I have created a new blog for the S&P 500 Index analysis at http://sandp500futures.blogspot.com/. Thank you for your visit and comment.
Dr. Chen
Saturday, September 18, 2010
Tuesday, August 31, 2010
S&P 500 Index Analysis (8/31/2010)
Analysis:
The market initially did what yesterday's analysis predicted. As the Consumer Confidence Index did not slip below 50, and the Chicago PMI was marginally better than consensus forecast, the market did take off after 10 a.m. But the market's rise was checked when the FOMC meeting minute was released at 2 p.m. and finished the day flat. After the last seven trading days the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040. Looking ahead to tomorrow, the PMI will likely surprise on the upside, which will prod the market higher, but any rise will be checked and partially offset by the Construction Spending release.
Strategy:
Hold long to reverse at 1,080
The market initially did what yesterday's analysis predicted. As the Consumer Confidence Index did not slip below 50, and the Chicago PMI was marginally better than consensus forecast, the market did take off after 10 a.m. But the market's rise was checked when the FOMC meeting minute was released at 2 p.m. and finished the day flat. After the last seven trading days the Bears should feel tired, as the market stubbornly refused to follow any prodding to plunge below 1,040. Looking ahead to tomorrow, the PMI will likely surprise on the upside, which will prod the market higher, but any rise will be checked and partially offset by the Construction Spending release.
Strategy:
Hold long to reverse at 1,080
Monday, August 30, 2010
S&P 500 Index Analysis (8/30/2010)
Analysis:
True to previous day's analysis, the market built on Friday's gain to top 1,072 overnight before fading prior to the market open today. The conventional wisdom is that the market sold out on the news of a meager personal spending in July, but the sell-out seems to have been overdone, especially in light of the continuing wave of mergers which the market largely ignored today. Looking ahead tomorrow, barring the scenario of a dip of Consumer Confidence Index below 50, the Chicago PMI will likely surprise on the upside around 59, which will provide much needed confidence booster for the market to recoup all today's losses.
Strategy:
Hold long to reverse at 1,082
True to previous day's analysis, the market built on Friday's gain to top 1,072 overnight before fading prior to the market open today. The conventional wisdom is that the market sold out on the news of a meager personal spending in July, but the sell-out seems to have been overdone, especially in light of the continuing wave of mergers which the market largely ignored today. Looking ahead tomorrow, barring the scenario of a dip of Consumer Confidence Index below 50, the Chicago PMI will likely surprise on the upside around 59, which will provide much needed confidence booster for the market to recoup all today's losses.
Strategy:
Hold long to reverse at 1,082
Friday, August 27, 2010
S&P 500 Index Analysis (8/27/2010)
Analysis:
Today the S&P initially acted strangely, and it is most puzzling when it
dropped sharply after 10 a.m., perhaps having to do with Intel's ill-timed
announcement at 9:58 a.m. The better than expected downwardly revised Q2 GDP
to 1.6% provided a sound backdrop for the Bulls to start with, and Chairman
Bernanke's comments at 10 a.m. gave assurance to the much battered Bulls, so
the market never looked back after a brief swoon at 10 a.m. Now that the
market has bottomed out from the 1,040 area, it will continue to build on the
upward momentum on Monday.
Strategy:
Hold a long position with a limit order to reverse at 1,082
Today the S&P initially acted strangely, and it is most puzzling when it
dropped sharply after 10 a.m., perhaps having to do with Intel's ill-timed
announcement at 9:58 a.m. The better than expected downwardly revised Q2 GDP
to 1.6% provided a sound backdrop for the Bulls to start with, and Chairman
Bernanke's comments at 10 a.m. gave assurance to the much battered Bulls, so
the market never looked back after a brief swoon at 10 a.m. Now that the
market has bottomed out from the 1,040 area, it will continue to build on the
upward momentum on Monday.
Strategy:
Hold a long position with a limit order to reverse at 1,082
Thursday, April 12, 2007
Crude Oil Market Analysis (4/12/07)
Mea Culpa!
