Wednesday, June 8, 2005
Issue Contents:
| 01:30 | Swing Scanner Results Tuesday June 7 closing data |
| 01:32 | Market Statistics Tuesday June 7, 2005 |
| 03:14 | Crude Awakening Notes from the field... |
| 06:46 | Swing Trade Setups Featured charts for Wednesday June 8th |
| 08:12 | Quick Take: Forex |
| 08:30 | The Day Ahead Economic releases and news |
| 14:43 | Market DIrection Last Wednesday's heads up... |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Tuesday June 7 closing data
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Statistics for Tuesday June 7, 2005
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 449 |
|---|---|
| Symbols in Down Swings | 297 |
| Up/Down Swing Ratio | 1.51 : 1 |
| Advancers | 44% |
| Decliners | 54% |
| Unchanged | 2% |
| Up Bars | 54% |
| Down Bars | 18% |
| Inside Bars | 6% |
| Outside Bars | 16% |
| Close > 20EMA | 44% |
| Close > 50SMA | 73% |
| Close > 200SMA | 61% |
| 20EMA > 50SMA > 200SMA (trend up) | 41% |
| 20EMA < 50SMA < 200SMA (trend down) | 16% |
Alaska Oil Field’s Falling Production Reflects U.S. Trend
Oil keeps flowing through a maze of aging wells, pumps and pipelines that poke through the snow on this desolate North Slope tundra. But this vast field is ailing: Output has fallen by nearly 75 percent from its peak in 1987 and is expected to continue dropping.—Washington Post
The European Commission said Friday it will ask OPEC to raise oil production when both sides meet in Brussels Thursday. Algerian Oil Minister Chakib Khelil said OPEC countries are already producing at maximum levels and they have no more spare capacity to pump more oil into the market. “Why should we change our policy? Opec is producing at full capacity. We cannot produce more,” said Algerian Oil Minister Chakib Khelil. “Refineries are producing at full capacity. This will multiply the risk of accidents, which could obviously have an impact over prices,” Khelil said.—Gulf Times
Crude, front-month contract; until proven otherwise, the down-trend on the daily has reversed back to up…
Crude Awakening
The only hope for meeting growing world demand for oil, say experts, is to tap Saudi Arabia’s reserves. A Bush advisor on energy says those reserves don’t exist.
“Nor is this phenomenon unique to the continental United States; most oil fields peak and decline in the same way. Prudhoe Bay peaked in 1989. The North Sea peaked in 1999. China’s massive Daqing field probably peaked a year or two ago. They’re all still producing oil, but they produce less and less every year.
No less an authority than that legendary curmudgeon-cum-oil magnate T. Boone Pickens thinks this is clear evidence that world oil production has already peaked. “Global oil [production] is 84 million barrels [per day],” he told a conference of alternative-fuel advocates in May. “I don’t believe you can get it any more than 84 million barrels. I don’t care what Abdullah, Putin, or anybody else says about oil reserves or production. I think they are on decline in the biggest oil fields in the world today, and I know what it’s like once you turn the corner and start declining. It’s a treadmill that you just can’t keep up with.”
