30
Jun

Wrap – Week Ended 06/29/12

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Commodity comments will be included in the Monday post. 

33 Responses to “Wrap – Week Ended 06/29/12”

  1. 1
    milepost_43 Says:

    China June PMI still above 50..BARELY….some short term pressure until-if loosening occurs??….
    –China's official manufacturing PMI falls to 50.2 in June from May's 50.4…median expectation was 49.8
    –Data signal world's second-largest economy hasn't bottomed out.
    –Economists expect more loosening measures in the third quarter.
    Economists said that although higher than market expectation, the gauge isn't as promising as it looks, as some subindexes paint a gloomy picture in new orders, as well as exports and imports.
    http://tinyurl.com/75d5vv2

  2. 2
    brodway Says:

    EXXI at $31. I think someone asked the other day why MMR was running and EXXI was just sitting there and I said something along the lines of them being often out of sync by a few days. 
     
    Zman i did ask this question and should have opted for a trade in EXXI, but as always a day late and a dollar short. Next time i see this sort of disconnect between the two i would be more inclined to to move on a short term trade.

  3. 3
    Zorgnak Says:

     
    S&P Futures Traded back to the 1358.5 level which as been the scene of two sell offs since May. It's also a transition
    from the major long term acceptance area to a previous range that exends to 1400 and beyond if buyers step in above 
    support at 1341.75 and push above 1358.50. 1386.50 would be the first upside target in that scenario.
    Resistance has been cracked at 1341.75 with the perception of a macro shift. A test of the same area as support will test that 
    perception.If 1341.75 fails as support 1321.50 is the next potential support level. Demand volume is positive and has turned up 
    on the weekly and monthly time frames…just. Again, the market is a transition zone on the profile and the ability of the market to trade up
    or at least sideways from 1341.75 will be telling this week.
    July POMO schedule is supportive on Monday then 7/13-16 and 7/24-31
    CLVN=Low Volume Rejection Zone – CHVN= High Volume Price Acceptance and Congestion Zone
     1386.50    Acceptance/Congetsion, CHVN
     1358.50….Upper Volume Pivot, Friday's High
     1341.75….Major CLVN, Potential Support, Fridays Low
     1330.50….Upside congestion above 1321 support
     1321.50… Short term Low volume rejection area. 
     1298-1318..Long and short term volume pivot/acceptance. News/rumor chop area. 1307 CHVN    
     1286.75….Short term volume void begins. A break here opens a test of gap, recent lows, support at 1252.50.
     1280…….Minor Support, Gap close.
     1252-58….Major Low volume area. Potential support and/or new leg down.
     
    S&P Futures
    http://www.charthub.com/images/2012/07/01/ES_Composite.png

  4. 4
    zman Says:

    re2 – Eh, don't  beat yourself up about, its a loose relationship and really worked well only due to the Friday mega rally in crude. Still expecting both names to trade higher into the time of the flow test at mid July. 

  5. 5
    brodway Says:

    Resistance has been cracked at 1341.75 with the perception of a macro shift. A test of the same area as support will test that 
    perception

     
    Zorg..
    this was an important turning point based on your recent communications. more important then support level holding at 1307-1309. 
    more importantly, i believe, is that unlike on the first bounce which lacked confidence and breadth, this rally was more convincing with larger volumes and more bold moves in equities.
    would you start to be a buyer on a retest, or are you still in the camp that we need to see more strength in equities and test of higher resistance levels before making that decision?

  6. 6
    brodway Says:

    KOG quickly made up ground breaking through $8 on the first day buyers reared their heads out to play. Was very surprised to see this quick return to the name, but not surprised to say that the name continues to be quite bullish on a long term chart.
    http://finance.yahoo.com/q/bc?s=KOG&t=5y&l=on&z=l&q=l&c=
    Looking at a 5 year chart, every dip since 2009 has proved to be a buying opportunity. Long term support levels have held up and upside resistance levels have been broken several months after the support level has been tested.

  7. 7
    Zorgnak Says:

     
    XLE traded up to resistance at 66.60 on Friday. Current setup (high in the 10 day range, below downsloping 50/200 MA's), hasn't been
     short term friendly for additonal gains without a pullback below the 10 day MA. A swing short on Friday's close = 71% winners, 3.51 profit factor(2001-2012).
    Demand volume has improved though on the weekly and daily time frames. Near support at 65.60. Bulls would not want to see it below
    64.91 with far support at 64.15
    XLE Chart
    http://www.charthub.com/images/2012/07/01/Stock_Weekly_2.png

  8. 8
    Zorgnak Says:

