Where we stand on crude oil
What a great move in crude oil yesterday. It was enough for us to cover our short positions and bank almost $10,000 a contract in profits.
Watch this video and see how we did it.
Here’s the full AP story from yesterday.
(AP:NEW YORK) Oil prices soared over $4 a barrel Wednesday, halting a dramatic two-week slide after a surprise drop in U.S. gasoline supplies fed speculation that record fuel prices aren’t keeping Americans off the roads.
But energy market analysts offered mixed views on whether prices would swing back toward record levels above $147 a barrel hit earlier this month or if Wednesday’s big rally was just a temporary bump.
Light, sweet crude for September delivery jumped $4.58 cents to settle at $126.77 a barrel on the New York Mercantile Exchange, after earlier rising as high as $127.39. It was crude’s biggest one-day rally since July 10, when prices ended $5.60 higher. Oil closed $2.54 lower on Tuesday at $122.19 a barrel.
The Energy Information Administration said in its weekly inventory report that U.S. gasoline supplies fell by 3.5 million barrels last week. Analysts surveyed by energy research firm Platts expected gas supplies to increase by 400,000 barrels. U.S. crude stockpiles also fell by 100,000 barrels last week, less than the 1.3 million barrels analysts had predicted.
The report gave some traders reasons to believe that crude’s slide was overblown and that the drop in gas supplies mean prices have fallen enough to nudge Americans back onto the roads.
“It’s stopping the bearish momentum that we’ve seen over the last few days,” Phil Flynn, analyst at Alaron Trading Corp. in Chicago, said of the surprise decline in gas supplies.
But some analysts raised questions whether U.S. fuel demand was picking up. Tom Kloza, publisher and chief oil analyst of Oil Price Information Service in Wall, N.J., doubted that Americans are actually driving more, saying a seasonal bump in gas demand probably drew down supplies temporarily.
“It’s nonsense to say that this proves that people are back to their old driving habits,” Kloza said. “There just wasn’t enough enthusiasm to push prices lower. ”
Crude’s jump was boosted by word that Israeli Prime Minister Ehud Olmert will quit his post in September, an announcement that raised doubts about the future of U.S.-backed Middle East peace efforts in the oil-producing region.
Also supporting prices was a report by Goldman Sachs, which affirmed its earlier forecast that crude will hit $149 a barrel by the end of the year.
The investment bank called weakness in U.S. energy demand “transient rather than permanent,” saying the fundamentals of falling oil production and rising world energy consumption remain intact. Past forecasts for higher oil prices have caused jumps in prices as speculative buyers are drawn into the market.
Still, other analysts said oil’s recovery doesn’t mean prices are about to go higher again, but rather shows that traders saw a short-term buying opportunity after Tuesday’s sell-off.
“I still expect to see further air being let out of this balloon,” said Stephen Schork, an analyst and trader in Villanova, Pa.
He noted that U.S. demand for energy is falling across most sectors. Inventories of distillates, which include heating oil and diesel, rose by 2.4 million barrels, more than the 1.8 million barrels expected, according to the EIA report.
And Americans continue to cut back on their driving to cope with almost $4-a-gallon pump prices. The average price of a regular gas fell 1.5 cents on Wednesday to $3.926, according to auto club AAA, the Oil Prices Information Service and Wright Express.
“We clearly have demand destruction,” Schork said.
Before Wednesday’s rebound, crude prices had dropped in seven of the last 10 sessions, and are down about 14 percent from their peak above $147 a barrel earlier this month. Prices remain about 60 percent higher than at this time last year.
The dollar was stronger Wednesday against the euro, but the oil market seemed to be ignoring a trend that ordinarily would pressure prices. Investors buy commodities as a hedge against inflation and a weaker dollar but tend to sell when the American currency strengthens.
Oil also gained Tuesday’s announcement from Royal Dutch Shell PLC that it may not be able to fulfill some oil export contracts after Nigerian militants sabotaged a pipeline in the Niger Delta.
Militant attacks on Nigerian oil facilities have trimmed nearly one quarter of the country’s regular daily output. The strongest Nigerian militant group, the Movement for the Emancipation of the Niger Delta, said it sabotaged two pipelines early Monday in the southern oil-producing region.
In other Nymex trading, heating oil futures rose 5.08 cents to settle at $3.5203 a gallon while gasoline prices gained 12.74 cents to settle at $3.1351 a gallon. Natural gas futures rose 11.8 cents to settle at $9.248 per 1,000 cubic feet.
