Crude Oil - Long Term
Still Looking Vulnerable
Little has changed this week to materially alter my sentiments expressed last week. Yes, the longer term trend still arguably is up, but this trend continues to look vulnerable to some sort of setback. Evidence of a serious slowdown in the housing sector, continues to mount in the US. Market watchers are already busy drawing parallels between housing market performance and economic performance / equity market performance. Factored into this effort is a sense that demand for energy will slow as the economy slows. Combine this with the notion that the current market rally may be running its course and that we may be heading into a 4 year cyclical bottom in the equity markets and you have the potential for a pullback in energy prices. Any violation of $69.50 could see us test the lower bounds of the up-trending regression channel that extends back to 2003. Heads up and watch closely.
Natural Gas - Long Term
Looking Vulnerable Too...
August is nearly gone and the hottest weather of the year is now well behind us. The Natural Gas market still remains below its 18 period moving average on this continuous front month Futures chart. RSI still remains stuck below "50". My sentiments remain little changed from last week and I remain only cautiously friendly to the Natural Gas market. My concern is that we go into the September/October time frame with ample Gas in storage, avoid serious Hurricane activity and continue to build inventory from there.
Crude Oil - Intermediate Term
Watch the Support at $71 ...
On the intermediate level we are also looking prone to a setback. Some very fragile support exists at the $71 level. Note on the above chart how we have tested the $71 level twice now. Markets made a valiant effort to hold above $71 this week on news of some tropical depressions forming in the Caribbean. However, this effort was not met with much follow-through success. We remain below the Lower Keltner Band. We remain underneath the 18 day moving average basis the October crude contract and we remain below the up-trend line that goes back to early 2006. RSI and DMI both continue to indicate poor momentum.
Pay close attention to the $71 support level. Any violation of this level will for sure prove problematic to energy related equities. Some may argue that energy firms will still be making gobs of cash even at $65 Oil. But in the financial markets, everything is relative. A drop in Crude prices to the mid $60's per barrel would be a 10% drop from current levels. Market players would focus intently on this 10% dynamic and energy equities would suffer accordingly.
Natural Gas - Intermediate Term
News of some potential storm action in the Caribbean was enough to get the Natural Gas market excited late this week. However, Friday's close was well off the Intra-day high which I find disconcerting. Thus, I still remain only cautiously optimistic and cautiously friendly towards Natural Gas in the Intermediate term.
The next 4 weeks are critical. If we are going to see some Hurricane activity in the Gulf, we need to see it now. If we fail to see meaningful storm activity in the next few weeks, we are going to see the deferred Futures months begin to trade down to come into line with the October front month contract. Market players will then turn their focus to amounts of Gas in storage and Natural Gas related equities could suffer. Again, all is relative in these markets as far as the major market movers are concerned.
This Week - For my Regular Subscribers
Something new for this Canadian Income Trust. This week for my regular subscribers I introduce a Canadian energy Trust and talk about its latest acquisition that takes it well outside the realm of what one would expect of an energy Trust.
More success in Argentina. Last week I introduced a Canadian company making huge strides in Argentina. This week flow testing on the most recent well provided some mind warping numbers.
This week I again update readers on the broader energy equity markets by way of the 3 ETF's that I follow. Definitely some concerns here.
Laggards become leaders. There is a school of thought that says those stocks that lagged during the most recent market rally will lead during the next rally. This week, for my subscribers, I follow this line of thinking as it pertains to energy service stocks. Most have lagged over the past several months, despite excellent revenues and cash flows. This week I review some laggards and take a look at their charts.
This week I take a different perspective on alternative energy and start to look at Uranium. I introduce 3 companies that are involved with Uranium and show how they are shaping up on the charts.
To keep fully abreast of what is happening in the energy markets, consider subscribing to Merv's Energy Central with Meridian. Visit www.themarkettraders.com for details.