Central Bank Actions The X Factor In Energy Prices

On June 6, 2012 by TradingDesk
Off

Energy prices are bouncing, along with the Euro and US Equity futures, as hints of possible central bank liquidity injections are spreading across the globe. This morning’s announcement from Mario Draghi suggests that Europe’s central bank is not yet prepared to release any significant stimulus measures, which means all eyes will quickly focus back on the US Federal reserve. Declining industrial production in Germany and Spain, along with a broad downgrade of German banks overnight continues to put pressure on the bureaucrats to do something to calm market fears.

The results of this bounce in energy prices will tell us a great deal about the larger trend. If products can rally back above resistance in the low to mid $2.70s, and if WTI can break $90, then we may have just witnessed our spring correction in prices, before a longer term bull trend resumes. If we are witnessing the beginning of a larger bear market, these pops will be treated as selling opportunities for long money trapped at much higher values and won’t last long. Technical and Fundamental issues continue to favor lower prices over the next several weeks, with central bank action remaining the key X factor just as it has been the past 2 summers.

CLICK HERE for a PDF of this morning’s charts

 

Euro Yo-Yo Wreaking Havoc On Markets

On June 5, 2012 by TradingDesk
Off

The Euro Yo-Yo is back wreaking havoc on financial markets this week, with rumors sending the currency – and stocks/commodities along with it – on a volatile ride. After a bounce Monday afternoon, a trio of European headlines – contracting PMI across the continent, declining manufacturing orders in Germany, and Spain capitulating and admitting that it needed EU bailout funds since capital markets were closing to it – sparked a modest sell off across most risk assets. News that the finance leaders of the G7 (7 largest industrial nations) were having an emergency conference call to discuss the situation wiped out those losses as hope springs eternal that a solution can be found.

Beyond the Euro theater, energy prices finally managed to bounce Monday, and appear headed for a period of consolidation after the furious selling of the past few weeks. Charts continue to suggest that WTI crude will make a run at $75, and products at $2.50 at some point, but several indicators are at extremely over-sold levels (most notably the 14 day RSI on heating oil, which is at a 30 year low) so a near term bounce is certainly possible. Expect choppy action for the time being, as each headline will be over analyzed for clues on what central bankers may or may not be doing.

CLICK HERE for a PDF of this morning’s charts

 

Slip Sliding Away…

On June 4, 2012 by TradingDesk
Off

Energy prices are slipping again, setting new 2012 lows for the 3rd consecutive trading session. A week ago, WTI was at $92, HO was $2.85 and RBOB was $2.90. WTI is at $82 this morning, and both products have traded below $2.60. Although significant, the move lower has been orderly thus far – in comparison to the moves in May of 2010 and 2011.

Speculative long interest in WTI and RBOB remains near all-time highs for this time of year, which could mean that the pace of selling picks up if trapped longs are forced to liquidate. Interestingly, the non-commercial HO position has turned negative for the first time in nearly two years, so there is certainly a conflicted opinion within the energy complex.

The global slowdown in economic activity and lack of Iranian sabre-rattling both suggest a fundamental reason for prices to test their lows from 2011, and while technical studies are oversold short term and due for a bounce, charts do suggest that we’ll at least try and trade down to $2.50 on products before we’re done.

The wild card in essentially every market right now is whether or not there will be a coordinated effort by central banks/governments to provide a solution – temporary or otherwise – to the debt crisis. Regardless of the long-term impact these actions may have, there is no argument that prior actions have caused sharp rallies in equity and commodity values.

CLICK HERE for a PDF of this morning’s charts

 

 

The Melt Down Continues

On June 1, 2012 by TradingDesk
Off

The melt down continues, with energy futures dropping 2-3% today following their worst monthly performance since the credit crisis of 2008. Another round of negative macro-economic data from China and Europe during the overnight trading session sparked the move lower, then a disappointing Jobs report in the US doubled losses in a matter of seconds.

All energy futures are now trading at their lowest levels of the year, and there is little technically keeping us from dropping another 15-20 cents in products to test our lows from 2011. With all the negative news out in the open, and with products already having dropped 50+ cents in a month largely priced in to the markets, expect all eyes to focus on what the central banks will do to stem the tide of selling.

