Thursday, July 7, 2005
Issue Contents:
| 09:18 | The Day Ahead Economic releases and news |
| 09:29 | Swing Trade Setups Thursday July 7 |
| 13:40 | Crude Realities Weekly report and demand analysis |
| 16:15 | TrendVue Trader Talk Today's transcript. |
| 19:21 | Energy Update |
| 21:14 | Swing Scanner Results Thursday July 7 closing data |
| 21:15 | Market Statistics For Thursday July 7, 2005 |
Good morning, its Thursday June 7, the 188th day of 2005.
Following the terrorist attack on London’s transportation system early this morning North American equity futures markets remain solidly down, off near 1 percent. Crude oil and other energy commodities are also trading down on natural concerns that terrorism spawns fears of demand slowdown, although energy markets have recovered quite a bit of lost ground through the morning.
We’ve been participating in and expecting further declines in equity markets—some component of today’s trade has simply been advanced by the unfortunate events in London. Trade is likely to be somewhat chaotic initially but eventually (within hours or days) settle back into patterns that had been in place before hand.
As traders our first goal today should be to secure capital and allow the emotion of the moment to pass and a concensus develop around the next intermediate term direction.
In other news, tropical storm Dennis was upgraded to level 1 hurricane yesterday evening and has since strengthened to a category 2 hurricane as it approaches Jamaica. Advisories and tracking information can be found on the National Hurricane Center website.
Both the Bank of England and European Central Bank held firm on interest rate policy, leaving rates again as is. Prior to the terrorist attack there had been increased speculation of a cut in rates but in light of the events this morning, that move may have been seen to be linked to terror and thus any desire to lower rates is likely now pushed off until August.
US Market Calendar
- 7:00 am: BOE Announcement
- 7:45 am: ECB Announcement
- 8:30 am: Initial Jobless Claims – Jul. 2nd week
- 10:30 am: EIA Petroleum Status Report
- 11:00 am: Chain-Store Sales – June
Canadian Market Calendar
- 8:30 am: Building Permits – May
- 10:00 am: Ivey Purchasing Managers’ Index – Jun.
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. Jobless Claims Rose 7,000 Last Week to 319,000
In light of this morning’s events, we can expect trade today to wipe out whatever patterns and setups may have been useful to us as of yesterday’s close. Today’s goal should be first for capital preservation, and for those nimble and agile enough to take advantage of wild but nonsensical intraday moves, perhaps we can take advantage of such situations.
Due to the fluid nature expected today swing trade setups will be discussed today in TrendVue Trader Talk and we’ll return to our normal schedule tomorrow.
Today’s EIA Petroleum Status Report offered the usual mix of contradictory signals:
Capacity: U.S. crude oil refinery inputs averaged nearly 16.5 million barrels per day during the week ending July 1, up 194,000 barrels per day from the previous week’s average and the highest weekly average ever. Refineries operated at 98.1 percent of their operable capacity last week, the highest weekly utilization rate since the week ending January 1, 1999. Gasoline production increased some, averaging over 9.2 million barrels per day, and the highest weekly average ever. Distillate fuel production increased substantially, averaging 4.5 million barrels per day and the highest weekly average ever recorded.
refiners are pumping out the stuff at record rates but are at near total capacity utilization – only imports can now make any substantive difference in supply – and then there’s Hurricane Dennis looming, quite literally, on the horizon
Supply: U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) fell by 3.6 million barrels from the previous week. At 324.9 million barrels, U.S. crude oil inventories remain well above the upper end of the average range for this time of year. Total motor gasoline inventories decreased by 0.9 million barrels last week, putting them near the upper end of the average range. Distillate fuel inventories jumped by 4.0 million barrels last week, and are now in the upper half of the average range for this time of year. Total commercial petroleum inventories increased by 1.8 million barrels last week, placing them near the upper end of the average range for this time of year.
