Crude Oil Two-fer?

Yesterday, 06.04.08, I stated that the downside objective that I specified on 05.21.08 was being tested.  Intraday the July contract hit 12182 with an overnight low of 12160. Those tests were the first shots across the bow for the crude oil shorts.  Today’s midday rebound back above the key (psychological as well as chart wise) 125 level was the direct hit below the water line.  By the day session close the Jul contract ran back up to 12800 before settling up nearly 550 pts.

So the 05.21.08 high call before a specified pullback and 06.04.08 low call before the expected mid-to-upper 120s retest complete the “two-fer”.  Barring some extreme event (e.g., Gulf hurricane, geopolitical event, etc), watch for crude to range out in the near term between 115-120 and 135-140.  A close above 134 or below 122, basis the July contract will negate this outlook.  Note that the Aug contract which traders begin rolling into next week, trades at roughly a 40-50 pts premium to July.

Key up the Rolling Stones – Excellent blogging tool

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Crude Oil Update

On Twitter the afternoon of 05.21.08, I stated the maximum upside for crude oil before a pullback was 13450.  Crude peaked out that evening at 13508 and has, as of this morning off the weekly API statistics, begun to test the stated objective of 11850-12250.  The maximum downside for this move before retesting the mid-to-upper 120s is roughly 110-115; a move below that and the mentality of the market will have changed.

So who is going to take credit for this recent pullback?  More-than-likely, you’re elected officials in Washington (where perception of action is actually more important than substantive action).

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Showtime

This past weekend I mentioned that some cycles I follow were pointing to a critical time this week for indices, bonds and crude oil. Monday saw the NQ and SP top out at 1916 and the 1390 area with crude oil setting another record, basis the Jun 08 contract, of 11895 on Tuesday (as this is written with less than 45 minutes remaining in the NYMEX day session.)

The sellers stepped in overnight and early Tuesday in the indices, pushing both the SP and NQ back inside their extended ranges mentioned last week with the NQ almost filling the real gap at 1870 from last Friday's session. The close today is critical. Below SP 1389 and NQ 1894 will be a weak sign with confirmation coming from a close at sub-NQ 1867. If this plays out, look for a least a short-term downside target to NQ 1824-1840.

For crude oil, a close below at least 11495 is necessary to slow the upward momentum with a close belwo 11370 signaling a short-term top.

Cycles, Cycles and more cycles…

There was an interesting article in Barron’s Getting Technical this past week. Though cycle analysis is not one of my primary tools in my trading box, I do use it as an ancillary indicator. The bottom-line of the article is a prediction for long-term cycles in equities to bottom in Nov 2008, interest rates to bottom (bonds top) in Jun 2008 and commodities to continue higher into Feb 2010 (George Soros seems to agree) . Oh, and by the way, some of my own cycle analysis is pointing to the next 3-5 days as critical for the indices, bonds and crude oil.

Busted!

Expiration Friday is seeing the ranges that presisted for 20 days in both the SP and NQ being broken to the upside. The DJ is stronger still, trading near early Jan08 highs. The closes today are key as stated in yesterday’s comments - above SP 1374 and NQ 1870 are strong with closes above SP 1390 and NQ 1894 breaking the range. Until there is a daily clsoe back below at least these latter two levels, the buyers are back in control.

Home on the Plains

Last week it was home on the range. Earnings news from GE sent the market lower to end out last week, with the longs being saved by positive news from INTC, IBM and JPM (relatively positive) early this week. The bigger picture however is unchanged with the key indices stuck in a longer-term consolidation (the “plains”). The smaller ranges for the SP and NQ are at 1349-1389 and 1824-1894 with the “plains” defined as the areas that have existed since 03.24.08, four days after the Bear Stearns debacle and the last FOMC meeting. These consolidation zones are defined as SP 1309-1389 and NQ 1765-1894 with sellers above SP 1370 and NQ 1860 and buyers below SP 1330 and NQ 1800. Until the market breaks SP 1374 or 1319, NQ 1870 or 1780 on a closing basis, expect the consolidation to continue.

Home on the Range

The US indices have been range bound for the past eight days with the SP futures confined to a roughly 1349-1389 consolidation area.  The Nasdaq futures (NQ), my primary focus, have traded an 1824-1894, 70 pts range for the prior with days.  Buyers are active below 1840 with sellers stepping in above 1875 with key levels at 1842/1843 and 1852.  Until there is a close below 1835 or above 1870, this range will persist.  Note that on the downside there is an unfilled real gap at 1796-1813 from 03.31-04.01.  Stay tuned…day 9 is set to begin with the market trading down on disappointing GE results.

Comics

Chicken Little or the Boy Who Cried Wolf?

These charts and the implications of reversals in their trends aren’t for the faint of heart, but prudence suggests you at least take a look.  How long can these trends persist?  Who knows, but trees don’t grow to the skies.  Also consider the long-term chart of the US dollar; see a correlation?  Check out the past 35 years here.

Which will it be for you – Chicken Little or the Boy Who Cried Wolf?  I’m hoping for the latter, but am hedging for the former.