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Discussion Starter · #1 ·
Oil exploded to new highs again in Mondays session......US stock markets are set to open at the lowest level since the London train bombings....JC


SINGAPORE - U.S. crude prices surged 7 percent to a new record high above $70 a barrel in opening trade on Monday as Hurricane Katrina, one of the most powerful U.S. storms ever, shut in oil production and closed refineries.

Oil futures on the New York Mercantile Exchange soared nearly $5 to a new record high of $70.80 a barrel, above last week’s previous record $68, after producers and refiners shut down operations ahead of the maximum power Category 5 hurricane.

It was later trading up $3.72 a barrel, 5.6 percent, at $69.85 as traders feared the storm could do lasting damage to infrastructure, further straining an industry that has struggled to keep up with robust demand growth for the past two years.

Oil producers in the U.S. Gulf of Mexico have closed down 633,000 barrels per day (bpd) of production capacity, about 42 percent of the total in the Gulf, the companies said on Sunday. The Gulf provides about a quarter of total U.S. domestic crude production.

Seven southeast Louisiana refineries with a combined daily refining capacity of 1.449 million bpd were shut, about 8.5 percent of U.S. crude processing capacity.

The Louisiana Offshore Oil Port (LOOP), a major crude importing facility, also shut down.

Katrina, the 11th named storm in what’s expected to be an unusually severe season, strengthened at the weekend into a rare Category 5 storm, churning up winds of nearly 165 miles per hour (mph) (270 kph), the National Hurricane Center said.

The storm revived memories of last year’s Hurricane Ivan, a Category 3 storm that ripped up pipelines and platforms in the Gulf of Mexico, disrupting production for months.

Katrina, which was measured as one of the four strongest storms on record, was expected to hit land at around sunrise on Monday near the low-lying Gulf Coast city of New Orleans, forcing hundreds of thousands of residents to flee inland.

The Organization of the Petroleum Exporting Countries (OPEC), which has been pumping at near capacity for nearly a year in an effort to reign in the buoyant market, expressed rising concern over robust prices, which have rallied 61 percent since the beginning of the year.

“OPEC will be exploring various options for the September meeting which will hopefully contribute to moderate prices,” said OPEC President Sheikh Ahmad al-Fahd al-Sabah, also Kuwait’s oil minister, in a statement in Kuwait City.

He did not elaborate on the nature of these options and analysts have said OPEC has little artillery left in its arsenal to restrain prices, which are being driven by refinery constraints and fears about a thin cushion of spare capacity.

OPEC meets on Sept. 19 to chart output policy.

Sheikh Ahmad said OPEC has been producing more than the call on OPEC crude by 1.5 million barrels per day in the third quarter of 2005, a fact borne out by steadily rising crude inventories.

“Furthermore, demand is starting to slow down as a result of high prices,” he said. “In view of these fundamentals, one expects to witness some price moderation.”

© 2005 The Associated Press
 

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watch the markets tomorrow--doesnt look good at all. Stocks have been getting hammered over the last couple of weeks and this will push them down a little more.
 

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Discussion Starter · #3 ·
With an open at current levels (1197 in the SnP), the market is seting up nicely for a short term bounce in here.
A close below the July lows around 1185 will however be an extremely bearish signal.

The big concern is a contuation in rising oil prices as a result of this storm. Last year after hurricane Ivan oil prices rose over 22% the following month.
 

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Discussion Starter · #4 ·
Since were talking about the market. I'll include this for anyone interested, here is an excellent report written last week by a friend of mine. (One of the top market timers in the country).


Heading for the Scene of a Real Crime - the July 7 London Bombings

As you know I often talk about how the market tends to return to its gaps, frequently (at least in the S&P Futures) filling them to the tick before they turn back in the other direction. I like to refer to the futures "returning to the scene of the crime," where the "crime" was the creation of the gap. Well now it looks like the market is focused on a real crime that it wants to revisit - the gap down openings from July 7, the day of the London bombings.

Early that morning the S&P futures had traded as low as 1167.00, but by the time the cash markets opened, the futures were well off the lows and the gap was a much less severe 12 points from the close of July 6 at 1198.60 down to the opening tick (and the exact low of the day session) at 1186.50. Like most gaps we see these days, it didn't take long for it to get filled, and since that gap was filled, the market hasn't returned to that level. But fast forward to the present and what does it look like now? It looks like the market has on its plate really just one thing. Not oil, not interest rates, not even the dollar. Just the return to the scene of that very real crime and the gap that was formed and then filled on July 7.

As you know, since that day - really since the market bottomed in Globex early that morning, it was pretty much straight up until the market topped in late July. In the S&P Futures this marked a spectacular run of better than 80 points (including the July 7 Globex lows) in just a few weeks. Bulls had pretty much taken over and nothing seemed to matter any more. Higher interest rates, record highs in oil, the housing bubble etc. etc., nobody cared. But recently we've seen a different pattern emerge. The S&P in particular has begun leaving more and more upside gaps, filling most of them but leaving some behind. For example now there remains the August 16 gap at the 1237.50 level (see chart below). It started filling more and more downside gaps -- even some of those that had been left behind and forgotten for weeks (see the July 11 gap below). Of course it is the nature of gaps (especially in the S&P Futures) to get filled. But the ones which draw the market's attention at any given time tell us the important stuff about where the market is headed next.

