Archive for October, 2008

Oil Futures Chart Looking Promising

Friday, October 31st, 2008

In the chart above of the Oil Futures, I am seeing some promising signs that crude oil will firm in price as we move into year-end.

The bollinger bands are starting to narrow (notice the flattening of the blue boundary line in the top graph) and the commodity channel index is moving up. What we really want to see is the green line cross the red, and that should happen IF the futures continue to firm up.

Looking at the Chart, it seems like we should rally into the $80 or $85 range (just extend the red upper boundary of the bollinger band to the right along its trajectory and it and the blue price line should meet around $80 or $85).

This will provide for some firming up of stock prices that we all want to see.

Have a great weekend!

mb

We Broke Through a Technical Level

Thursday, October 30th, 2008

You can see on the graph above that we broke through the 20 day moving average to the upside – that is a good thing.

Also, the MACD after breaking into positive territory yesterday is moving nicely upward – that is a good thing.

And, the Relative Strength Indicator is doing its best to move above 50.

Bottoming out of a bear market or a crash is a process, and this one seems to be bottoming.

We are due to have a down day, but as long as the technicals continue to move positive, the bottoming process will continue.

Mark

Woulda, Shoulda, Coulda

Wednesday, October 29th, 2008

Well, if you read the earlier post, there was a bit of misinformation relative to a side comment about GE today that sent the market lower at the end of the day. After the market closed, it was determined that the misinformation was completely incorrect, but the damage was done. In the after hours market, the futures are up in an effort to recapture the ground lost to the mistaken story on the news.

Had the day ended up 300, where it was with 10 minutes to go before end of day – when the misinformation was circulated about GE – the Dow (and the S&P 500) would have closed above the key 20-day moving average. I've circled on the graph above the action today so you can see how the slight down close kept us from closing above that level (the dashed green line).

Additionally, the MACD indicator (described in an earlier post) has crossed into positive territory – a positive sign for the market.

Given this, we are still in the base building mode and – hopefully – ready to move higher into year-end.

The good news is that many of the economically sensitive companies had HUGE days recently. National Oilwell Varco is up 40% from its low, and its not alone. As the liquidity being pumped into the system works its way into the economy over coming months, these stocks will regain much of the ground they've lost. Particularly important is the China is pressing its growth agenda and will be sucking up oil, copper, and steel again when their stimulus gets into full gear.

Hang in there – the bottoming process is underway – it won't be a straight line back up but it will happen.

Mark

Markets Close Lower Due To a Twisted GE Story

Wednesday, October 29th, 2008

Financial Times of London reports on oil

Wednesday, October 29th, 2008

World will struggle to meet oil demand

By Carola Hoyos and Javier Blas in London

Published: October 28 2008 23:32 | Last updated: October 28 2008 23:32

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Output from the world’s oilfields is declining faster than previously thought, the first authoritative public study of the biggest fields shows.

Without extra investment to raise production, the natural annual rate of output decline is 9.1 per cent, the International Energy Agency says in its annual report, the World Energy Outlook, a draft of which has been obtained by the Financial Times.

The findings suggest the world will struggle to produce enough oil to make up for steep declines in existing fields, such as those in the North Sea, Russia and Alaska, and meet long-term de­mand. The effort will become even more acute as prices fall and investment decisions are delayed.

The IEA, the oil watchdog, forecasts that China, India and other developing countries’ demand will require investments of $360bn each year until 2030.

The agency says even with investment, the annual rate of output decline is 6.4 per cent.

The decline will not necessarily be felt in the next few years because demand is slowing down, but with the expected slowdown in investment the eventual effect will be magnified, oil executives say.

“The future rate of decline in output from producing oilfields as they mature is the single most important determinant of the amount of new capacity that will need to be built globally to meet demand,” the IEA says.

The watchdog warned that the world needed to make a “significant increase in future investments just to maintain the current level of production”.

The battle to replace mature oilfields’ output could even offset the decline in demand growth, which has given the industry – already struggling to find enough supply to meet needs, especially from China – a reprieve in the past few months.