    #5  Thanks for asking … I find the act of putting out what I see in writing helps to be clear with my self. 
     I was a buyer last week in the Bakken names KOG NOG and OAS none of which I owned at the time. I also added to PVA on test of support at 5.98 and WHZ below 18 .  HK  bought and sold at a loss and SSN currently red) It all looks ok now but if the Europeans had whiffed on their hail Mary pass it wouldn't have looked so swift. As far as resistance breaks go… It's good to see 1341.75 get broken to the upside and demand volume improve, but will it be sustained beyond the relief that there wasn't a complete disaster in Euroland? Now there is a little confidence in watching and trading retests in the broader market. I do a lot of yapping about demand volume. It has now turned up. Will it continue after the first test? I don't know. I added some hedges at the close on Friday, see post#7. I'm not planning to do any more buying unless the perception of a macro shift transforms into something more tangible ( like a big volume follow though) beyond  short covering and disaster relief and then if will be on a pullback to whatever support area is relevant at the time.
    I change my mind all the time though….that's why writing it down as an outline of a plan is helpful when the poo is hitting the fan

  9. 9
    brodway Says:

    just to understand better, were you a buyer in OAS, KOG and NOG because the selling pressure eased some time mid-week or was it for other technical reasons tracking back to support levels reached in the fall of last year?

  10. 10
    Zorgnak Says:

     
    Crude Futures
    Crude futures coming off exhaustion moves in the weekly and daily time frames with demand volume turning up….. though not yet positive in both time frames.
    Price closed at 85 resistance on Friday. Near support at 82.50 with 81-81.25 as far support. A volume break above 85 has little recent supply until 91
    with strong acceptance higher.
    Crude Futures Chart
    http://www.charthub.com/images/2012/07/01/Crude_Composite.png 

  11. 11
    Zorgnak Says:

    The Bakkens all had Demark Sequential exhaustion setups near well defined volume support levels. On 6/26 both OAS and KOG showed positive demand volume on the 60/130 minute charts. NOG was more of a crap shoot. I thought it would rise with the others.It still trades heavier to my eye than the other two. It could have not worked of course. Last year KOG went under 4. I could again for all I know. I can't remember the market/crude oil context at the time but it was pretty bleak and these stocks looked exhausted and stopped going down.  Longer term demand volume is still negative on these stocks…I don't look for enormous rallies until that changes. to me KOG looks the best, then OAS and NOG looking lost and forlorn still.
    ..Suppport as marked on the composite(long term) volume profile. Demark setups and Demand Volume on another software platform. I use Herrick's Demand Index, Klinger Volume and Arm's Ease of Movement to track demand volume trends.
     
    http://www.charthub.com/images/2012/07/01/Stock_Weekly_2_2.png
    http://www.charthub.com/images/2012/07/01/Stock_Weekly_2_3.png
    http://www.charthub.com/images/2012/07/01/Stock_Weekly_2_4.png

  12. 12
    brodway Says:

    re: 11
    Zorg…
    very useful info. and this is what it "felt" like mid week when prices stopped going down and stability set in in energy land. on Tuesday there was a moment late morning when indexes were down over 1% and energy names were either up or flat and this is probably what triggered the positive demand volume (or vice versa).

  13. 13
    Zorgnak Says:

    #12 sounds about right ….I remember Z bot some OAS? around the same time ….. I'm not counting my chickens yet……plenty wolves licking their chops

  14. 14
    PackMan Says:

    ZMAN – A request re: MMR
     
    Do you have any recent workup on the name ?  I was searching the site and could not find much, but it could be that I just don't know where to look.
    I am particularly interested in your assessment of:
    – MMR's value / metrics w/out DJ1
    – MMR's potential value / metrics w/ DJ1
    – Comments on what you would view as strong success, moderate success and failure re: DJ1
     
    Thanks

  15. 15
    zman Says:

    re 15

    Most of those comments are under EXXI

    Latest ones can be found in this post

    http://zmansenergybrain.com/2012/06/26/tuesday-morning-bakken-comments-plus-conference-wrap-day-1/

    I'd clarify that DJ1 is the first of many wells, it is more proof of concept that necessarily of value by itself.  Any results over 20 mm/d should be looked at favorably but this is a narrow casing string (DJ2 is not) and their could be issues with that.. Without the Ultradeep is really the question you want to ask and in that case the name would be exceedingly overvalued. MMR has to have the ultra deep work of the stock would be under half of current levels. EXXI does not. 

  16. 16
    zman Says:

    re 13 – Added more OAS last Monday and TPLM calls in the ZMT as well

    see Blotter here:

    http://zmansenergybrain.com/subscriber-data/zeb-zlt-blotter/

    Also added more NOG later in the week in the ZLT. 