Even if the doomsayers are right, solutions are hard to agree on. Market forces will certainly solve part of the problem. As prices increase, demand for oil will level out and production will—for a while—increase slightly as it becomes profitable to drill in marginal fields that are currently lying fallow. But this obscures the fact that high prices, as bad as they are for an economy addicted to cheap oil, aren’t the worst prospect facing us. The real problem is spare capacity.—Washington Monthly, June 2005 (More >)
[...] To aggravate matters, American natural-gas production is also declining, at five percent a year, despite frenetic new drilling, and with the potential of much steeper declines ahead. Because of the oil crises of the 1970s, the nuclear-plant disasters at Three Mile Island and Chernobyl and the acid-rain problem, the U.S. chose to make gas its first choice for electric-power generation. The result was that just about every power plant built after 1980 has to run on gas. Half the homes in America are heated with gas. To further complicate matters, gas isn’t easy to import. Here in North America, it is distributed through a vast pipeline network. Gas imported from overseas would have to be compressed at minus-260 degrees Fahrenheit in pressurized tanker ships and unloaded (re-gasified) at special terminals, of which few exist in America. Moreover, the first attempts to site new terminals have met furious opposition because they are such ripe targets for terrorism.—Macon Online
Oil Forecasting Legend Paints Dire Energy Picture
Groppe says that we are at “a major turning point for world oil and north American natural gas.” According to this veteran, “We’ve been down a long road of exploration and exploitation and found everything easy. We’ve reached the point where all the major initial discoveries have reached their peaks and are declining. The newer ones are too small to offset it, and North American natural gas production has clearly peaked and is irreversibly declining. We think were at that turning point for world oil. From now on we’re in a new era where the key question is what prices will be required to cause consumption to decline to match an irreversible decline in supply?”
A critical question, and here Groppe seems to feel a little bit better about the situation than Simmons. “We think it requires a minimum of 6.50 to $8.50 during the next 10 years to balance our supply demand system.”
Doom and gloom? Or a sign of a top? Or a real change in the fundamentals? I tend to believe the latter, but as a trader we don’t have to rely upon conviction – the charts will tell us what to do.
Currently, the price of crude and natural gas is in a tentative up-trend, needing only a higher swing low to be set and followed by a higher swing high to confirm. One thing is certain, the sector will continue to deliver the volatility required for traders…
Featured setups from Tuesday June 7, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
It remains to be seen if everything that needs to go right for markets to hold up – TXN spark a tech rally; Crude sell off all day to keep it going – will transpire or not. I’ll add tech exposure using QQQQ or perhaps also IWM to get small cap exposure on long side.
- Before the open CL made a lower low than yesterday’s range, currently off over 1% from yesterday’s close. NG however is up 1.4% at present. NG weighted companies like ECA likely to hold up reasonably well into the report at 10:30; the others may offer intraday sell offs and possible buying opportunities. Crude should attempt to find support at points 1 or 2 here, heads up:
- Gold and USD – we should expect the USD to make a bounce up wihtin the next day or so but this retracement is getting a little hold now therefore by default we’ll expect any minor wiggle up to fail and the retracement to pull back more of the spring rally in the greenback. There may be a little noise in Golds over next few days but I’ll take any valid long trade today to add to my existing Gold positions and if stopped out will try again at the very next opportunity. IF the USD is to rally typically it will from here as line (1) on this chart ought to provide support. If not, then gold will head higher fairly quickly. Up only marginally before the open:
- Working against Gold producers is copper, which up until Tuesday had been moving up strongly for the past three weeks and is likely due for a pull back itself; initially we shall look for a single day pull back and a push to new highs; if the latter does not materialize then targets for a deeper retracement are as follows:
Note on the same chart that Aluminum has also rolled over albeit still in chop.
Long Setups
General common strategy: Unless noted otherwise, buy stop just above the “high” value, with an initial protective stop at the low value of the bar, not below the bar.
Retracement or Pause in Up Swing / Up Trend
ENERGY
TSO – refiner – follow up for 1 – 3 days if pullback deepens. Same holds true for E&P stocks such as TLM, ECA, OXY, APA. I’m still holding core positions in ECA, TLM, have sold trading positions in PDS, OXY and looking for re-entry (may switch focus away from PDS due to divestiture news of late)
DO – driller – also charts such as RIG, HAL, BJS have to be followed down for next few days if not triggered or held at close today.
SLB – oil services
NE – oil services
MATERIALS / METALS
PD – basic materials, copper weighted
IAG – gold
BGO – gold
PDG – gold
ABX – hold, disclaimer I hold this one lower
Test of Top – Continuation
Short Setups
General common strategy: Unless noted otherwise, place a sell alert at or just below the low of the setup bar, and look for the first failed intraday bounce after the low has been broken. What we are looking for is price to push down, bounce a little, and fail again – this is where we want to get short.