The IEA predicted in its draft report, due to be published next month, that demand would be damped, “reflecting the impact of much higher oil prices and slightly slower economic growth”.

It expects oil consumption in 2030 to reach 106.4m barrels a day, down from last year’s forecast of 116.3m b/d.

The projections could yet be revised lower because the draft report was written a month ago, before the global financial crisis deepened after the collapse of Lehman Brothers.

All the increase in oil demand until 2030 comes from emerging countries, while consumption in developed countries declines.

As a result, the share of rich countries in global demand will drop from last year’s 59 per cent to less than half of the total in 2030.

This is the clearest indication yet that the focus of the industry on the demand – not just the supply – side is moving away from the US, Europe and Japan, towards emerging nations.

8,500 Did Not Hold

Friday, October 24th, 2008

Well, as I dejectedly type the the title to this entry I have a weekend ahead of me trying to figure out what the market is telling us by holding 8,500 until 5 minutes before close and then dropping below it in a decisive manner.

My earlier post noted that we were forming a bottom at 8,500 on the Dow and I drew the line on the graph so you could see it. I was feeling good about the market action until 2:55 – we had the big downdraft at the open and got stronger during the day moving above 8,500 during the day. Then, it fell apart in the last 5 minutes.

I'll be analyzing the trends and reviewing the charts this weekend (don't you wish you were me). I still believe we are in the process of bottoming, but it appears that it may be a bit longer than I had hoped. If 8,500 had held, the psychology of it would have been supportive of buyers who need to step into the market and commit some of the > $4 trillion sitting on the sidelines.

More later…

Mark

Elliott Wave Theory?

Friday, October 24th, 2008

OK, maybe I'll start to take Elliott Wave Theory seriously.

If you read my earlier post from last night, you saw that I made a comment about Elliott Wave analysis showing that today is a pivotal day in those charts predicting a 2,000 point loss in the Dow.

I've never been a believer in Elliott Wave Theory, treating it like Sarah Palin treats global warming. But, it correctly forecast the downturn that started in September and it pointed to today as a key day.

Following the analysis, it shows we have the big capitulation day today followed by a rally within a couple of days that lasts until November 20th at which there is another key turn date.

Right now, the S&P Futures are shut down-limit and there is no pre-market trading. This should lead to a BIG drop at the open.

Hang in there…

Mark

A Moment From History

Thursday, October 23rd, 2008

As OPEC meets tomorrow to discuss increasing the price of a barrel of oil (several members lose money at current levels), I think its important to remember that this is the 35th anniversary of the Arab Oil Embargo.

According to a report released by the IMF Monday on the Economic Outlook for the Middle East and Central Asia, the following are the break even levels on spending for oil exporting countries. If oil is less these price levels, the respective country’s income could fall short of its spending:

Iran = $90
Bahrain = $75
Oman = $77
Iraq = $111

I was looking for a good summary of the origin of the embarge and found this at Gregor.us:

In October 1973, OPEC ministers were meeting in Vienna when Egypt and Syria (non-OPEC nations) launched a joint attack on Israel. After initial losses in the so-called Yom Kippur War, Israel began beating back the Arab gains with the help of a U.S. airlift of arms and other military assistance from the Netherlands and Denmark. By October 17, the tide had turned decisively against Egypt and Syria, and OPEC decided to use oil price increases as a political weapon against Israel and its allies. Israel, as expected, refused to withdraw from the occupied territories, and the price of oil increased by 70 percent. At OPEC’s Tehran conference in December, oil prices were raised another 130 percent, and a total oil embargo was imposed on the United States, the Netherlands, and Denmark. Eventually, the price of oil quadrupled, causing a major energy crisis in the United States and Europe that included price gouging, gas shortages, and rationing.

You may want to check out this video as well (copy/paste into your browser):

http://dailynightly.msnbc.com/2006/10/real_to_reel_li.html

Mark