Right now there is no (nearby) downside gap remaining in the S&P other than the Island Reversal Gap highlighted below. And for that matter if you include the July 7 Globex session, that gap was actually filled. The only other remaining downside gap -- the tiny July 11 gap that I have highlighted for weeks as a potential downside objective -- was filled this past Tuesday. So at this stage there is no downside gap in the S&P drawing prices lower. But there is still the sharp rally off the July 7 lows which is clearly in the process of being retraced. Question is: how much of it must be retraced to make an impression on all of those bulls? How about to the top of that day's gap? That suggests a pullback to 1198.60, the July 6 close, to really make a clean sweep of this. Wouldn't that be sufficient to get those bulls worked up? Think of all the stops that must be piled up just below that level. Everyone who has shown a profit since the launch began probably is watching that level, just below 1200, as maximum risk or breakeven or the spot to cut and run. Anyway, it's a big number, and ultimately it probably has to come out.

That's not to say that the S&P must retrace its entire rally off of the July 7 intraday lows. This also doesn't mean that the plunge into that gap must take place right now. But somewhere in that vicinity, probably just below the top of that day's gap, somewhere south of the 1199-1200 level, there is a spot that will cause lots of bulls to throw in the towel, and that's a pretty good spot for this retracement to find a bottom and for the market to turn back up (once again with relatively few on board to benefit from the ensuing rally).



Arguing against an immediate plunge into the area of the July 7 (now filled) gap in the S&P are some of the divergences evident on this latest drop to new lows. In fact, there are some things to like about the action of the past couple of days. First and foremost, note that despite a net loss of about 80 points in the Dow from Tuesday's close, the A/D line on the NYSE is quite positive, as yesterday there were only 370 net declines on the NYSE and today (Thursday), despite the tepid rebound of the blue chips, breadth is quite positive (as of 2:00 eastern). A similar story on the Nasdaq (though breadth is slightly negative since Tuesday's close). And look at the Russell 2000 - earlier today up over 1/2 % from Tuesday's close. So things may not be as bad as suggested by the action of the blue chip averages, and that is a positive sign.

Along similar lines, the McClellan Oscillator closed yesterday at a barely oversold -106, a long way from last Thursday's -164. This despite lower lows yesterday across the board. These kinds of divergences often signify a near term low forming. And occasionally something more significant.

On the other hand, there are other reasons previously cited (see our Overnight Report Forecast) to suspect that the current pattern isn't quite complete. For one, the Nasdaq has some unfinished business on the downside. This is true for both the NDX (100 cash) as well as the Composite. Lately, for a change, the NDX seems to have been calling the shots somewhat, so let's take a fresh look at its chart.

As you know, for 4 consecutive days last week, the NDX found support just above its July 19 gap at the 1570 level. Finally earlier this week that gap at the 1570 level was filled but it still had some influence, as the NDX refused to close below 1570 on Monday and Tuesday even though it broke below 1567 both days on an intraday basis (see the NDX chart below). Of course yesterday, that level got snapped, and in the process, the NDX pulled back into its next downside gap from the close of July 13. Assuming this one also gets filled, there is another gap to be filled not too far below, from the close of July 8 at the 1533 level. That one is not really out of the question, though it'll take some work to get there. Certainly, if that gap gets filled, you can bet the S&P has pulled back into its July 7 gap below the 1198.60 level. Just for the record, there is another downside gap in the NDX below the one at the 1533 level. It's a tiny gap from way back on May 13 at the 1455 level. But I suspect the market isn't headed there any time soon so we won't go there either.



Meanwhile, as you know, there is also the Nasdaq Composite with its nearby downside gap also from the close of July 8 at the 2113 level. Yesterday's downside reversal brought the Composite to within striking distance of this gap so it would now be a surprise if this gap were not filled in its entirety. Not that it must happen right now, but odds are better than good that it will happen and when it does, we will probably be buying for the obligatory bounce.

Speaking of buying for bounces, as you know that is what we want to do into this weakness, especially as the market becomes increasingly oversold. We will probably continue to trade from the long side unless or until it looks like the current weakness is something more serious than just a needed retracement of an overdone, overblown rally. While I cannot be certain that the July 7 gap in the S&P will be revisited over the very near term, one thing I know for sure, is that if and when it gets there, I am a buyer.

H. Schiller
 

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I work at Barclays Capital in FX so let me know if you want to receive some research from our guys. We have one of the best technical analysts on the street for currencies and he is expanding into commodities soon.

PS
Barclay's has been forecasting oil at $90 by year end and I heard that Goldman has it at $100. I talked to the guys at Chevron last year and they had budgeted crude in the low/mid $60's for the end of 2005.

Bob
 

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I always wished I had chosen business and finance in college instead of engineering, I wish I could understand what you guys were talking about.
 

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I wish I could understand what you guys were talking about
Your not the only one.
 
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