Crude Oil – She’s Warming Up Again

Once again the weekly inventory numbers provided the fuel for the bears.  After testing up to 7390 and 7335 last Thursday and Friday, in line with the projected resistance zone specified last week, the sellers were back on Monday.  After the failure at 7200-7400, the opposite side(support)  is now being tested once again at 6750-6950.  Today posted the lowest settle since mid-April and below last week’s low as well as below the recent 7000-7500 range.  At a minimum on a break of 6800, the mid-60s should be tested.  A sub-6750 close turns the short-term momentum to the downside with a potential objective of 6000-6200.  A daily close below at least 6150-6450 is required to establish a long-term top with a sub-6000 close confirming.

Currencies – Reversal Day

After the Pound set a new 52-week high Tuesday on the higher-than-expected US CPI data without the other major currencies confirming the move, the sellers jumped in.  The result was a reversal day to the downside for the major currencies (to the upside for the US Greenback).  As stated last week, the upside momentum is strong and a pullback to the late-April, early-May breakout areas sets up a potential position trade for at least a retest of the past week’s extremes.

Currencies – Buy the Rumors, Sell the News…and repeat

The US Dollar Index (DXC) tumbled to new weekly lows at 8450 with the major crosses including the Euro (ECM6), Pound( BPM6), Canadian (CDM6) and Yen (JYM6) eclipsing recent highs going into the FOMC rate decision news. News of another 25 bps increase initially caught the longs off guard, producing a quick drop to new session lows before reversing to new weekly highs (day session basis) with the Dollar Index setting another low at 8437.

Obviously, the buyers remain the dominant force and until there is a catalyst otherwise, don’t fight the momentum.  The breakout patterns mentioned over the past month remain in effect and continue to be tested.  Due to the continued move higher, support has moved as well. Watch for retracements to the late-April, early-May trading levels for entries with the objectives at the recent extremes. These levels are approximately as follows: DXC 8610-8640, BPM6 18250-18300, CDM6 8950-8970, ECM6 12600-12630 and JYM6 8860-8890.

Crude Oil – Inventory Update

The inventory numbers were baked into the cake prior to Wednesday’s open. On news that gasoline inventories came in roughly double the expected gain with crude and distillate builds less than half the expected gains, crude dropped roughly $1.00/bbl to support in the mid-6900s before rebounding back through the early high. News of production problems at two major refineries (Texas City and Bayway) put the shorts on defense once again. By session close, the market tested back above Tuesday’s high to the 7220 level before settling just below the key 7200 level.. Nothing has changed – the zones to monitor remain at 6750-6950 and 7200-7400.

Crude OIl – A Case of Laryngitis?

Yesterday crude flirted with  the key short-term closing level of 6975 after an intraday reversal to the upside from a 6820 low.  As I stated last week, turning this upside momentum is about as easy as turning a super-tanker on a dime.  Tuesday proved that out with the buyers re-emerging and pushing the front-month contract up to 7150 before closing back above 7000.  If a real short-term top is going to develop, recall that 7200-7400 is the key level for the sellers to control.  On the downside, 6750-6850 is short-term support with a sub-6975 daily close a warning sign for the buyers with a sub-6750 close turning the short-term momentum down.  A daily close below at least 6150-6450 is required to establish a long-term top with a sub-6000 close confirming.
 

Crude Oil – Update – Can She Sing?

She’s warming up her vocal chords – Last Thursday 05.04.06 when crude started to break, I indicated that the top may finally be forming.  News over the weekend that Iran would like to negotiate directly with the US regarding the nuclear situation produced substantial selling pressure in the energies.  Crude (CL #F) has been trading lower since overnight, setting a low area of 6820-6840, down almost $7.00/bbl since last Wednesday.  Recall that a sub-6975 daily close is a warning sign for the buyers with a sub-6750 close turning the short-term momentum down.  Any rebounds should now be contained by 7200-7400 if the trend is in the process of changing by topping out.  As previously stated, a daily close below at least 6150-6450 is required to establish a long-term top with a sub-6000 close confirming.

Forex Update – Pre-FOMC 2-day meeting

With the upside objectives met last week, I suggested that the upside move was nearing a short-term top and the forex and debt markets were setting up for a retracement. A period of stagnation is likely now as the market awaits the results of the two-day FOMC meeting on Tuesday and Wednesday. The news decision will be announced at approximately 1415ET, 05.10.06. A summary of the major crosses follows.

As stated last Thursday, the initial upside objectives for both currencies was tested after strong moves over the prior month. The Pound (BPM6) ran 13.52 pts from the 04.03.06 low of 17284 to Friday’s NFP high of 18636, a 23-day rally. The majority of the move was posted in the last 7 days from 17813-18636 after the Monday 04.17.06 gap up at 17550-17688. Overnight Sunday, it moved to 18700. At a minimum now, expect a consolidation with a potential for a test back down to the breakout area of 17950-18050 realizing that there is a small gap at 18059-18070 from 04.27.06-04.28.06. Aggressive buyers could look for entries in the 18150-18200 area with conservative traders waiting for a test to at least 18075-18125 realizing that the breakout zone is the potential target.