CLICK HERE for a PDF of today’s chart

DOE Weekly Report

On May 31, 2012 by TradingDesk
Off

CLICK HERE for a PDF of this morning’s DOE Weekly Report

Energy Prices On The Verge Of A Major Meltdown

On May 31, 2012 by TradingDesk
Off

Energy prices are on the verge of a major meltdown this week, having already dropped a dime since Tuesday morning. Europe is imploding, and the weaker Euro/stronger US Dollar is driving several commodities to their lowest levels of the year. RBOB and HO face critical tests of support in the low $2.70s this week, and the price reaction from that level may determine a great deal as we head into June. Technical and fundamental data continue to suggest that lower prices are coming.

Perhaps the most notable action in global markets today is that both US and German bonds have hit record low yields, demonstrating the fear that is beginning to grip many traders and investors. With the amount of leverage being used to trade, if this trend continues, we may see much lower prices in a hurry as hot money heads for calmer waters.

 CLICK HERE for a PDF of this morning’s charts

 

 

Energy Prices Breaking Down Again

On May 30, 2012 by TradingDesk
Off

Tuesday’s big rally in stock and commodity markets was cut short on news that Spain’s debt rating had been downgraded yet again. The negative sentiment picked up overnight, with Asian and European shares selling off sharply, although fresh rumors that the Eurozone would create a “banking union” to help solve the most recent crises, has limited the losses to around 1%. While these rumors are unlikely to provide any real solution to the issues at hand, with the Euro and many global stock markets hitting their lowest levels since the summer of 2010 – when QE2 was announced – speculation on central bank activity will surely reach a fever pitch.

Energy prices are breaking down again, after being unable to hold their gains yesterday morning, with news that China is not planning a large stimulus package wiping out hopes for a rebound in oil demand. WTI has broken below $90, and Brent and HO are hitting their lowest levels of the year. RBOB continues to hold support, but with extreme backwardation in the contract, gasoline values will catch up with the rest of the complex when we roll to the new contract on Friday. Look for $2.70 as the must-hold values in products, otherwise a run to the $2.50 range is in play.

The DOE report will be out tomorrow due to the holiday.

CLICK HERE for a PDF of this morning’s charts

 

US Stock and Commodity Markets Moving Modestly Higher

On May 29, 2012 by TradingDesk
Off

US stock and commodity markets are moving modestly higher this morning, as the worst trading month in nearly a year for many markets winds to a close. Liquidity injections into Spanish and Greek banks have eased short term liquidity fears, but at the same time highlight the dire situation across the pond.

While talks with Iran over their nuclear program stalled, again, crude prices are barely reacting as OPEC production increased in the past month, with new barrels from Iraq and Saudi Arabia offsetting the losses caused by Iranian sanctions.

In the near term, energy prices seem to be attempting to carve out a bottom, with a bounce into the mid $2.90 range a strong possibility, although longer term studies suggest this is simply a consolidation in a longer term bear trend.

CLICK HERE for a PDF of this morning’s charts

 

Markets Coasting into the Weekend

On May 25, 2012 by TradingDesk
Off

Markets are coasting into a long weekend this morning with little in the way of news or movement in prices. The Euro continues to sink, hitting a fresh 22-month low a few moments ago, which has helped wipe out small overnight gains in stock and energy prices. The lack of news may be seen as a blessing after another week filled with weak economic data from all over the globe, Europe of course gains the most attention, but slowdowns are noted across Asia and South American emerging economies as well.

Look for energy prices to trade in choppy fashion on either side of unchanged today, as traders balance their books and wait for next week to make their next move. The lull in action shouldn’t be seen as strength however, as most indicators still suggest gasoline and diesel prices are heading towards $2.75.

CLICK HERE for a PDF of today’s chart

Energy Prices Recovering

On May 24, 2012 by TradingDesk
Off

Yesterday’s morning meltdown in the Euro/USD – currently trading at its lowest level since July 2010 – pushed stock and commodity prices sharply lower. Stocks staged an impressive comeback in the afternoon, erasing all losses, on hopes that another summit of EU politicians can solve the financial crises. The sentiment has stalled this morning however, as negative manufacturing and GPD reports published in China, Germany, the Eurozone as a whole, and just now the US, with domestic durable goods orders missing expectations for the month. Stocks appear poised to consolidate, as traders seem content to wait and see what the central banks will do.

Energy prices are recovering after making new lows for the year overnight. Headlines point to uncertainty in the talks with Iran as the reason for the bounce, although it seems unlikely that anyone really expected something tangible to come from the meeting. While fundamental – Crude inventories at Cushing hit another record high yesterday, and product demand remains weak – and technical indicators continue to favor lower prices to come, our markets do have a tendency to drift higher ahead of long weekends, and with the massive selling that lead up to this one, we’re likely to see a similar move as traders close out their shorts.

CLICK HERE for a PDF of today’s chart