In London, September Brent crude rose $3.34 cents at $126.05 a barrel on the ICE Futures exchange.
Gold ends down but off 5-wk lows, eyes US data
By Frank Tang & Jon Harvey
NEW YORK/LONDON (Reuters) - Gold ended 1 percent lower on Wednesday as the dollar climbed, oil prices feel and U.S. stocks rose, denting the precious metal’s appeal.
Gold was at 918.80/920.30 by New York’s last quote at 2:15 p.m. EDT, down from $928.45/929.65 late in New York on Monday.
Gold’s decline was “pretty much forex related, and oil is coming down,” said senior Commerzbank trader Michael Kempinski. “We need to see come stronger commodities in general, and a stronger euro, to push gold higher again.”
The dollar rose to its highest level in a month against major currencies, pressuring bullion prices. Gold tends to move in the opposite direction of the U.S. currency, as it is often bought as an alternative investment.
Declining oil prices also dragged gold, as signs of weakening demand for crude and a rising dollar outweighed the supply threat linked to tensions in Iran and Nigeria. U.S. crude futures ended $2.54 lower at $122.19 a barrel.
Gold also dipped as U.S. stocks ticked up, dampening interest in the precious metal as an alternative investment.
“When crude oil goes down, gold also goes down with the stock market going up. Everyone is watching that correlation,” said Adam Hewison, president of MarketClub.com in Annapolis, Maryland.
Hewison said gold should find support at current levels, but the $905 to $912 an ounce area represented a key support area. Should bullion fail to hold there, prices could test the lows set in June below $860 an ounce, he said.
Absent significant moves in oil and the dollar, gold prices should remain rangebound, analysts said, with physical buying muted during the low-demand summer season and exchange-traded funds’ holdings steadying after recent gains.
U.S. gold futures for August delivery settled down $11.20, or 1.2 percent, at $916.50 an once on the COMEX division of New York Mercantile Exchange.
Gold traders awaited release of U.S. economic data this week, including GDP numbers on Thursday and nonfarm payross, construction spending and auto sales data on Friday. These reports could have a significant impact on the dollar.
Traders also looked ahead to Wednesday’s oil inventory data from the U.S. Department of Energy.
“The consensus is looking for another drop of crude oil inventories, which might provide some support for crude oil and thus also for gold,” said Dresdner Kleinwort analyst Peter Fertig.
Among other precious metals, spot platinum hit its highest level in almost a week at $1,775 an ounce, then retreated to end at $1739.00, down from $1,739.00/1,759.00, down from $1,763.00/1,783.00 late in New York on Monday.
Spot palladium was at $380.50/388.50, unchanged from late in New York on Monday. Silver fell to $17.35/17.41 an ounce from $17.46/17.52 late in New York on Monday.
—
See original Reuter’s article here: http://www.guardian.co.uk/business/feedarticle/7690017
Straddling Options
The post below is from Eric at The Stock Market Prognosticator. Free free to leave a comment or let him know if you have any other option tips you would like him to write about.
—
It is important for investors not panic during the current market volatility. Money can be made on both the upside and downside. One of the strategies I employed recently involves using options to take advantage of this volatility. During the month of July, I opened “straddle” positions on six different stocks and ETF’s. I closed all of them out at a profit within two weeks.
So here is how it works, a straddle is the simultaneous purchase of an equal number of both calls and puts on the same underling stock, ETF, or index. Both the calls and the puts should have the same strike price and same expiration.
What I am looking for is a large move by the stock before the options expires. I am indifferent as to which way the market moves, as long as the combined premium when I close it out is more than the combined premium that I paid.
Here are some other things to know:
1) Make sure that the options have several weeks to expiration so there is time for the underlying instrument to move.
2) Pick only options with large volume and narrow spreads, a few pennies per contract is best.
3) Be careful about using this strategy when the underlying instrument has very high-implied volatility, as all other things being equal, a high implied volatility leads to a higher option premium. If this implied volatility suddenly dissipates then one side of your position may drop sharply in price.
4) I usually wait until the underlying instrument is trading right at the strike price, so the options cast per contract is roughly the same.
