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Showing posts from August, 2015

Major Crude Reversal: Technicals and Sentiment

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Here we are once again. It is the end of August. The start of a new week, a refreshing restart to markets that were in turmoil just a week before.Confidence in securities seems to be brimming as investors end their sell-off that crashed the stock market earlier in the month. As August ends, the Dow Jones Industrial average records its weakest performance in the history of this summer month (months where seasonality patterns typically show an increase in overall demand). The real story is crude oil and the turn around it has managed in the last few days. Throughout the summer months and despite the summer driving, the WTI price fell to sub-$40 price levels. In the past three trading sessions, prices recovered 27% to $48.51 a barrel. Today alone, investors sparked a rally of 7.28% or $3.29. Brent crude oil showed the same gains as it rose back above $50 on positive sentiment regarding fundamental data. Today's movement sent prices above 30-day and 7-day moving averages which still r…

The Market: A Retreating Bear And A Surging Bull

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After reviewing this week in the markets, one will not find it hard to write about the volatility and waves of sentiment that defined the past five trading days. The Dow Jones Industrial Average ranged from 15,446 to 16,650, a 1,204 point difference over a trading period of about 40 hours. That's about 30 points an hour without counting retracements. It's fair to say now that the worst is over as corrections ease back over the 7-day short-term trend line, inching closer to the 30-day moving average. Volatility will begin to rescind into the oblivion of the recent past as investor keep their eyes on the Chinese recession as well as the Federal Reserves musings on rate hikes.While U.S. stocks were getting beat up in every sector, the crude oil price posted surprising results with the global market surge that immediately followed the crash. A chart from WSJ shows the phenomenon best:
It took 3 trading weeks to drop the WTI benchmark price to its low, and only 5 days to record a s…

Buy Cheap Energy While You Can

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Good news all around the markets today as everyone seems to be seeing green. The plantlike growth that has stemmed from the major corrections didn't come easy as Chinese and U.S. stocks had to see buds worth billions of dollars nipped before blooming could occur. The Dow Jones Industrial Average, Standard and Poor's 500, and NASDAQ all saw significant gains up to 2% upon opening and throughout the morning. Technicals on the indices reveal the relaxation of oversold momentum after the crash as the RSI statistics increase to the early 40's. MACD indicators reveal similar momentum shifts as a trough formed two days ago forms into a smooth parabolic shape on the upside. Investors will be wondering how far the handle will increase as retracements are already above the 50% levels for DJIA, S&P, and NASDAQ. The exchange has formed a perfect bull market for traders buying at the bottom on the 25th and making windfall profits in every industry. If that's not the case, losin…

Emotional Surges for WTI and DJIA

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Domestic markets appear to stabilize a bit today as the Dow Jones threatens to break through the 16,000 point level just a 1,000 points below where it had been all year. Glancing at the global Dow Jones index reveals the alleviation of ideas of heightened volatility that could have come as a result of Chinese financial problems. The taste test sampling international markets is down only 0.49% despite losses of 7.48% for the past five days. Crude markets showed signed of life as Brent and WTI benchmarks both increased at +0.68 and +0.42 respectively. More stability permeates the oil markets as Exxon and Chevron are among the top movers in the U.S. stock market (XOM +$3.79, +5.52%; CVX +$3.07, +4.38%). Oil and natural gas companies posted significant gains overall with XOI and XNG gaining over 2.5% of price lost in the past three days


A look at the high, low, open, and settlement prices over the past five days reveals the reversal of a new trend after a recovery from the global markets …

Dow and WTI Trends: SMA

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How does sentiment change so quickly? The stock market is the most volatile arena in the world where feelings reverse and intensify in an instant. Going from losing 1000 points the day before, the Dow Jones Industrial Average shows a strong 350 point surge just 24 hours later. Investors flip from selling in bulk to buying into positions that seem firmer than they were just a week ago. Grou psychology is a funny thing. Earlier in the day when North American traders were sleeping, the Chinese market continued a bearish trend with losses as large as 6.4% at the opening of the market. Just a few hours later, the Chinese government enacted reactionary countercyclical monetary policy by reducing interest rates and bank reserve ratios. Just like that, the New York Stock Exchange erupted in a fit of bullish surges.Plotting various simple moving averages (90d, 30d, 7d) over the past 3 months allows the identification of various short term and long term trends that have been hard to identify in…