During the same time frame, the Euro (ECM6) rallied 6.89 pts with a Monday 04.17.06 gap at 12158-12262. Its key support zone, the breakout area, is at 12350-12450 with the 12550-12600 area offering initial support for aggressive buyers. Conservative traders should look for the breakout zone test.

The Loonie (Canadian Dollar) broke key support during Monday’s session at 9020-9025. Major overhead resistance is at 9025-9055 with the move setting up a potential break of the past 5-days range of roughly 8985-9090 targeting 8880-8900. The key support zone is at 8920-8950, a potential area for aggressive buyers, with the conservative entry area down at 8875-8900.

Despite the Euro failing to break the NFP high overnight, strength in the Asian currencies forced the US Dollar Index (DXC) through the Friday lows to 8468. The Japanese Yen (JYM6) traded at its highest level since Sept 05 with 8875-9025 now major support on any retracement. Coinciding with the above levels on the major currencies, look for the US Dollar Index to test to 8650-8700.

The bottom line is that a rebound in the US Greenback (pullbacks in the major currencies) is likely into the FOMC news. Likewise, watch for and upside test in the US debt markets to setup short entries. The US T-Bond (USM6) breakdown area is roughly 110 with a test to that area offering a potential short play. Roughly 106-1/2 on the 10-yr notes (TYM6) offers a similar opportunity.

April Non-Farm Payrolls – the following took place between 0800 and 0900ET

The April US NFP report came in weaker than the consensus at only 138,000 jobs vs. 200,000 expected. Hourly wages however were up 3.8% YOY, the strongest gain in 5 years. On the news, the Euro, basis the Jun contract (ECM6), traded up to 12802 on the news, 40 ticks above the prior-day high while the Pound surged to 18636, 76 ticks above the Thursday day-session high. The US Dollar index (DXC) traded down to 8500. US Treasury Bonds, basis the Jun contract, USM6 are up over 1 pts from the Thursday low.

The major currencies are pressing the levels mentioned yesterday at 12825-12925, 18625-18725 and 8500-8525 for the Euro, Pound and US Dollar respectively. Today the key intraday downside zones to monitor are 12770-12785, 18575-18600 and 8530-8540. Note that 12760, 18560 and 8545 are the most significant trading levels. For those watching the Loonie (Canadian Dollar CDM6), 9020-9025 remains the most significant support area.

With all the economic news out and the markets are heading into the weekend, look for choppy trading for the balance of the session unless the aforementioned levels fail.

Showtime – Non-Farm Payrolls – 05.05.06

US Treasury notes/bonds (TY #F and US #F), US Dollar and major currencies are at or nearing critical levels.  Tomorrow morning at 0830ET the US non-farm payrolls numbers are released.  Strap on your speed-jeans, this could be a wild one!  The Jan-May 2005 levels are the keys.  For the Euro, Pound and US Dollar, the major zones to watch are 12825-12925, 18625-18725 and 8500-8525 respectively.  It’s been quite some time since we’ve had a 2-pts move in the US Treasuries.  Today may be the day and if so, the currencies will join the ballistic reaction.

* Note that since the earlier intraday post, ECM6 and BPM6 set new weekly highs at 12762 and 18560 while the DXC hit 8531.  With less than 30 mins to the pit-session close the million dollar question is "who will jump ship – the longs that are in control or those caught short?".  Logic would say the shorts, but anything is possible in front of such a key economic number.

Crude Oil – Stick a Fork in It?

Back in mid-April, crude oil (CL #F – continuos contract) broke through the Sept 05, post-Katrina highs setting up a potential test to 7750-8500/bbl. On 04.24.06, a new contract-high of 7535 was set with a retest on 05.03.06 failing at 7499 before reversing lower on strong API inventory numbers. For the day, the contract closed down over 200/bbl. Today, its been working its way lower since the open, setting a 7010 low so far. What’s next?

The long-term trend to the upside has been very strong since about Apr 2004 when it broke above 3500/bbl with the inception of this long-term uptrend rooted in late-1999 to early-2000 lows. The short-term trend has been in effect since the mid-Feb 2006 lows. Is the trend finally coming to an end? It is too early to tell as yet, since turning this upside momentum is about as easy as turning a super-tanker on a dime. However, for the very short-term watch for a close of sub-6975 as a warning sign that the fat lady is warming up her vocal chords. A sub-6750 daily close turns the short-term momentum down. Do not be over-aggressive in looking for the ultimate top though. The long-term trend has seen several 1200-1500/bbl pullbacks before resuming the move higher. Therefore, a daily close below at least 6150-6450 is required to establish a long-term top with a sub-6000 close confirming.