Here is an example of one of my trades:
I purchased the Financial Select Sector SPDR (XLF) July 21 Calls and July 21 Puts at a price per contract of $1.14 and $1.13 respectively. This position was opened prior to the huge rally in financials last week. Four days later I closed the position out, selling the calls at $2.28 and the puts at $0.51 per contract. The profit before commissions per contract was $0.53, or $53.00. So a round lot of 100 contracts would have yielded a profit of $5,273 in less than a week.
Investing in options carries a lot of risk, so please decide yourself whether a strategy like this is correct for you as an investor.
—
If you would like to learn more about my investment philosophy, then please visit The Stock Market Prognosticator.
Seven trading lessons guaranteed to boost your bottom line
trading experience both in the pits of Chicago, and from Geneva, Switzerland .
Look for more educational Traders Whiteboards in the near future
| If you enjoyed this educational series, be sure to check out our next video series titled, “90 Second Trading.” In this series we cover trading in stocks, futures, forex, crude oil and gold. For a limited time only we are making this series available free of charge.
Watch with our compliments.
Look at our logical approach to decision making.
Be Our Guest We welcome syndication of our content in your blog or on your trading website. Please feel free to use our content with attribution - more details here to syndicate our content.
|
Traders Toolbox: The Elliott Wave Principle
As with any tool, the Elliott Wave Principle is not the answer to most analysts’ problems. It is only a tool, but used properly with other analytical aids, it can greatly enhance the understanding of the overall direction of a market.
The following discussion will be very basic. The primary goal is to give you an understanding of the basic structure or skeleton of a market.
With all due respect to Robert Prechter, I have seen very few other analysts survive almost solely on the Elliott Wave theory. However, having a working knowledge of the principle can prove invaluable when analyzing markets. While I do not purport to be an Elliott Wave expert, I have had success applying many of the basic elements of the principle. In fact, I like to think of myself as an Elliott Wave realist instead of a theorist.
I like to compare the Elliott Wave theory to an outline one might use to present a speech; it provides a general format to follow without having the text etched in stone. The primary pattern for a market consists of a 5-wave rally, as illustrated, followed by a 3- wave downmove, commonly referred to as an a-b-c correction. The 5-wave pattern is referred to as an impulse wave which means a wave in the direction of the prevailing trend.
The primary 5-wave structure may be subdivided into smaller 5-wave patterns, creating smaller impulse waves followed by a-b- c corrections. Note after these waves combine to create a 5-wave move, a larger a-b-c correction forms. The a-wave is shown in this example as a 5-count pattern, indicating this is the direction of the near-term trend and only the first part of a larger degree corrective move. Be aware that an a-wave may or may not be a 5- count wave but that a c-wave invariably will contain 5 swings.
Also take note that the a-b-c corrections ideally return to the area of the previous fourth wave. This may be followed by a new impusle wave or by a congestion or sideways pattern.
For an in-depth discussion of the Elliott Wave theory, I suggest you get the book Elliott Wave Principle, by Frost and Prechter. This book should be part of any serious technician’s library.
<h2>Basic wave extension</h2>
As with any theory, reality proves variations of the ideal pattern will occur. The primary variation of an impulse is an extension.
An extended wave generally is an elongated or protracted wave within the 5-count basic wave. Extra swings develop which commonly appear to be individual primary waves but actually form a single impulse wave. The wave extensions are generally larger than the minor degree swings within a primary wave but often are not as large or clearly denned as the primary waves.
At times, the extended waves are difficult to distinguish from the primary waves, giving the appearance of a 9-wave structure. The extension is undefined, which is not critical since a 9-wave structure is an extended 5-wave pattern and holds the same level of importance. When dealing with an undefined extension, I have found the subsequent a-b-c correction often terminates in the area of wave 6 (see arrow) instead of the normal area of wave 4.
While the extra swings or extensions may occur within the first or fifth wave, the most common location is within a third wave. Extensions are common, especially in bull markets; generally an extension should be expected to occur in one of the three primary impulse waves. However, extensions normally occur in only one primary wave.
Once an extension has occurred, you can expect the subsequent wave(s) to be easy to identify 5-wave patterns. If the first two impulse waves form without exhibiting an extension, the final wave can be expected to contain an extension; if the first two impulse waves are of similar length as well, the last has the potential to be explosive. Explosive fifth waves may contain extensions within extensions.
For an in-depth discus sion of extended waves, lmpulae read Chapter 1 of Elliott Wave Principle by Frost and Prechter.
What makes a worthwhile forum?
