euro was selling off overnight, but bounced slightly at 1.30 after Spain held a successful bond auction, which helped folks ignore reports that home prices there fell 11% on the year and employment surpassed 20%.

Energy prices are mixed, with European grades off slightly which is dragging RBOB and HO lower, but WTI is rebounding after yesterday’s DOE induced sell-off. Products remain stuck in the upper end of their trading ranges and the technical outlook is still neutral. We still have another month until we get to our seasonal peaking window on gasoline prices, and it appears our typical pattern will hold again.

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On March 14, 2012 by TradingDesk

Large US Banks stole the FED’s thunder Tuesday, announcing that they’d passed the central bank’s stress tests and would be increasing dividends and stock buy backs as a result. The FED, in an almost unheard of move, was forced to release its test results early – 15 of the 19 passed. US stock markets went on an afternoon tear on the news, having their best day of 2012, and finishing at their highest level in nearly 4 years.

Energy prices were tempered by a stronger dollar/weaker Euro and managed gains of less than 1% despite the big move in stocks. Both Saudi Arabia and Kuwait have again announced that they would increase production if Iranian oil is taken out of the market – but recent reports from the IEA and OECD suggest that spare oil production capacity is dropping to levels not seen since the rally to $147 in 2008.

Today’s DOE report is expected to show crude builds and product draws as refinery maintenance and run cuts due to weak economics on the gulf coast offset slumping product demand. Tech studies remain mixed, but RBOB is only 2 cents from breaking its highs for the year, which would leave it one headline away from racing to last year’s high.

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Markets Treading Water

On March 13, 2012 by TradingDesk

Markets are treading water this morning, waiting eagerly for the FED’s policy statement this afternoon. While no immediate changes are expected, the language used by the market committee will be parsed in painful detail to find any hint about future plans for dropping cash from helicopters.

We’re sorting through several paradoxical headlines today, Italy revealed it entered a recession in 2011, but then had its strongest bond auction in 2 years. German manufacturing data continues to struggle, but its consumer confidence keeps rising. Weak Chinese economic data is now unveiling hopes of Chinese monetary easing and a stronger economy.

Adding to the conflicting sentiment, the USD index has broken above 80, which typically lends to cheaper commodity and stocks, but global equity markets are moving higher, pulling products into the green.

Energy markets are doing their part to add to the aimless behavior, having taken back most of yesterday’s losses as the contracts struggle to break out of their recent trading ranges and find direction.

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China Trade Deficit A Slight Drag On Futures.

On March 12, 2012 by TradingDesk

Energy prices, along with most commodity futures, are off around 1% this morning after China reported its largest trade deficit in over a decade, which is the latest in a string of weaker economic data for the great consumer of raw materials and energy.

Currency and equity markets seem to be largely shrugging off the news, although some modest selling is taking place. Market watchers are eagerly watching to see what the repercussions will be of Friday’s announcement that Credit Default Swaps on Greek debt had been triggered, forcing payouts on billions of dollars-worth of contracts insuring against default. While the immediate consequences may be minimal, we’ve learned with Europe to simply wonder, “who’s next”.

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On March 9, 2012 by TradingDesk

A deal to swap out old Greek bonds for new Greek bonds was successful yesterday, and that made stock and commodity buyers happy. This morning, the ISDA is meeting to decide whether the forced action qualifies as a default event, which would trigger the huge amounts of insurance contracts purchased on this debt, which is the last hurdle to clear before we can stop watching Greek headlines for the week.

Energy prices were also boosted by rumors that US and Israeli leaders had worked out a secret deal on the timing of attacking Iran. The White House denied the claims, but traders apparently believed them.

The dollar is rallying this morning following the Non-Farm payroll report which showed 243,000 jobs added in January, and a seasonally adjusted unemployment rate at 8.3%, and U6 unemployment up 1% from December at 16.2%.

The strong dollar/weak euro combo is pushing energy futures fractionally lower this morning, although longer term direction is still unclear. Technical studies offer arguments for both bulls and bears, so we’ll go back to flipping coins to predict where the market will go.

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Risk Is Back On

On March 8, 2012 by TradingDesk

Risk is back on this morning, as hope springs eternal that the Greeks have it figured out. Stronger than forecast manufacturing data out of Germany has the Euro rising nearly 1%, pushing the dollar lower and most stock and commodity markets are rallying along with it. A 3rd straight week of slight rises to initial unemployment claims in the US has tempered the move over the past 20 minutes, but most markets remain in the green.

Yesterday’s action was driven largely by a WSJ report suggesting that the FED had a new “sterilized” version of QE ready to inject the next dose of free money into the financial system. While the news is unsubstantiated, it does point clearly to the fact that FED policy may provide better market direction than anything, a full 3 years after their first round of Quantitative Easing in March of 09.

Energy prices used the stock rally to get back above their bullish trend lines, and have followed through with more modest buying today. Despite the bounce, technical studies are still in neutral territory, and there are potential Head and Shoulder topping formations in both products. Expect a choppy day of trading as the headlines from Europe continue to pour in.

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Oh What A Night

On March 7, 2012 by TradingDesk

It’s been a quiet overnight session, as US and European markets lick their wounds after their worst day in 3 months. The ADP jobs report showed 216k private jobs added in February, which has helped futures bounce, taking back roughly 1/5th of yesterday’s losses.

Energy prices held up relatively well during yesterday’s blanket selling of risk assets, settling down less than 1% while most stock market indices were down 1.5-3%, suggesting that fears of supply disruptions continue to trump economic worries for now. Both RBOB and HO settled below their 3 month old trend lines, and their technical indicators have moved into neutral territory. From here, HO needs to break support at $3.17 or resistance around $3.23 to find further direction. RBOB has a wider range of consolidation between $3.20 and $3.30 that should contain trading until our next big move is found.

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Prices Stumble on Fresh Fears

On March 6, 2012 by TradingDesk

We’re watching a “risk off” day unfold this morning, as global equity and commodity prices stumble on fresh fears of an economic slowdown – the Eurozone reported a contraction in Q4 GDP – and on concerns that despite 2 years of struggle, Greece may still end up in a messy default on its debt. The USD is rallying as investors seek safety.

Energy prices are down roughly 1%, with an Iranian olive branch – or stall tactic, take your pick – has temporarily eased concerns of imminent fighting stirred up by yesterday’s meeting between the US and Israel. The bull trends which have been in place for refined products since mid-December are breaking down this morning, although we still need to settle below these lines before we can celebrate the end of the run. Prices have moved so high so quickly, that there is little support on the charts until we drop another 10-20 cents, and with combined speculative long positions in the market at all-time highs, the selling could get furious if the fast money heads for the exits.

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