  17. 17
    brodway Says:

    we are certainly not out of the woods yet, especially if the move up was based on a European agreement. those guys can change their opinion in a moment. in fact many were surprised Merkel had a change of heart on the issues. this article points out some issues which concern me.
    http://finance.yahoo.com/news/merkel-seen-big-loser-euro-145023249.html

  18. 18
    brodway Says:

    Zman was a little ahead of the more calm Tuesday trade in energy. OAS, however, was ahead of the curve and found stability at 22 on Monday when Zman chiseled off his piece.

  19. 19
    PackMan Says:

    15 – Thank you.
    Any thoughts on the odds of MMR failing completely … no UD ?
    How would you describe the scenarios of different outcomes here ?

  20. 20
    PackMan Says:

    Also, w/ success of UD, how high is high for stock price in your view ?

  21. 21
    zman Says:

    Pack – Thanks for the question, having a dinner at the house, will circle back late-ish tonight. 

  22. 22
    nrgyman Says:

    Excellent article on market prospects.  Somewhat technical, but it puts forth a strong case for the bulls:
     
    http://macrofugue.com/the-real-cult-of-equity

  23. 23
    elduque Says:

    Pack – MMR took off after it had been announced that Chevron and it had bt a number of leases in the last auction. My thought is that neither company would not have been so aggressive  if they thought that there was a chance of failure. 

  24. 24
    PackMan Says:

    elduque – 23 – Thanks.  I was unaware of that; thought it might be related to expectation of July news on DJ1.  Do you have a link to the Chevron news
     
    nrgyman ….macrofugue … I usually discount that guy; the writer is always bullish; he's a smart guy; but amateur economist wanna be  … not sure he has any skin in the game … fwiw & jmho

  25. 25
    zman Says:

    Pack / Eld = the leases may have been a bit of the move but honestly the high bid total of $3.1 mm is not a lot of dough. I do think we are in run up mode and you have a couple of analysts within the last two weeks start to turn more positive on the prospects for a good test at DJ 1 . 

    The Ultra Deep will be proved up in stages. 24 months ago many believed you simply could not produce hydrocarbons under this kind of heat and pressure regime. DVN's CEO even said so in a speech. That was then. Now we have had a flare to the surface on the first attempt at a flow test.   The play is actually a number of plays and as they move around between the well bores and tie the seismic from one to the next they learn more. So each target will be in the hundreds of Bcf and the total play (which is not 13 large prospects) will be in the multi Tcf of gas range on a gross basis.  But again, they learn more with each well bore. When you look at the seismic and think, this little spot looks like this Miocene sand, and then this Wilcox sand and you end up find things down in the Tuscaloosa that's not been seen offshore (except in the deepwater) in one of your shallow water wells, then it changes your thinking about your seismic interpretation of your future wells. You start to see things in those targets and then you go about the region tying all those targets together and de-risking them on paper before you turn a bit. So the first stage is almost done, all the way from concept to production. The next stage is moving along in other prospect but again, tied back to the first one, and expanding all the while as things not so deep in Blackbeard West spawned going after deep, but not ultra deep, targets with BB 2 to be completed with more conventional production equipment. 

    Here's that news story though:

    http://www.mcmoran.com/pdf/2012/062212.pdf

  26. 26
    nrgyman Says:

    RE 24:  Thanks PackMan.  I don't know the guy.  He may be what you say, but I didn't see much in the way of opinion in that article.  He presented data and historical relationships to support the bull case.  Before Thursday of last week, there wasn't much of that as sentiment and the media has been dominated by bears.  He also wasn't arguing against the possibility of further downside short-term.  But he made good points about the intermediate/long-term case for the bulls based on historical relationships and current data.
     
    Here is another blogger with a good rep, with a positive, data-based,  market perspective.  He was the source for the above article:
     
    http://oldprof.typepad.com/a_dash_of_insight/2012/06/weighing-the-week-ahead-fireworks-in-the-forecast-1.html?utm_source=feedburner&utm_medium=email&utm_campaign=Feed%3A+typepad%2FWuQQ+%28A+Dash+of+Insight%29

  27. 27
    zman Says:

    This was the OAS trade comment from Monday:

    OAS – Adding to the trading position in the ZLT for an average cost of $22.14.   The name continues to impress fundamentally as the quarters roll by, and it's likely in this oil price environment they stick with 10 rigs and the same size well program instead of opting to add 2 more rigs in 2H12 as planned at the beginning of this year with reduced spud to spud times making this possible. Name remains one of the cheapest onshore oily, high growth E&Ps I own and estimates have not materially fallen from month ago levels (here or in many oily names) although I expect them to come in when the Street gets into more serious "mark to market mode" in early July as they take down their oil price decks and therefore their CFPS estimates. Meanwhile, the stock would seem to have largely pre discounted this coming move lower on estimates, falling off with the group and is now down roughly 12% since our last Bakken Players update piece in mid May.   I am likely to get more aggressive with Bakken player adds once we see some more sideways trading in the group but this is one is cheap now and seems more than a little overdone. This can be said of many of the names but OAS is cheaper and has been snafu free this year, and continues to grow more efficient (helping with capex) while the bottom line benefits from falling costs on a per unit basis.  