Test of Top – Reversal
FD – department stores, second retest of top.
Retracement or Pause in Down Swing / Down Trend
MU gap down may mark the swing low therefore we can attempt a long on this stock as well, myself I will reserve it for short side and hunt others long.
ACS – computer services – bear flag just above support
ADP – payroll services – ought not to be hit unless it really is heading lower
ELNK – bear flag, follow up from yesterday
WYE – pharma – bear flag
FBR – brokerages – weak bounce back to broken trendline; hold short only if solidly profitable.
ORCL – tech software, often suggested as SEBL acquirer
SNDK – ram cards, developing bear flag just above next support
DOW – chemicals
AUTO SECTOR
MG.SVA:C (MGA:NYSE) auto parts/components
LEA – auto parts/components
Special Situations
VAR – medial products – acting strong, often we can latch on to a direct move up with such a chart but must in fact demand it push almost straight up to hold.
SEBL – software – long slow drop back over last month, will stalk a long here once more, one day only. Would like to see price clear overhead resistance marked…
The USD is now on day 5 of the retracement off last week’s highs. Generally when price is past bar 3 or 4 of a pull back, we expect an up-day to stop in some new longs, only to have it fail and retrace more deeply. That’s what we are looking for within the next session or two, and if it does transpire as such there will be new short opportunities in at least USDJPY and USDCAD.
USDJPY – expecting a minor bounce in this pair to create a short opportunity; swing low can be used for today.
GBPUSD – has hit its two primary targets and bounding to resistance. Stalking a long above the next down bar is the current plan.
USDCAD – if the energy rally holds up, it might be reasonable to expect USDCAD pair weakens as the Canuk buck strengthens. I’m looking for any minor move up to fail and give me a reason to sell USD in favour of CAD
Summary
DYX US Dollar Index – the greenback has surprised many with its strength through 2005; key overhead resistance here offers a critical test for the forex market. Its time to start to stalk short positions against the USD, or stalk longs in Gold.
Good morning, its Wednesday June 8th, the 159th day of 2005. Continuing on with a light week for economic news, the principle issues facing the market are:
- reaction (lasting or not) to TXN news
- where crude and natural gas head post 10:30 report
Mortgage applications surged last week, up 6.5% as rates continued to ease, more than offsetting the prior week’s near-3% loss. Bonds are looking a little frothy – I can’t help but wonder if the sell of the year is coming up in debt…
US Market Calendar
- 7:00 am: MBA Purchase Applications1
- 10:00 am: Wholesale Trade – Apr.
- 10:30 am: EIA Petroleum Status Report
- 1:00 pm: 5-year note auction
Canadian Market Calendar
- 8:15 am: Housing Starts – May
- 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 U.S. mortgage applications increase last week
Last Wednesday’s Market Direction and Pulse notes served as a heads-up that the market was starting to fail important tests. Like any big ship, it takes a while to complete a turn, and today we are reconfirming the new direction with a weak market continuing to break down support despite “good” news.
This market needs to go up on “bad” news to be believable!
Nasdaq is substantially weaker than the NYSE and is already in a well established down swing triggered three days ago. Minor pull back or complete reversal? Impossible to tell up front, but for the swing trader its shoot first and ask questions later.
COMPX – Nasdaq Composite internals chart, showing yesterday’s new 52 week high spike and the quick reversal – a double whammy combo somewhat more indicative of at least an intermediate term top than simple chop. On Nasdaq 2040 and 2025 and 2000 are the principal down side targets.
Possible upside surprise: Initially we’ll be interested in seeing if price can bounce right back up into the range above and regain 2065 as support and hold those levels and head higher—if this can transpire today or Thursday then the market has more underlying strength than is obvious today.
Else: If it bounces and fails again, we can all but be assured of a quick trip to 2025 or 2000.
Today's transcript.
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