Despite Today’s Early Selling, Overall Trend Remains Bullish

On February 6, 2013 by TradingDesk

The Euro Yo Yo is taking another spin to the downside this morning, leading energy and equity prices into the red, although they haven’t yet erased Tuesday’s gains.  With the correlation between the EUR/USD, equity and energy prices returning, we’re subject to riding this rollercoaster for a bit longer.  Despite today’s early selling, the trend in all of these markets remains bullish for now.

WTI Crude is leading the selloff, down more than 1.5% and testing support at the $95 level, while refined products are relatively stronger, continuing to follow the lead of Brent crude which is only down .5%.   The spread between the world’s 2 leading grades of crude oil stands at nearly $21/barrel this morning, its widest in 2 months, as Enterprise struggles to unclog a bottleneck along its reversed Seaway pipeline which allows the distressed north American barrels to reach the market.  One the other hand, Magellan just announced yesterday that startup has begun on its reversed Longhorn pipeline which now will bring crude from west Texas to the Houston market, after years of taking refined products in the opposite direction.  This is one more example of how the  struggle to bring landlocked crude to the coasts will create logistical issues for refined product markets, as refiners clearly worry more about what they feed their dog, than how they dispose of its waste.

If WTI does break and hold below $95 today, expect a quick test at $93 which should set up a drop in RBOB to the $2.90-2.95 range, and to $3.10 for HO.  A bullish flag formation may be created if RBOB holds support at $3 and breaks out above $3.05, which would ultimately target the $3.40 level, right in line with a typical spring rally in gasoline.

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The Rally Is Back

On February 5, 2013 by TradingDesk

After a strong day of “risk off” selling across most global equity and commodity markets Monday, it appears that we have returned to the rally this morning. European stocks are leading the way, after some of the political concerns raised yesterday were allayed by Prime Minister Mariano Rajoy’s claims that the reports of an alleged slush fund of public dollars being held by his party were “untrue – except for some things.” While that may not entirely explain the 1.5% rally in European stocks today, it does point out what a complex situation is being faced in the region. US stock futures are following the EUR/USD higher, taking back roughly half of yesterday’s losses overnight.

RBOB is leading the energy complex higher, boosted by reports that the Come by Chance refinery in Newfoundland was shut due to a power outage. The plant is a major exporter of gasoline to the US East coast, and while reports of a restart have slowed the gains in the past hour, this is another clear example of how sensitive the Nymex delivery hub is to any perceived supply disruptions. The Nymex futures contracts failed to seriously threaten nearby support levels during yesterday’s selling, and today’s bounce seems to confirm that it was in fact simply a short term pull back rather than the end of the 2013 rally. WTI is still poised to test $100, with RBOB set to test $3.065 and HO $3.20. Above those levels there is at least another dime to the upside on the charts.

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What goes up…

On February 4, 2013 by TradingDesk

A fresh bout of concern over the political and financial future of Spain and Italy, has spooked global markets today, sending equity and commodity prices lower across the globe. After rallying 1% Friday, and leaving themselves one strong day from all-time highs, both the S&P 500 and DJIA appear poised to give back all of those gains today, and energy prices are selling off in sympathy. After a respite of nearly 6 months, today’s action may hint at a return to the action of 2010-2011 when “risk assets” moved in lockstep on seemingly every European financial headline. Several global central banks are announcing policy decisions this week, so expect the debate over the proper use of intervention into financial markets to remain in the forefront.

RBOB and WTI are leading energy prices lower this morning, with support at $3.00 and $95 respectively giving us the first opportunity to determine if today’s sell off is the beginning of a new trend lower, or simply a correction of the overbought condition the contracts have been facing for the past two weeks.

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The Rallys in Energy and Equitites Continue

On February 1, 2013 by TradingDesk

Thursday provided a very brief respite from the relentless RBOB rally, but an attempt to make a meaningful push lower in the morning failed, and the losses were cut by 2/3rds in the afternoon. Another selloff attempt was rejected overnight, and $3.05 appears to be the only level of resistance preventing a move to $3.20 in the March contract, which would push the April (low RVP) contract into the mid $3.30s and fulfill a typical spring rally target. HO meanwhile continues its slow and steady march higher, on the heels of European products. $3.15 appears to be a small resistance point with a target of $3.25 if that level fails.

January’s jobs report was close to expectations, and US equities are responding positively to the news, with DJIA and S&P futures pointing to a higher open that will wipe out the past two days of losses, which should set up a test of their record high levels, and continue to add to the bullish momentum for energy prices.

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Total nonfarm payroll employment increased by 157,000 in January, and the unemployment rate was essentially unchanged at 7.9 percent, the U.S. Bureau of Labor Statistics reported today. Retail trade, construction, health care, and wholesale trade added jobs over the month.

 CLICK HERE to link to the US Department of Labor’s complete release

Household Survey Data

The number of unemployed persons, at 12.3 million, was little changed in January. The unemployment rate was 7.9 percent and has been at or near that level since September 2012.

Table A-15. Alternative measures of labor underutilization