COMA was bullish and interpreted yesterday’s DOE report as “EXTREMELY bullish” and was seeking to enter the market on the long side by buying at a dip—at $60.40. As a result COMA focused on the forecast that today’s IEA report would revise down 2007 global oil demand--which was correct as the IEA revised down 2007 global demand by 250,000 barrels per day—but chose not to forecast that today’s IEA report would also warn a continued tightening of global oil supply due to OPEC production cut—from 26.77 million barrels per day in Feb. to 26.55 million barrels per day in March among the OPEC-10.
The market did not dip to provide a buying opportunity but instead took off on the bullish IEA report to break resistance at $62.30 and stayed comfortably above $62.50 until the news that ConocoPhillips shut several of its oil processing units in Wilmington, California gave the market another push in the last hour of trading to finish $1.84 higher at $63.85.
Fundamentally, the tightening of global oil supply leading up to the upcoming summer driving season and the uninterrupted refinery glitches will provide a solid support to the market.
Technically, now that the market trades above the resistance at $64.00, the gasoline’s breakaway from $2.1500 will lead the crude market to break away from $64.00 resistance until the gasoline market tests the next resistance at $2.2800.
Strategy: Buy at market at $64.12 with a stop at $63.15.
Dr. Chen
For the archive of Crude Oil Market Analyses, please visit http://energyfutures.blogspot.com/
COMA was bullish and interpreted yesterday’s DOE report as “EXTREMELY bullish” and was seeking to enter the market on the long side by buying at a dip—at $60.40. As a result COMA focused on the forecast that today’s IEA report would revise down 2007 global oil demand--which was correct as the IEA revised down 2007 global demand by 250,000 barrels per day—but chose not to forecast that today’s IEA report would also warn a continued tightening of global oil supply due to OPEC production cut—from 26.77 million barrels per day in Feb. to 26.55 million barrels per day in March among the OPEC-10.
The market did not dip to provide a buying opportunity but instead took off on the bullish IEA report to break resistance at $62.30 and stayed comfortably above $62.50 until the news that ConocoPhillips shut several of its oil processing units in Wilmington, California gave the market another push in the last hour of trading to finish $1.84 higher at $63.85.
Fundamentally, the tightening of global oil supply leading up to the upcoming summer driving season and the uninterrupted refinery glitches will provide a solid support to the market.
Technically, now that the market trades above the resistance at $64.00, the gasoline’s breakaway from $2.1500 will lead the crude market to break away from $64.00 resistance until the gasoline market tests the next resistance at $2.2800.
Strategy: Buy at market at $64.12 with a stop at $63.15.
Dr. Chen
For the archive of Crude Oil Market Analyses, please visit http://energyfutures.blogspot.com/
Wednesday, April 11, 2007
Crude Oil Market Analysis (4/11/07)
Today’s market is “much ado about nothing.”
Today’s market followed yesterday’s forecast that “tomorrow’s DOE report should be supportive, and the market risk remains on the upside.”
Refinery input of crude oil was 15.1 million barrels per day, in line with COMA forecast of 15.0 million barrels per day, and was the first time it reached above 15.0 million barrels per day since Jan. 12, 2007. Crude oil import fell to 9.8 million barrels per day, in line with COMA forecast of a drop “below 10.0 million barrels per day.” The crude build of 0.7 million barrels falls within the COMA forecast range of a build of 0.5-1.8 million barrels.
Despite the increase in refinery turnaround to 88.4%, gasoline production fell to 8.5 million barrels per day, the lowest output since Oct. 7, 2005 after Hurricane Katrina. Import also fell to 953,000 barrels per day, resulting in a draw of 5.5 million barrels, the largest draw since Aug. 22, 2003, to 199.7 million barrels, the first time the inventory falls below 200.0 million barrels since Nov. 25, 2005.