demand as we shall see is also above the average for this time of year; to put in perspective the inventory balance this is roughly 20 days supply
Demand: Total product supplied over the last four-week period has averaged nearly 20.8 million barrels per day highest since March 05, or 2.2 percent more than averaged over the same period last year. Over the last four weeks, motor gasoline demand has averaged nearly 9.5 million barrels per day, or 2.7 percent above the same period last year, with last week¿s average of over 9.7 million barrels the highest weekly average ever. Distillate fuel demand has averaged 4.1 million barrels per day over the last four weeks, or 6.0 percent above the same period last year. Kerosene-type jet fuel demand is up 5.5 percent over the last four weeks compared to the same four-week period last year.
and yet again demand numbers are ahead of projections
A look at the rolling comparison of EIA demand projections vs actual shows distillate use far ahead of projections which certainly maps on to the supply issues the market has been experiencing. Not obvious in this summary but clear in the chart below, gasoline demand growth has continued to trend higher following three quarters of general decline.
Demand growth continues to trend higher on balance for all markets and total product consumption is heading higher off a higher base leading into the summer months.
Conclusion? We can never be sure what the market – which is more often ruled by emotions than numbers – will tweak on but it does seem logical that strong (and growing) demand is likely to trump a surprise increase in distallate production. After all, distillates had been in short supply so of course refiners are going to work to satisfy that market. We shouldn’t be surprised to find a short fall in another fuel sector next week.
In the meantime stalking this mornings dip has so far proved correct even as commodity prices have remained on the weak side. Stops at break even…
Today's transcript.
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Hurricane Dennis: Updated this afternoon to a dangerous category 3 hurricane with further potential to strengthen. The key question now is where does it land – farther east along the Florida Panhandle, or farther west toward key production and refining facilities.
There’s ample time for direction to change but this storm will land over the weekend while markets are closed, so most traders are going to be making their bets on Friday.
Crude: Trade today spanned a range not seen in many months, demonstrating just how emotional the debate over supply and demand is for this market.
CL: In the end bulls scored a marginal victory with price closing above the breakout levels and, for now, with hurricane Dennis as a backdrop, further reinforces the case for oil heading higher than $60 at least for the near term.
OIX oil and gas index also reconfirms breakout above the consolidation of past two weeks.
Natural Gas: As it turns out the Natural Gas report for last week was released on time today, and while the report was somewhat bullish for Natural Gas with a lower than expected injection into storage, NG traded mostly weaker for the day until crude oil took a stand and rallied above 60 to stay through the close.
Briefly noted off the Weekly Natural Gas Update report:
- Net injection 32% lower than the 5 year average, likely on account of warmer than usual temperatures and increased electricity generation demand
- Cooling Degree Days showed weather 31% warmer than normal for this time of year
- Gas in storage is 12.4% above the 5 year average for this time of year
NG: trading in a narrowing range – albeit volatile – within a larger triangle. Lack of direction will hold NG heavy stocks back somewhat compared to oil focussed companies unless price can clear and hold above resistance near 7.55 and won’t be fully in the clear unless price trades > 7.70. Fear of or actual shut-in or damaged fields and equipment on the scale of anything approaching last years Hurricane Ivan would certainly do the job.
Thursday July 7 closing data
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Statistics for Thursday July 7, 2005
Note: Statistics are compiled based on our custom symbol universe of the most heavily traded stocks.
| Symbols in Up Swings | 286 |
|---|---|
| Symbols in Down Swings | 456 |
| Up/Down Swing Ratio | 0.62 : 1 |
| Advancers | 55% |
| Decliners | 43% |
| Unchanged | 2% |
| Up Bars | 10% |
| Down Bars | 66% |
| Inside Bars | 5% |
| Outside Bars | 15% |
| Close > 20EMA | 55% |
| Close > 50SMA | 66% |
| Close > 200SMA | 57% |
| 20EMA > 50SMA > 200SMA (trend up) | 41% |
| 20EMA < 50SMA < 200SMA (trend down) | 22% |