Crude Oil - Long Term
Long Term Support Breached
For many weeks now I have been cautioning that the chances of a significant correction in the Oil market are indeed real. Perhaps I should be careful what I wish for because we have in fact now encountered some stiff headwinds in the Oil market over the past 2 weeks and I have not enjoyed it one bit. As a matter of fact, I have been feeling absolutely miserable of late.
However, I do not think that Oil will fall apart. OPEC this week has voiced concerns to this effect saying that they will not allow it to slip under $60 on a sustained basis. The global economy keeps using ever more of the stuff and it is getting more and more expensive to find the lucrative big deposits as the recent Jack#2 well in the Gulf has demonstrated with its $200 million price tag. I say from here, we encounter a period of sideways price action as we strive to get a clearer picture on global economic growth going into 2007. And frankly, this kind of scenario will be quite fine with me as a market trader. There are a good many energy stocks out there right now that have been pummeled and as they recover I will be pointing them out to my subscribers. I will be seeking to play the $1 and $2 bounces using 500 or more shares in a margin account. Stay tuned....
Natural Gas - Long Term
The Natural Gas story really boils down to a simple set of economic observations. We have had no Hurricane related disruptions to production in the Gulf and gas producers have continued to inject gas into storage. Supply now well exceeds demand and a la Economics 101, price has fallen.
These low prices are now causing gas producers to scale back on production and to postpone drilling decisions. Eventually the supply situation will be resolved and a new price level will be established. This is what Adam Smith - the father of modern Economic thinking referred to when he wrote of the "invisible hand" that guides the marketplace. Until we see the full effect of this invisible hand, I am advising my subscribers to be extremely cautious towards gas weighted producers.
Crude Oil - Intermediate Term
A Closer Look at Support
The above chart is simply a continuation of what I have been showing for several weeks now. I think we are completing a very tortuous, agonizing "c" wave down in a complex Elliott Wave pattern. We seem to be holding support (see Long Term comments above) and we are now recovering from a grossly oversold situation. As I said above, get set to play the bounces on energy stocks. Just remember, be like Jack of nursery rhyme fame and fortune - nimble and quick.
Natural Gas - Intermediate Term
A Tight Wedge
Inventory numbers were released this week as usual. And again, we saw an further addition to inventory. We are now clearly approaching peak storage capacity and we are there a full month ahead schedule. Normally we peak out in November sometime. Here we are October 1st and we are nearing peak storage.
One day soon, I really hope I have some good news for you. In the interim, be careful out there with energy stocks weighted towards Gas.
This Week - For my Regular Subscribers
The venerable Henry Groppe recently alluded to how the markets will seek out alternatives to higher priced oil. This week I review the idea of shale gas with my subscribers and highlight a small Canadian exploration company that just may be onto something significant in Canada.
The "crack spread". What is this rather strange sounding thing? This week for my subscribers I again review the "crack spread" and show how it can signal turns in the Oil market. This is a valuable tool that many people have never heard of.
This week I again update readers on the broader energy equity markets by way of the 3 ETF's that I follow.
Coal Bed Methane in Vietnam? Could be so. And this week I introduce the Canadian company that stands to benefit.
And, this week I continue my look at alternative energy with a look at two more Uranium companies. One is thinking outside the Box while the other is sticking with the old adage - the best place to find a new mine is right next to an old one.
If you believe like I do that energy is the lifeblood of an economy, give some serious thought to subscribing to the newsletter products available to you at www.themarkettraders.com. As we stabilize in the energy markets, use the ideas that I present to my subscribers to take advantage of the next upswing in the energy sector. Use the ideas that Merv expounds to his subscribers in his Precious Metals newsletter to take advantage of the next upswing in metals prices. Each week I take an in depth look at the energy markets and even profile as many as 9 different stocks to consider as trading candidates. All in all, excellent value for your hard earned dollar and an excellent website chock full of information.