Crude Tumbles, Law of Small Numbers

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We resume the financial week with stock losses to add onto the market correction in both the United States and China. The numbers explain it better than I do. China's Shanghai Composite Index dipped 297.84 points to 3209.91 (a -8.49% loss). The Dow Jones Industrial saw losses up to 1000 points in reaction to the Chinese rout but are settling down about 200 points instead. The 1.5% loss comes after a 500 point loss at the end of last week. Dow levels below 15,000 accompanied by Chinese recession threats since the devaluation of the yuan send investors' memories to crashes in the past with a BBC reporter comparing today to the flash crash in 2010. The stories don't stop there. Oil and gas investors will be worried more as the WTI and Brent crude benchmarks extend prolific losses on the day amidst the global market conundrum. A little bit over halfway on the day, WTI stands at $1.17 or -2.92% and Brent maintains a loss of $1.55 or -3.34% attempting to recover larger losses th…

Analysis of Diversified Portfolios: CHK, ECA, UPL, and WPX

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If there is one sector of the economy laden with mousetraps with balls of sour cheese, that sector right now would be the energy industry. Cheap oil prices have pervaded the speculation of traders looking to send their money into the energy sector. Looking back at the last earnings period reveals a massive sell-off of companies that used to be some of the most profitable in the entire stock market. Now, decreasing revenue and razor thin margins have been demolished by cheap crude oil prices. That was a month ago when oil prices still drifted around $50. Ten dollars lower, $40 futures contract endanger the ability to hedge against low prices that could be below operating costs. This article will be focused on energy companies that show the potential to survive in the slump. Because the overall trend is so far bearish, an inevitable uptrend can be an easy road to profits if the right stock is chosen. We'll be looking at some cheap investments (share price under $10) by analyzing per…

Dow, WTI Major Losses Today

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Losses were the name of the game today, but the markets today acted very seriously today. If the stock exchange had agency, investors would feel as if a ground war had been waged on portfolios across the financial sector. The Dow Jones slid over 500 points today, reversing gains over the past couple months. From highs to a yearly low, today's movement has been called a major correction of speculative gains. The correction was fueled mostly by concerns over global growth augmented by the Chinese stock market and dampened projections for growth. Most of the speculation began after the devaluation of the yuan about a week ago, but market health and volatility has been shaky with the oil slump. As an input for most companies, low oil prices affect the market by reducing the inflation of prices and wages because of cheap energy. Although more demand and consumption are predicted with lower gas prices, dragging in the energy sector can play a role in weakening the economic condition. S…

Response to @ANorthInvestments

If you haven't hedged already, then margins are going to be especially squeezed. There is a lot of downward pressure on / WTI prices, and crude oil through Cushing will be very cheap in the next year. The best market for oil and gas companies right now is the global market because of the spread. If exports are opened, there would be a huge institutional movement into the Brent futures market which would reduce the spread and help alleviate some downward pressure on WTI. Time will definitely be the best solution as I predict WTI to be back around $45 at the end of the year with better supply news. Diversification is another avenue to save growth. I think the oil services with established natural gas infrastructure are in the best spot right now. Energy prices are extremely deflated now, but crude oil saturation will experience the longest effects. Driving down costs is extremely important so that companies don't have to take their chances on waiting to hedge. In these times, pr…

Growth Economics in the Energy Sector

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The oil markets today are heavily embattled with the sentiment over Chinese market and moves to buy into cheap oil positions. As of the first hour of market opening on Tuesday, the WTI spot price inches 0.14% lower with more losses on the Brent end down 0.78%. Most of the bearish pressure comes from the Chinese stock index opening with 6% losses, but overall low prices in the market are stocking up bullish confidence in a slight reversal. ETFs follow the same pattern as the jaded market holds on to a neutral day. Technical traders will be looking at indicators for signals of a support price where profits will come from a bounce. In the end, it's all cyclical with a tinge of randomness, but a saturated market will keep any rebounds in check.Speculation in the near future will be inhibited by the pressure of supply and demand numbers that come out in EIA reports tomorrow. The good news is, all it will take for WTI price increases is negative rig utilization data. I would bet on one …