    Note this isn't a short term trade and I don't measure them necessarily by what they do that day, week, month after the trade and since I've owned the name since the IPO and have like the story every inch along the way I'm unlikely to sell these trading shares unless the run is too far too fast and has that feeling that it could be quickly repeated. Otherwise they get sold in time when the name is more fairly valued or they get acquired, whichever comes first. 

  28. 28
    PackMan Says:

    nrgyman – I follow the guy on Twitter.  A lot of his Fed (FRED charts) are ones he makes. To me, he cherry picks charts, data to fit his thesis.  He's one of those guys that believes we don't have a debt problem in this country, the fed can print unlimited amounts of money, and we can deficit spend our way to prosperity forever.  Just my observation. 
    I am trying to read & understand his piece, then I read declarations like: "Marginal investment opportunities are fatter & juicier than at any other time in modern history", and my reaction is "huh ?"
     
    I will read and consider info from multiple sources, even if I am skeptical about their POV.
     
    Sorry for the OT discussion Zman.
     
    And Z – thank you for #25 … good stuff.

  29. 29
    zman Says:

    Now worries Pack, its what weekends are for plus I find it interesting. 

    Tomorrow look for the Natural Gas Supply Slide Show, The Natural Gas Demand Slide Show, the Week That Was, and a lot more and its a going to be one of those increasingly rare FREE posts so send the link out to everyone you know in all corners of the interwebs. Thanks much. 

  30. 30
    brodway Says:

    there are lots of opinions every where these days, but one thing i agree with is that corporate buy backs and increase in dividends has taken on new life. the govt's seem to be debt driven, but the private side balance sheets are getting as pristine as ever. many companies have lots of cash, low debt and don't know what to do with their cash other than to give it back to shareholders and continuing to buy back their stock.
    sooner or later this will all translate to productive gains in equity prices as the investment crowd once again becomes comfortable with equity markets, and come to the realization that stocks are the single best investment strategy. as the article suggests, it may be new blood that fuels in this phenomenon, maybe the money that has been sitting on the sidelines finally realizes that you can't continue to make sub 2% in US gov't bonds when inflation is eating up their wealth. that wealth will eventually erode.  this may take 2 years, maybe 5 years or maybe 10 years, we are however, on the road to recovery after undergoing a crisis in 2008-2009.
    finally, the fear that has led to fierce and quick downturns in markets will slowly start to fade and reaction to headlines will become less pronounced on the downside. the markets are healing after sustaining wounds deeper then at any time in history other than the great depression. time heals all.

  31. 31
    brodway Says:

    have to find the interview on Bloomberg where a guest had stated that the trouble with information superhighway and the speed news travels these days is that people have not yet learned how to deal with news and over react on any headlines by panicking and making hasty decisions which aren't always the best decisions.
     

  32. 32
    milepost_43 Says:

     
    CO futures…swoosh…more pressure…http://tinyurl.com/75sbc7o
    China's factory activity shrank in June at the fastest pace in seven months as new export orders tumbled to depths last seen in March 2009, a private sector survey showed, underlining the risk of a lurch lower for the Chinese economy.
    The HSBC Purchasing Managers' Index (PMI) fell to 48.2 after seasonal adjustments, its lowest since November 2011, and little changed from a flash, or preliminary, estimate of 48.1. The final reading in May was 48.4.
    June was the eighth straight month of a reading below 50, the threshold dividing expansion from contraction in the survey methodology.
    China's official PMI, released on Sunday, also fell to a seven-month low in June. However, the official PMI was 50.2, indicating the sector was still expanding.
    The two indexes often give divergent readings as the official PMI surveys mainly big, state-backed firms, while the HSBC PMI takes the pulse of more smaller, private-sector companies.
    But both readings underline speculation that Beijing will relax monetary and fiscal policies further to boost domestic activity to compensate for weakening foreign demand for China's factory goods – a problem for the world's biggest exporter.
    The survey said export demand from Europe and North America was especially weak.

  33. 33
    zman Says:

    Market Watch story 

    http://www.marketwatch.com/story/the-time-has-come-for-natural-gas-2012-07-02?link=MW_latest_news

    Favorite quote:

    "I won’t get into the fundamentals of huge supplies of natural gas and limited infrastructure to use it"

    … right, because that would be work.

    And he comes to that statement after leading with this one:

    "But something is different now and this ugly duck is finally ready to turn into a swan."

     Sheesh, TA without a thought for the fundamentals.   Might as well say he likes it because its not going down every day any more. Tune in for the slide shows tomorrow where we do "get into the fundamentals"

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