After visiting the forum of Blain Reinkensmeyer, one of our frequent guest bloggers, I started thinking about forums. So I started searching. There are hundreds, if not thousands, that I came across. Some free, some paid, and all different. I ran across some that were very niche, only covered “edible futures” (YES EDIBLE FUTURES). After looking through as many as I could manage in a 3 hour time window…I decided to go to our amazing user base to see what they think makes up a worthwhile forum.
Blain and StockTradingTogo have a forum that I spent a good bit of time reading, and learning from. Take a look at the StockTradingToGo Forum, analyze the posters and moderators, look over the content, and see how it compares to YOUR favorite forum.
There are many things that make up a good forum…but what do you think are the most valuable tools?
Please post in the comment section what YOU think makes up a good forum. There are no right or wrong answers as everyone trades differently, thinking differently, and needs different info.
OK…COMMENTS ARE OPEN!!
All my best,
Brad Stafford
Director of Marketing
“Saturday Seminars” - Keep It Simple Stupid: Trading with the Elliott Wave
Using Elliott Wave successfully means using it simply. Mark designed this session to provide you with the basic tools needed for a solid understanding of basic Elliott Wave structures: the 5-wave (impulse) pattern and the 3-wave (corrective) pattern. Specifically, Mark believes that you can successfully trade using Elliott Wave analysis by following only three basic rules accompanied by a handful of guidelines.
Each Elliott Wave structure defines the trend and the market’s next likely move. With a solid understanding of these simple rules and guidelines, you will gain confidence in counting a chart, which can result in a positive balance sheet. Along with the basics, Mark shares several trading approaches to the Elliott Wave sequence. These include deriving likely targets for the next move, assessing risk/reward parameters and using the Wave Principle to minimize risk.
PDF Workbook
Mark A. Schimmel is a senior market analyst with Elliott Wave International (EWI), the world’s premiere Elliott Wave organization. He provides real-time commentary on dozens of global equity, bond, currency, and commodity markets for professional and private investors around the world. Mark teaches EWI’s comprehensive tutorial on the Elliott Wave Principle and conducts seminars and workshops to retail and institutional investors worldwide. He has served as the editor of The Elliott Wave Theorist Short Term Update, an adjunct service offered to subscribers of Robert Prechter’s Elliott Wave Theorist newsletter. Mark also provides EWI subscribers with live telephone market opinions on all w..
—
Saturday Seminars are just a taste of the power of INO TV. The web’s only online video and audio library for trading education. So watch four videos in our free version of INO TV click here.
How a 500 year old charting program predicted the top in crude oil
How could a 500 year charting system possibly predict the top in the crude oil market in 2008?
Well, it did, and this video proves it.
You may have missed my earlier video on crude oil, if you did, I strongly recommend that you take a few minutes and see what we predicted for crude oil on July 16. You will also get to see the exact sell signal that all our members received.
In this short video we analyze the crude oil market and what we expect it will do in the future.
There are many skeptics out there who do not believe in charting and this methodology. Japanese candlestick charting has been in existence for over 500 years and has prove itself time and time again. I think this video and modern day example will put to rest a lot of those skeptics.
Enjoy the video. We welcome your comments.
Every success in trading and in life.
Adam Hewison
President, INO.com
Be Our Guest
We welcome syndication of our content in your blog or on your trading website. Please feel free to use our content with attribution - more details here to syndicate our content
Five ways to shake the money tree.
LEARN HOW TO TRADE CRUDE OIL
Record high prices for crude. Did you miss the move to $147? Watch this 90 second video on trading crude it will enlighten you to the possibilities that this market offers.
LEARN HOW TO TRADE GOLD
Record swings in Gold. Did you miss the move to new all time highs? Watch my 90 second video on trading gold. See how it is possible to dominate this precious metal.
LEARN HOW TO TRADE FUTURES
Soaring commodity prices. We say that’s inflationary, the government say’s that inflation is under control. What does your pocketbook say? Watch this video on how you can protect yourself against inflationary commodity pressures in ‘08.
LEARN HOW TO TRADE FOREX
The dollar index hit a record lows in ‘08. Watch this 90 second video on forex trading right here. See how you can protect your dollar purchasing power in ‘08.
LEARN HOW TO TRADE STOCKS
In 2008 some stocks soared, while others tanked. Find out how you can put these moves in your pocket and walk away a winner in the stock market.
My five videos show you how you can protect and grow your nest egg no matter what happens to the economy.