Learning From the Past

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This week in the crude oil spot price Monday opens with an initial loss of around 1.2%. A dead market with less than one hundred thousand trades on the New York Mercantile Exchange is lulled once more into sleep where nightmares are dreamed up and market sentiment reacts further to nightmare fundamentals. One has to wonder when the market has determined an equilibrium price because supply and demand energy data is remaining stable with tiny increases in rig count and similar sized decreases in overall stocks. Reacting to downward movement, the oil and gas industry shows more weakness as XOI (Oil Industry Index) loses 6.65 points or 0.54%, the biggest loser currently Chevron down 1.08%. Although, some companies show small gains including Marathon. Phillips 66, Valero, and Exxon-Mobil mostly likely because of the small gains in gasoline prices from the shutdown of BP's facility. Natural gas contract prices and its respective index show similar losses to a smaller degree (XNG losing …

OPEC's Demise and the U.S.'s Rise in Energy Policy

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A year earlier, crude oil analysts would have never believed in a bear market with spot prices dropping to almost $40 a barrel less than half the 2014 price. No, before the fracking revolution in North America, analysts knew an era of slippery market economics controlled by an oil cartel that controlled a third of the world's oil supply. But they weren't a cartel, they were a faucet that chose its own flow in order to manipulate profits in their favor. So they were a cartel and analysts and oilmen and their corporations played it like they were. They, the men behind the fracking glut, saw it as an inevitability, a process of technology that pushed peak oil off into the future. OPEC responded in a different way. To them, fracking was just a threat to their market share from a country that used to be their favorite customer. When prices started to drop in mid-2014, onlookers waited for OPEC to preserve their profitable margins and reduce production as they had done before, but i…

Crude Oil's Pulse

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Typically when a stock is graded against the market for volatility and performance, traders compare percentage changes between that stock and the Dow Jones Industrial Average which represents a pulse if you will of the market. The Dow Jones index is up 0.28% points on a favorable day in the markets. Crude oil's WTI price is up around 0.20 as well with the news of the crumbling oil export ban sponsoring new trade with Mexico. Although the movements may not have a direct connection, market health can still play a crucial role in the fundamental side of crude oil price. In reviewing the financial crash of 2008, a tanking stock market had tremendous deflationary pressure on the WTI crude oil price. Demand projections dropped significantly in the aftermath of the crisis as well as consumption tapering off with consumers and businesses spending conservatively. With the recovery of the global financial system, WTI price stabilized at the previous higher price until it continued into the …

Natural Gas During the Slump

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Crude oil prices posted modest gains as a quiet market responded to strong demand data from international reports. After an injurious reaction to the devaluation of the yuan, WTI prices opened just above $43.00 and struggle to maintain any gains as the day continues. Demand reports came from significant consumption increases due to extremely low spot prices. Also today. natural gas prices rose as modestly as its crude counterpart did. This can probably be attributed to positive demand statistics as well. With gains in both categories, both industries experienced positive movements today with the oil and gas index (XOI) gaining 1.2% and the natural gas index (XNG) adding 1.5%. For both indexes, there were 18 winners and 2 losers on the day, a strikingly similar comparison.



The charts above are excerpts of the oil industry index and the natural gas index, and if I never made that distinction, one might never tell the difference between these charts. It is clear from the patterns above t…

Natural Gas versus Crude Oil

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Today in the crude oil markets, oil takes a tumble that reverses the gains of yesterday after the Chinese release the news of their devaluation of the yuan. As a result of the weakening of the Chinese currency. speculation of oil demand has decreased. Because oil is priced in the dollar, barrels of oil in the future will be more expensive due to the new exchange rate. Brent and WTI both reacted negatively to the change in fundamentals. This news is coupled with constant reports of weak Chinese stock performance that spur speculators to react bearishly. But such news is predictable especially after a false gain yesterday confused commodity experts fixated on fundamental factors.

