Rolling In The Deep

On May 18, 2012 by TradingDesk
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Markets are digging in their heels this morning, trying to recover from a relentless day of selling Thursday. Yesterday’s action was a confirming follow-through on the technical support breakdowns across several markets, and a spike in gold prices suggests a flight to safety by investors across the globe. Overnight the selling picked up steam in Europe and Asia following rating downgrades of 16 Spanish banks, but most markets have since recovered on rumors that the ECB is stepping in to support the Euro and ban short selling on financial stocks, and on rumors that Facebook shares will cure global warming.

Energy prices were led lower by Brent crude yesterday, which promptly dropped $3 after breaking its 3-year-old bull trend line at $110. WTI was supported by news that the Seaway pipeline was sending its first deliveries south from Cushing OK into Houston’s refining hub. Both RBOB and HO dropped sharply, and while they’re due for a bounce to relieve an oversold condition, charts suggest we’re heading for the mid $2.70s over the next couple of weeks.

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Too Low For Euro

On May 17, 2012 by TradingDesk
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Once again, the Euro pulled the rug out from under a stock market rally yesterday, after news broke that the ECB had suspended transactions with several Greek banks. The action has carried through the overnight session as the Euro is now threatening to test its lows for the year and dragging global stock markets along with it. US stock markets have now broken through several key support levels on the chart which suggest more selling to come.

WTI and HO both settled at their lowest levels of the year yesterday, while RBOB continues to trade directly on its long term bull trend line. Brent crude opened trade below its trend line from a $36 low in December of 2008, which could be significant for refined products – which have been trading closer to the European grade of crude over the past year – and becomes just another in a long line of bearish factors weighing on prices.

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DOE Report

On May 16, 2012 by TradingDesk
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CLICK HERE for a PDF of this week’s DOE report

Strong Enough To Bend

On May 16, 2012 by TradingDesk
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Energy prices continue their bend-not-break trading pattern today, with WTI leading the way after yesterday’s API report showed yet another huge build in crude inventories, while products continue their typical seasonal drawdown. Values are well off their lows however, following the lead of the Euro, which bounced from multi-month lows on rumors that Germany and France – under new management – are planning to do something to save Greece (again) which has now turned its government over to a “caretaker” until new elections can be held in June. You couldn’t make this stuff up if you tried.

While the Euro-drama continues to drive much of the action, concerns over a slowdown in China and India continue to crop up, most recently in the forward demand outlook from the world’s largest hard commodity producer BHP Billiton. All of these concerns paint a bleak fundamental picture for oil and refined products, and the technical view is equally bearish. RBOB and HO are both very near their $2.90 support ranges, with a break here targeting $2.75.

Watch Padd 3 inventories in today’s DOE report. Distillate stocks in particular have been dwindling due to surging exports, a trend that provides the silver lining for domestic fundamentals.

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We’re Livin’ On The Edge

On May 15, 2012 by TradingDesk
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Energy markets are pulling back from the edge of a cliff again this morning, taking the lead from US and European stock markets which are hopeful that positive GDP data from Germany will be enough to stem the tide of selling triggered by fears over Greece and Spain. US Economic data was positive, although not overwhelming, as consumer spending increased fractionally, CPI was flat (thanks again to cooling gasoline prices) and the NY Fed Manufacturing survey showed growth. Volume thus far has been light however, as it appears traders may lack conviction to the long side after two weeks of relentless selling.

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The Euro Is Leading Markets Lower

On May 14, 2012 by TradingDesk
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The Euro is leading markets lower this morning, as Greece continues to crumble and Spanish and Italian debt costs continue to rise. A move by the Chinese central bank to lower the reserve requirements for its banks – following a string of weak economic data – has done little to slow the selling, as this is the 3rd time in 6 months that the move has been made. As the EUR/USD now touches its lowest levels since January, several commodity and stock markets are hitting multi-month lows as well.

Heating oil has now given back all of its gains for the year, down 39 cents from its late February high. If the drop holds, the next target on the charts is a range of support in the mid $2.70s, that held up 5 times in 2011. WTI is now down $12 for the month of May, and with chart support being wiped out almost daily, it is certainly possible that we could see crude in the $80 range before the selling is done.

RBOB is holding up relatively well, managing to stay above key technical support levels despite the “risk off” mood in the markets, although it’s unlikely that the contract can hold up the rest of the energy complex on its own.

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Energy Futures Setting Up To Test Recent Lows

On May 11, 2012 by TradingDesk
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After our Reversal Thursday Rally fizzled late, we’re shaping up to have yet another red day in the markets. More negative, albeit largely expected, headlines from Europe (the EU has officially recognized that it’s in a recession) and weak data points from India and China  have set a notably negative tone for the day. The silver lining headline once again came from the US, as PPI for April had a negative print, as retail fuel prices finally pulled back and gave consumers some much needed relief.

JP Morgan’s hedging mistake is grabbing plenty of attention, although it is still unclear whether it will have a lasting impact on the market, unless it prompts the FED to pull back on the reigns of its primary dealer network.

Energy futures are setting up to test their recent lows, although there is still another 3-5 cents of room to get there, as a reverse flag pattern (aka the hockey stick pattern to some of us) is setting up on the charts. If the pattern is fulfilled by a break below $2.91 in RB and $2.93 in HO, look for another 20 cents of losses to complete the move.

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Reversal Thursday Rules In Play

On May 10, 2012 by TradingDesk
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Markets are following Reversal Thursday rules so far this morning, bouncing from multi-month lows in US Equity and Commodity markets, and multi-year lows in Europe. The reason for the bounce seems to be more of a reaction to oversold markets rather than due to some positive fundamental news. In fact, the headlines out of Spain, Greece were likened to a “slow motion train wreck” and Chinese trade data has been dubbed a “wake up call”.

New data from the ICE and Nymex exchanges shows that Brent Crude traded more contracts than WTI in April, the first time that’s happened in over 30 years. So, like it or not, we seem to be stuck with having to watch action across the pond for direction in energy markets.

Refined products have minor upside resistance around the $3.05 range, with more major technical roadblocks coming in at $3.10. If this is a true reversal Thursday, look for light volume buying this afternoon followed by another sharp drop tomorrow.

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DOE Report

On May 9, 2012 by TradingDesk
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This week’s Department of Energy reports are assembled and ready for your review.

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Euro Dance Mix Continues To Miss The Beat

On May 9, 2012 by TradingDesk
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US markets staged an impressive rally Tuesday afternoon, erasing most of the day’s losses on hopes that the European situation really wasn’t as bad as it seemed. Unfortunately, European markets opened back up overnight, and markets are crumbling once again. The Euro is hitting multi-month lows, below 1.30, against several currencies, on fresh bailout concerns and a weak Spanish debt auction. The US Dollar Index has broken back above 80, which is shaping up to be bad news for bruised risk assets.

RBOB put on quite a show yesterday, bouncing 8 cents off of its early morning lows, and largely ignoring the news that Petrochina is trying to buy the Aruba refinery from Valero, which would go a long way towards easing Padd 1 supply concerns. The other contracts staged impressive rallies as well, but still ended in the red. The technical outlook continues to favor more selling, with the $2.90 range critical for both products.

Today’s DOE report is expected to show another build in crude stocks, with modest draws in products. A late breaking headline of a fire being extinguished at Sunoco’s refinery in Philadelphia should keep the selling at bay until more news is available.

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