The increased refinery turnaround did cause an increase in distillate production to 4.2 million barrels per day, slightly above COMA forecast of 4.1 million barrels per day. The drop in import to 259,000 barrels per day was larger than COMA’s forecast drop to “just above 300,000 barrels per day.” The record cold temperature in the Northeast did cause an increase in demand but only to 4.3 million barrels per day, less than COMA forecast of 4.4 million barrels per day. The result was an inventory build of 100,000 barrels instead of COMA forecast of a draw of 2.8 million barrels.
Today’s DOE report was EXTREMELY bullish, as the crude build was smaller than the Street forecasts, and gasoline draw was much larger than the Street forecasts. Gasoline did what was expected—jumping to $2.1700 after the report, but the jump in gasoline price did not impress the crude market, as the market could not stay above yesterday’s high of $62.28 after reaching a high of $62.56 and settled $0.12 higher at $62.01.
The market may have focused on the recovery in refinery turnaround and expect more products to be available when more refineries come back online. Two considerations may also have contributed to the market’s discount of the gasoline draw of 5.5 million barrels. One is that the draw of 5.5 million barrels may have been a technical necessity by refineries as they empty tanks of winter-grade gasoline for summer-grade gasoline, much as they did before May 2006 when they were switching product from MTBE to RBOB. A second consideration is that the consistent below-normal import level may soon end as the strike at French port has ended recently.
The failure of the crude market to stay above $62.28 despite the bullish report signals that the market wants to test the low at $61.35 again before rallying back to the mid-$60s.
Fundamentally, the supply of crude oil remains tight as refineries ramp up to produce more gasoline to meet record demand for the summer. As COMA briefly mentioned yesterday, the market is temporarily distorted by the bulging inventory in Cushing, Oklahoma of 27 million barrels, the highest level since record-keeping began in April 2004. The bulging inventory has caused the Brent crude premium to West Texas Intermediate to widen further today to $5.83 from yesterday’s $5.53. Once the inventory in Cushing begins to be drawn down, the market will move higher toward Brent price.
Technically, the market has difficulty to stay above $62.28 despite today’s bullish DOE report, so the market will break the low of April 9 and April 10 at $61.35 towards $60.13 support.
Tomorrow, the IEA’s monthly report will revise down the oil consumption growth for 2007 due to a slower growth in the world economy. If no bullish news springs the market to above $62.30, it will drop below $61.35 toward $60.13 support once all the stops are triggered at or below $61.00.
Strategy: Buy at $60.40 with a stop at $58.95.
Dr. Chen
For the archive of Crude Oil Market Analyses, please visit http://energyfutures.blogspot.com/
Today’s market followed yesterday’s forecast that “tomorrow’s DOE report should be supportive, and the market risk remains on the upside.”
Refinery input of crude oil was 15.1 million barrels per day, in line with COMA forecast of 15.0 million barrels per day, and was the first time it reached above 15.0 million barrels per day since Jan. 12, 2007. Crude oil import fell to 9.8 million barrels per day, in line with COMA forecast of a drop “below 10.0 million barrels per day.” The crude build of 0.7 million barrels falls within the COMA forecast range of a build of 0.5-1.8 million barrels.
Despite the increase in refinery turnaround to 88.4%, gasoline production fell to 8.5 million barrels per day, the lowest output since Oct. 7, 2005 after Hurricane Katrina. Import also fell to 953,000 barrels per day, resulting in a draw of 5.5 million barrels, the largest draw since Aug. 22, 2003, to 199.7 million barrels, the first time the inventory falls below 200.0 million barrels since Nov. 25, 2005.
The increased refinery turnaround did cause an increase in distillate production to 4.2 million barrels per day, slightly above COMA forecast of 4.1 million barrels per day. The drop in import to 259,000 barrels per day was larger than COMA’s forecast drop to “just above 300,000 barrels per day.” The record cold temperature in the Northeast did cause an increase in demand but only to 4.3 million barrels per day, less than COMA forecast of 4.4 million barrels per day. The result was an inventory build of 100,000 barrels instead of COMA forecast of a draw of 2.8 million barrels.
