Wednesday, March 16, 2005
Issue Contents:
| 09:18 | The Day Ahead Economic releases and news |
| 09:24 | Today's Strategy Preparing for the gap |
| 11:32 | Crude Realities |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Good morning – its Wednesday March 16th, the 75th day of 2005.
The top news for this morning is a record US Trade Deficit, hitting $187.9 billion. Forex traders in many currencies have largely or completely erased any gains the greenback made yesterday.
``It’s a reminder of how large the financing requirement is and how long it will take to get that requirement down to more manageable proportions,’’ Nick Bennenbroek, a currency strategist at Brown Brothers Harriman & Co. in New York, said before the report. ``The dollar seems to be fragile.’’
Betting against the dollar paid off for Berkshire Hathaway Inc. Chairman Warren Buffett. Berkshire posted a 40 percent increase in fourth-quarter profit because Buffett increased his bet the currency would weaken. Berkshire had $21.4 billion of forward contracts, or agreements to purchase foreign currencies on future date at a certain exchange rate.
Buffett, 74, said earlier this month he expects the U.S.‘s widening trade and budget deficits to erode the value of the dollar for the next few years. [1]
US Market Calendar
- 7:00 am: MBA Purchase Applications
- 8:30 am: Current Account – Q41
- 8:30 am: Housing Starts – Feb.
- 8:30 am: Building Permits – Feb.
- 9:15 am: Industrial Production – Feb.
- 9:15 am: Capacity Utilization – Feb.
- 10:30 am: EIA Weekly Petroleum Status Report
Canadian Market Calendar
- 2-year bond auction
Earnings and the Federal Reserve
For earnings highlights, please see today's WSJ Earnings Calendar.
For a list of upcoming speeches, congressional testimony, Federal Open Market Committee material, and statistical releases, please visit the What's Next page of The Federal Reserve Board website. Recently released Federal Reserve Board material, including market moving FOMC decisions and speeches by members, will be found on their What's New page.
1 Dollar Falls After Current-Account Gap Grows More Than Forecast
Today’s strategy:
- First manage the gap down – price had been hitting the recent lows over and over again; what we want to first identify is if a post-gap bounce back to those prices – former support, now new resistance until proven otherwise, manages to hold up or prove to be a failing bounce.
- Hunt down safer short opportunities
- Check gold stocks (Gold up > 0,5%) (and other specific sectors) for long opportunities
I’m running late this morning and for the first part of today will post all swing trade setups within TrendVue Trader Talk.
The latest scan results are available in text form at http://www.trendvue.com/latestscan
Summary of Weekly Petroleum Data for the Week Ending March 11, 2005
U.S. crude oil refinery inputs averaged 15.1 million barrels per day during the week ending March 11, up 180,000 barrels per day from the previous week’s average. Refineries operated at 90.7 percent of their operable capacity last week. However, gasoline production decreased last week, averaging 8.3 million barrels per day. Distillate fuel production declined slightly compared to the previous week, averaging 3.9 million barrels per day.
U.S. crude oil imports averaged over 10.0 million barrels per day last week, down 58,000 barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged nearly 10.0 million barrels per day, which is 413,000 barrels per day more than averaged over the comparable four weeks last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) averaged 964,000 barrels per day last week, while distillate fuel imports averaged 307,000 barrels per day.
U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) rose by 2.6 million barrels from the previous week. At 305.2 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year. Total motor gasoline inventories dropped by 2.9 million barrels last week, but remain above the average range. Distillate fuel inventories fell by 1.9 million barrels last week, and are in the lower half of the average range for this time of year. A sharp decline in high-sulfur distillate fuel (heating oil), more than compensated for a slight increase in low-sulfur distillate fuel (diesel fuel). Total commercial petroleum inventories declined by 5.1 million barrels last week, but remain in the upper half of the average range.
Total product supplied over the last four-week period has averaged over 20.7 million barrels per day, or 1.5 percent more than averaged over the same period last year. Over the last four weeks, motor gasoline demand has averaged nearly 9.0 million barrels per day, or 2.0 percent above the same period last year, while distillate fuel demand has averaged over 4.2 million barrels per day, or 0.6 percent above the same period last year. Kerosene-type jet fuel demand is up 6.8 percent over the last four weeks compared to the same four-week period last year.
Take away? Demand, every week it seems, is rising, at substantial rates above last year. Interestingly, inventories are up and the issue appears to be more of refined product shortages rather than raw crude supply itself.
Traders seem willing to bid up crude on the expectation that demand will eventually pressure supply of raw materials further, and possibly on the expectation that a raw crude supply disruption of any sort – a strike in Nigeria or Norway, a pipeline problem here or there (and just wait for hurricane season!) – will squeeze price hard.
Crude
Crude current contract made an all time high today; the back-adjusted continuous contract shows the context of price against expired contracts – these are historic levels. Note on the weekly chart ADX is starting to tick upwards too. Through all of 2004 and 2005 I’ve been unwilling to call the end of Crude’s rise despite the noise from most analysts, and I am still unwilling to do so. However, at a test of top like this we have to at least be open to the potential, however unlikely it seems at the time.
Industry Stocks
There are a great many potential failed bear flag trigger setups in the making today – and some indication on the charts of a number of industry names that support may be building at recent lows. Most of these are swing trade setups for tomorrow and our first priority tomorrow will be to identify the entry but also be wary of a minor wiggle up which triggers longs followed by weakness and failure.
With these stocks all having run so much we have to ask the question – “who is left to buy”?
XLE – energy ETF – building a base here.
VLO – refiner – building a base.
XOM – integrated international – building a base. Tomorrow’s setup: buy stop trigger above today’s “down bar”.
TLM – large Canadian and international upstream exploration and producer. Building a base, possible trigger for tomorrow.
Its important to note that some of these names (ECA for example) may put in outside bars today – we’ll want to monitor the sector closely and attempt to find safer intraday entry locations on dips, and move to break even stops at the earliest opportunity. For the most part I am waiting until tomorrow – we’ll see how these names fare once the news wears off.
Today's transcript.
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