Slope Of Hope with Tim Knight

Economic Data, Oil Spill Push Crude Prices Higher at End of Week

Oil Market Summary for: 04/26/2010 to 04/30/2010

Stubbornly high crude oil inventories continued to stymie bulls through the middle of the week, but the market seized on positive economic data to push prices higher toward the end of the week.

The oil spill from a collapsed rig off the Gulf coast may also have played a role in firming prices. Analysts said that the spill could have a short-term impact on supply if it interfered with oil deliveries to Gulf coast refineries, and a longer-term impact if it led to new restrictions on offshore drilling.

The gains on Thursday and Friday enabled oil futures to offset the decline in the first part of the week and finish higher on the week, with the West Texas Intermediate benchmark June contract settling at $86.15 a barrel on Friday, compared with $85.12 a week ago. The contract traded below $82 at one point during the week.

The news Friday that consumer spending powered U.S. GDP growth to a 3.2% annual rate in the first quarter spurred oil prices to further gains after Thursday’s report of a continuing decline in jobless claims also boosted the outlook for oil demand. Analysts also cited the Federal Reserve’s upbeat assessment of the economic situation following the Federal Open Market Committee meeting on Wednesday.

But the weekly inventory report from the Energy Information Administration showed crude stocks up nearly 2 million barrels, with inventories at the New York Mercantile Exchange depot in Cushing, Oklahoma up by 450,000 barrels, and this weighed on the Nymex contract.

The high inventories at Cushing have enabled the European benchmark contract, the ICE Brent crude, which normally trades at a discount to the WTI contract, to overtake the Nymex contract, with the gap this week at times widening to more than $3 a barrel in favor of Brent oil. Brent crude settled at $87.11 on Friday.

The situation has also kept oil futures in contango – later-dated contracts are priced higher than the nearest month because traders expect prices to improve when inventories decline. The July contract on Nymex closed at $88.36 a barrel on Friday.

Oil prices rose on Friday even as stocks plummeted, with the Dow Jones Industrial Index accelerating its decline in late trading to finish down 158 points to 11,008 as financials were hit by news of a criminal probe of Goldman Sachs.

Source: http://oilprice.com/Energy/Oil-Prices/Economic-Data-Oil-Spill-Push-Crude-Prices-Higher-at-End-of-Week.html

Market Sickology

Let me start by saying how pleased I am that my conjecture yesterday about the market's near-term direction has been correct so far. As a reminder, here was my prediction (drawn in green).......

.....and here's what we've seen since then..................

Ahem. Pretty stunning, huh? How did I do it? With the KnightVision system, which I'm selling immediately for the low, low price of $49 per day! Operators are standing by! 1-800-TIM-RULZ

No, that's not it. My method was simple enough. I look at 5,000 charts every stinking week. I've been doing this for twenty years. Look at enough charts, and you get good at it after a while. I have looked at literally hundreds of thousands (God help me............) of charts in my trading lifetime. So my brain is full of this crap.

Now, listen, I've made plenty of "bold predictions" which were worth less than Lloyd Blankfein's good name. I declared in October, I think it was, that the S&P had topped out. Errr - -that wasn't the case. So as I'm standing here beating my chest about my oh-so-brilliant prediction, I do so with the knowledge that I've had lots of lame-o attempts at divining the market's next moves in the past.

The difference this time is that I was really, really confident of what was going to happen, just like I was back in mid-January when I stared at my 30" Apple monitor and felt a glow of assurance about what was coming next. It is truly gratifying to see things pan out so far. If the entire pattern completes, you'll have to forgive me if I put these charts up at least a few dozen more times in order to cluck about it.

There was a bit more to it, though. I mentioned getting a completely snarky email last week - - on the 23rd - - which, by the way, marked the exact day of the highest close on the Dow. On top of that - - and this actually had much more weight - - a stunning number of Slopers yesterday seemed to finally throw in the bear towel. I don't think I'd ever seen so many people saying - in their own words - "I give up. I'm sick of losing money. I'm joining the bull camp and am just going to buy all the dips."

They didn't say it to be funny or sarcastic; they were serious. And when Slopers...........the bears' bears .........surrender, well, things are bound to get interesting. So I was shorting like crazy during yesterday's ridiculous rally.

I have survived the past seven months by being very "light", committing only 30% to 50% of my cash to positions, and by avoiding options and leverage. It's been a losing stretch of time, but only a single digit percentage loss, and something from which I feel I can handily recover. No one likes a loss, but in the face of a 25% explosion on the Russell 2000 over the past seven months, I actually feel OK about it.

My point is that I am finally comfortable being 100% committed. Further, if things continue to break my way, I am comfortable pushing into leveraged territory. As a trader, I strive to lose money slowly and make money quickly. I have excelled at losing money (!) slowly over these months, but I believe things are setting us for some serious money-making. At least that's what I hope!

Anyway, it's been a good week, and I'm going to rest. I'm still stuck in France time, and getting up at 3:30 each morning is getting kind of old. Hopefully this weekend I can shake off this jet lag and resume a more human schedule. Have a good weekend.

April's End Bar

Shorting Hormel

 

Chart on Silver (by Mike Paulenoff)

It is staggering to think that spot gold prices have rocketed well beyond the January 1980 high, while spot silver prices are about 60% off of the 1980 high! Let’s notice that the silver price structure is heading for a confrontation with its long-term resistance line, now at $19.54, which if hurdled and sustained just might be the catalyst for upside acceleration that plays catch-up in a hurry with the advance in gold prices. In any case, my work points to an approaching confrontation with the 1980-2010 resistance.

The iShares Silver Trust (SLV) has hurdled its Dec-Apr resistance line at 18.05, and has traded above its prior high at 18.17 (from Apr 15). Both of these are technical signs of strength that point to upside acceleration that confronts much more important resistance along the March 2008-present trendline, now at 18.70/75.

 

Dow 150 Points from Major Trendline Failure

 

The Big Short - Lame Has-Been MSFT

 

IWM Breakout Failure and H&S Pattern

Two for one! Confutatis maledictis flammis acribus addictis.

GLD Continues Its Winning Ways

 

Keep it Coming