Today’s DOE report was EXTREMELY bullish, as the crude build was smaller than the Street forecasts, and gasoline draw was much larger than the Street forecasts. Gasoline did what was expected—jumping to $2.1700 after the report, but the jump in gasoline price did not impress the crude market, as the market could not stay above yesterday’s high of $62.28 after reaching a high of $62.56 and settled $0.12 higher at $62.01.
The market may have focused on the recovery in refinery turnaround and expect more products to be available when more refineries come back online. Two considerations may also have contributed to the market’s discount of the gasoline draw of 5.5 million barrels. One is that the draw of 5.5 million barrels may have been a technical necessity by refineries as they empty tanks of winter-grade gasoline for summer-grade gasoline, much as they did before May 2006 when they were switching product from MTBE to RBOB. A second consideration is that the consistent below-normal import level may soon end as the strike at French port has ended recently.
The failure of the crude market to stay above $62.28 despite the bullish report signals that the market wants to test the low at $61.35 again before rallying back to the mid-$60s.
Fundamentally, the supply of crude oil remains tight as refineries ramp up to produce more gasoline to meet record demand for the summer. As COMA briefly mentioned yesterday, the market is temporarily distorted by the bulging inventory in Cushing, Oklahoma of 27 million barrels, the highest level since record-keeping began in April 2004. The bulging inventory has caused the Brent crude premium to West Texas Intermediate to widen further today to $5.83 from yesterday’s $5.53. Once the inventory in Cushing begins to be drawn down, the market will move higher toward Brent price.
Technically, the market has difficulty to stay above $62.28 despite today’s bullish DOE report, so the market will break the low of April 9 and April 10 at $61.35 towards $60.13 support.
Tomorrow, the IEA’s monthly report will revise down the oil consumption growth for 2007 due to a slower growth in the world economy. If no bullish news springs the market to above $62.30, it will drop below $61.35 toward $60.13 support once all the stops are triggered at or below $61.00.
Strategy: Buy at $60.40 with a stop at $58.95.
Dr. Chen
For the archive of Crude Oil Market Analyses, please visit http://energyfutures.blogspot.com/
Tuesday, April 10, 2007
Crude Oil Market Analysis (4/10/07)
Today’s market was uneventful. The market held above yesterday’s low at $61.35 and slowly drifted upwards but could not break $62.30, the lows of March 26 and March 27 just before the market spiked to $68.09, and traded in a $0.93 range before settling $0.38 higher at $61.89.
Yesterday the market sold off by $2.77 despite the close of the European market. The $2.77 drop eclipsed the $2.75 drop on Jan. 3 and became the biggest one-day sell-off in dollar amount since Aug. 2005. Although analysts have attributed the sell-off to the delayed reaction to the release of British servicemen (including one woman) and the rollover of the Goldman Sacks Commodity Index, COMA would attribute the sell-off mostly to the unique situation in Cushing, Oklahoma where the storage facilities for West Texas Crude are about to reach their capacities, because the “delayed reaction” theory does not explain the high premium Brent Crude has over West Texas Crude--$5.53 as of today. Adding to the frenzied sell-off was long liquidation after a week in which the net longs increased by 26,496 contracts to a total of 66,675 contracts amidst an increase of 27,574 contracts in open interest when the market rose by $1.71.
Fundamentally, Iran’s continued defiance on the U.N.’s demand for its compliance of its nuclear program by announcing that it is aiming to install 50,000 centrifuges to enrich uranium and the ongoing unscheduled maintenance of many refineries, including BP’s 410,000 barrels per day refinery in Whiting, Indiana, Exxon Mobile’s 563,000 barrels per day refinery in Baytown, Texas, and Valero’s 158,000 barrels per day refinery in recovery from fire, all add support to the crude oil market. In addition, as the EIA pointed out today in its monthly Short Term Energy Outlook, the prospective limited gasoline supply this summer from importers due to their supplying other countries such as Iran, Nigeria, and Venezuela will also support the product market.