There is no registration required. Watch any or all of my videos.
Preserve and prosper in ‘08.
Enjoy the videos.
Adam Hewison
President , INO.com
Be Our Guest
We welcome syndication of our content in your blog or on your trading website. Please feel free to use our content with attribution - more details here to syndicate our content
Bear Market
Today I have the opportunity to introduce Brian Shannon from AlphaTrends.net. Brian is the author of “Technical Analysis: Using Multiple Time Frames.” I had the chance to read this book on a flight form Maryland to California and I can tell you that I didn’t put it down. The insights and strait forward analysis made me come home and rethink my positions and methodology. Brian takes what he’s learned as a broker, hedge fund manager, speaker, and writer to really convey his knowledge. Enjoy his post below.
===
For the majority of market participants, the stage four bear market decline is a dark, scary period that they wish didn’t exist. Whether you are a died-in-the-wool bull or someone who feels trapped by the long-only choice of your 401K, a bear market is most participants least favorite time to be involved in the markets. Unfortunately, it is a painful time for many market investors who try to catch a falling knife, rather than wait for it to drop and then pick it up.
For the perennial doomsayers of the world, a bear market is their time to say “I told you so” as they endlessly preach their pessimistic viewpoints.
The fact is declining equity prices bring about the strongest emotional response — annoyance from longs to jubilance of shorts — from the average participant. However, if you are an objective trader who understands the cyclical nature of the markets, a bear market can represent a terrific opportunity for your short-term profits.
There have been many attempts to classify exactly what constitutes a bear market, but it simply boils down to this: It is an environment where the path of least resistance is lower for the market being studied. The sellers are clearly in control and are able to create a condition where lower highs and lower lows prevail. The supply of stock offered to the market is greater than the demand can absorb at current prices, which forces a move lower in search of liquidity. That’s it.
The stage three distributive action which precedes a downturn robs the market of further upside as sellers gradually wrestle control from buyers. When prices break below the lows of stage three and establish the first evidence of lower lows and lower highs a new downtrend has begun and ensuing rallies should be treated as “guilty until proven innocent.”
Note that trend reversals can occur early on. However, as more long participants are trapped with losses, fear-driven liquidation is more likely and typically will play out in multiple waves. Not only is there an absence of buyers; there is also an increasingly aggressive source of supply from who short sellers apply further pressure to the market. The obvious resulting technical signs of bearish enviornment take the stage — lower lows which form below declining longer-term moving averages.
The stage four decline is market by lower lows and lower highs, regardless of time-frame. Notice the direction of the moving averages, they can be used to quickly identify “the path of least resistance.”
It is easy and tempting to look at bounces in a primary downtrend and think there is an opportunity to make money form the long side, but simply math favors trading the short side. For example, when a stock drops three points, the only way it can remain in a downtrend is to rally less than three points as a counter trend rally ensues. On other words, the sum of the declines will always be greater than the sum of the rallies in a downtrend. Understanding the basis of trend trading (once a trend has been established, the more likely it is to continue than to reverse) increases the likelihood of further downside, and the declines will travel further than the corrective rallies within a downtrend. This creates a powerful reason to embrace short selling.
Picking bottoms is the hardest job on Wall Street, and frankly, nobody rings a bell at the market bottom. Yet for some reason there seems to be an attraction to declining prices among most participants. Natural human optimism and learned behavior of hunting for bargains in a retail environment provides a “slope of hope” along which stage four stocks, decline, crushing the dreams and finances of bewildered longs in its path.
We have all experienced the helpless feeling of searching every new source for a shred of bullishness to justify holding onto a stock in the face of declining prices. This fruitless action only delays the inevitable recognition of truth. It does not delay your losses. The is said that “it is better to be in cash wishing you were in a stock than it is be in a stock and wishing you were in cash.” This is perhaps never truer than the point at which you are “foraging” for a reason to continue on a course that offers little promise.
For long participants, the stage four decline is market by two brands of fear:
- Fear that the stock’s descent will continue to wipe out their equity (a good fear to have as it may portend a proper action into cash).
- Fear of feeling stupid for selling “the loser” at a point just before the stock turns higher (a bad fear to have). Do not fall prey to the short-term pauses in a primary downtrend; the short term action will typically be resolved in the direction of the larger, more powerful trend of the longer time-frame.
See the rest of this post by clicking HERE.
