Wednesday, August 3, 2005
Issue Contents:
| 08:39 | The Day Ahead Economic releases and news |
| 09:16 | Swing Trade Setups Featured charts for Wednesday August 3 |
| 16:15 | TrendVue Trader Talk Today's transcript. |
Good morning, today is August 3rd, the 215th day of 2005.
In case you missed it yesterday amid all the talk about oil, Natural Gas made a new record high for the current contract and is approaching levels only seen in 5 months over the past 5 years. What’s a little different this time is unlike prior months where price has ramped up over $8, its not winter this time. Since 2002 prices have risen over 400%—even if we discount the winter spikes, a clear trend of higher swing highs and higher swing lows is in place, not unlike the crude oil trend which is up 300% in the same time period.
Yesterday the head of the Energy Information Agency (EIA)‘s oil division, John Cook, threw a little cold water on a notion that had been gaining some currency among energy analysts, namely that demand growth for petroleum was slacking. Backing this up, in July the International Energy Agency had revised its world demand growth expectations lower.
Common sense says this isn’t likely so, given GDP growth remains relatively strong world wide and particularly strong for the economies of the world’s largest oil consumers including the US and China. Mr. Cook subscribes to this thought as well:
“If you look only at the traditional indicators of apparent demand, you will see flat to sluggish growth for the first half of the year,” Cook said. “But in the case of China, since inventory movements are not transparent, you need to be a little circumspect because what you do not know is how that demand rate is stacking up against supply.”
Cook seconded that skepticism, saying economic growth, a traditional gauge of oil demand, remains buoyant in both the U.S. and China, leading him to conclude that oil demand will eventually register an increase for 2005. Together, the two countries account for about a third of total world oil consumption.
“Everyone agrees we will have slower demand growth this year after last year’s strong growth, but how does that stack up with supply?” Cook said in an interview. “Given the spotty data we have so far, if one looks at GDP growth and the close correlation it has to oil demand growth, one has to wonder how significant the slowdown in underlying demand growth may be.”
Crude futures are up 3/4%, Natural Gas is trading up 2.35% off yesterdays close. Stock index futures are off marginally from yesterday’s close, following up on a minor clunk that came in after 4pm. In TrendVue Trader Talk we’ve been stalking a potential top here – the market has to prove that it can break out of the range developed over the past couple of weeks or we are likely to see a decent retracement shape up leading into September.
The US Dollar, which we’ve been highlighting for a couple of weeks now as it started to demonstrate that its run was over, has dropped a full point on the index this morning on news of some improvement in European and Japanese economies, and perhaps in part to the unwinding of the idea that the greenback was the only place to be. In tandem with the 0.83% decline in the US Dollar Index, Gold futures are trading up just over one percent to $436.
Later today the Treasury department is expected to announce that the 30-year bond is back. You’ll remember that the Treasury department stopped selling long-dated debt back in 2001, amid budget surpluses a-plenty seemingly reaching out into the future as far as the eye could see. It’ll be interesting to see what the demand for the long bond is, particularly if demand takes away from the 10 year, potentially impacting short term rates.
US Market Calendar
- 7:00 am: MBA Purchase Applications
- 10:00 am: Non-mfg ISM Index – July
- 10:00 am: Challenger Layoff Report – July
- 10:30 am: EIA Petroleum Status Report
- 3, 5 & 10-year note auction announcement
Canadian Market Calendar
- No scheduled releases
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.
Featured setups from Tuesday August 2, 2005 closing data symbol scan
Jump to: Long Setups | Short Setups | Special Situations
Notes for the Day
- Premarket futures open up the potential to break yesterday’s lows – in DIA / YM / Dow 30 in particular this means a continuation of the current down swing and an opportunity to consider a short at yesterday’s lows via DIA.
- Please remember that price is still stuck in a range; markets have proven fairly resilient. I stalk tops where they are likely to come in, but that doesn’t mean a market reversal is at hand; to hedge my bets I always look for long side opportunities unless a significant down trend is underway (not yet… far from that)
- Continue checking all swing trades before the close to ensure companies are not reporting overnight or pre-market the following day.
ETFS
DIA – short opportunity – Dow 30 is the weakest of all the indexes.
PPH – pharma ETF – potential bottom in early July
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
CDE – ABX was/is a great trade; we have to be careful in this sector – many companies are reporting higher costs and production issues. Here’s one with a convenient downbar but as a laggard my spidey sense says caution with this and all laggards in the gold sector.
GFI – comments as per CDE
Test of Top – Continuation
CREE – reminder for a subscriber!
ORCL – a bit complicated pull back here – hold only if closes above the 2 day high.
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.
Retracement or Pause in Down Swing / Down Trend
JNS – financial services, reported big drop in profits; this is a three inside up setup but I personally am not interested in trading such a chart on the long side while its under resistance as it is now – stalk short for 1 – 2 days if not triggered today.
BAC – has been on our short list before…
BRL – pharma – doji bar (indecision) – stalk short one day only, target is the July swing low.
Test of Bottom – Continuation
IMH – mortgage holder
Special Situations
HEALTHCARE
HCA – healthcare – close up view shows a three inside up setup here and high ADX suggesting the potential for a bounce to at least resistance near 51.75 if not a “bottom” forming. However, lets back up and look at the big picture so we know how important protecting ourselves is:
HCA – bigger picture – showing that HCA in a precarious position here. Despite upgrades from some in the brokerage biz, this one could easily retrace 50% of the 2005 rally – implying more downside.
Today's transcript.
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