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.

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.

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.

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.

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.