Today, I wanted to do some analysis of the natural gas contract price which is traded alongside WTI light crude oil on the New York Mercantile Exchange. More specifically, I was interested in comparing price movements between the two commodities in the past 6 months. Both commodities are inputs in the energy se…

Market Psychology: Part 2

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Earlier today I discussed the jump in WTI price after a week of losses amounting to over 6%. Many securities would consider a 2% increase in their price over one market day to be a significant movement, but we see in the aura surrounding spot price for Cushing sweet, light crude a different story. Reflecting on supply data from the week before and poor demand fundamentals from China, financial news outlets don't have any positive news to accompany the gains today. Wall Street Journal's headline article was a report on crude oil futures and how contracts that won't be fulfilled in one to two years are being priced below their counterparts in 2015. Like pessimistic onlookers in the eye of a hurricane, analysts and economists fail to acknowledge the respite provided by the market today. So instead of reading how the Brent crude price jumped over 3% today, investors, the minds behind what drives price rolling across the ticker, are informed how refinery use is at maximum capac…

WTI Price Up From Momentum: Part 1

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Last week, crude oil price dove to yearly lows confirming bearish sentiment across the market in support of recent sell-offs. My last article described the extremely poor performance and the impetus behind it, fundamental changes in the market. Supply increases and a stronger dollar closed the WTI spot price at $43.87, a disparity of 1.8% from the previous day. The first day of an August week brought much better news. A positive correction over 2% reversed some of the losses of last week and look to push prices to the $45 level. I call it a correction because of the heavy speculation that dragged prices to extremely oversold regions. Most indicators exhibiting momentum suggested that a short burst up was in store. The standard Relative Strength Index ended below 25 which is well below the typical oversold indicator of 30.
The chart of the WTI spot price shows the movement for Monday, August 10, 2015. At the opening. we see an initial jump in the price that represents a correction abov…

Jobs, Supply Reports

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As the end of the work week comes closer, oil investors look for a tunnel to duck into to make a quick exit. The first piece of news on the day reports an increase of 215,000 new jobs in the United States. To go with the positive labor numbers, the dollar swelled against foreign currencies as the positive economic news whispered hope of recovery (and interest rate increase). In the end, the jobs report served as a validation for Federal Reserve chairs that spoke earlier in July on the tough position in which the slow recovery had put them. Crude oil, in response, slid upon opening as well as the DJIA which reacted to bearish signals of interest rate increases. At 1:00 p.m. E.S.T., the Energy Information Administration released supply information, and to the further dismay of crude investors, the data showed a slight increase in rig count. Despite a 60%  decrease in utilization data from a year ago, the market still remains oversupplied and over speculated. Further details from the EIA…

The Oil Industry's Hangover

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There's not much to say for crude this week as dampened spirits wait for some good news to turn the market around. No large movements out of the $40 price level look hopeful as supply data from the EIA's monthly report looms over traders. At the same time, executives and their employees of oil companies look stare at oil prices with their tails between their legs, one dreading major losses in revenue, the other praying he doesn't get laid off. Meanwhile, Federal Reserve representatives slowly inch towards forcing their own hands to raise interest rates, a move that will limit expansion in an already tough time for the market. While crude oil looks to rebound modestly today, the crowd will surely wait and pray for some stability to come out of the slump but not yet, as prices still need to lift off from underneath the pressure they have been experiencing. Many financial institutions are now lowering price projections to a meager $50, for some of those institutions, this pre…

Climate Change, Policy Changes

The cause for climate change can be said to be vainglorious for some, but others lead its valiant charge in the name humanity. President Obama has made it a noble cause, one that he has promised will mark his legacy. As a result, his administration has finally realized its efforts to assist in the conquest of evil carbon emissions. In order to do that, Obama will push new regulations in the energy sector, looking for a major reduction in carbon-dioxide based pollution, a push to invest in new markets for renewable resources, and a place in climate control history. Although introducing significant regulations on the energy industry may not be historic, it will surely change how and what will power American homes. Currently, the United States uses coal to support 18% of its energy consumption, and in electricity generation, coal is the source of 368.5 million megawatt hours. This high carbon fuel source supported as much as 50% of electricity generation in 2000 but has been on the decli…