Technically, the market faces weak support at $61.35 and then a major support at $60.13. Resistance is at $63.75-$64.00.
In tomorrow’s DOE report the refinery input is likely to increase slightly to about 15.0 million barrels per day while the import drops below 10.0 million barrels per day, leaving a modest inventory build of 0.5-1.8 million barrels.
Gasoline production will recover to below 9.0 million barrels per day, as the crack spread has reached $23.54 today, the highest since Sept. 28, 2005. Import will likely increase to 1.1 million barrels per day while demand drops to $9.4 million barrels per day, leaving a draw of 1.5 million barrels, in line with the Wall Street forecast of a draw of 1.2-1.5 million barrels.
Distillate production will remain flat at 4.1 million barrels per day while import drops to just above 300,000 barrels per day. The demand will increase to just below 4.4 million barrels per day given the record low temperature last week, resulting an inventory draw of 2.8 million barrels, much larger than the Wall Street forecast of a draw of 900,000 barrels.
Overall, tomorrow’s DOE report should be supportive, and the market risk remains on the upside.
Strategy: Buy at $60.35 with a stop at $59.30.
Dr. Chen
Yesterday the market sold off by $2.77 despite the close of the European market. The $2.77 drop eclipsed the $2.75 drop on Jan. 3 and became the biggest one-day sell-off in dollar amount since Aug. 2005. Although analysts have attributed the sell-off to the delayed reaction to the release of British servicemen (including one woman) and the rollover of the Goldman Sacks Commodity Index, COMA would attribute the sell-off mostly to the unique situation in Cushing, Oklahoma where the storage facilities for West Texas Crude are about to reach their capacities, because the “delayed reaction” theory does not explain the high premium Brent Crude has over West Texas Crude--$5.53 as of today. Adding to the frenzied sell-off was long liquidation after a week in which the net longs increased by 26,496 contracts to a total of 66,675 contracts amidst an increase of 27,574 contracts in open interest when the market rose by $1.71.
Fundamentally, Iran’s continued defiance on the U.N.’s demand for its compliance of its nuclear program by announcing that it is aiming to install 50,000 centrifuges to enrich uranium and the ongoing unscheduled maintenance of many refineries, including BP’s 410,000 barrels per day refinery in Whiting, Indiana, Exxon Mobile’s 563,000 barrels per day refinery in Baytown, Texas, and Valero’s 158,000 barrels per day refinery in recovery from fire, all add support to the crude oil market. In addition, as the EIA pointed out today in its monthly Short Term Energy Outlook, the prospective limited gasoline supply this summer from importers due to their supplying other countries such as Iran, Nigeria, and Venezuela will also support the product market.
Technically, the market faces weak support at $61.35 and then a major support at $60.13. Resistance is at $63.75-$64.00.
In tomorrow’s DOE report the refinery input is likely to increase slightly to about 15.0 million barrels per day while the import drops below 10.0 million barrels per day, leaving a modest inventory build of 0.5-1.8 million barrels.
Gasoline production will recover to below 9.0 million barrels per day, as the crack spread has reached $23.54 today, the highest since Sept. 28, 2005. Import will likely increase to 1.1 million barrels per day while demand drops to $9.4 million barrels per day, leaving a draw of 1.5 million barrels, in line with the Wall Street forecast of a draw of 1.2-1.5 million barrels.
Distillate production will remain flat at 4.1 million barrels per day while import drops to just above 300,000 barrels per day. The demand will increase to just below 4.4 million barrels per day given the record low temperature last week, resulting an inventory draw of 2.8 million barrels, much larger than the Wall Street forecast of a draw of 900,000 barrels.
Overall, tomorrow’s DOE report should be supportive, and the market risk remains on the upside.
Strategy: Buy at $60.35 with a stop at $59.30.
Dr. Chen
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