29
Jan
Tuesday Morning – Refiners Set To Bounce On Valero Beat
Commodity Watch:
- Crude Oil rallied $0.28 to $90.99 reversing a big, broad market related decline early in the morning. OPEC meets on Thursday-- and they appear to be dead set against increasing production levels. Analysts and traders came out of the woodwork early in the day pointing to lower crude but by about noon it was clear their tea leaves were burned. This morning crude is trading up slightly this morning
- Natural Gas jumped 11 cents to $8.095 as traders took note of the colder than expected weather last week and the "season high" gas storage withdrawal that weather will bring this Thursday. Last week saw a sharp reversal in the net short position and traders have got to be saying things like,"warmer than normal my butt." Natural gas is trading off a little this morning but is holding $8.
- Imports continued to run light to last year. Last week both LNG and piped volumes from Canada chalked up lower totals versus year levels.
- LNG was down 1.0 Bcfgpd from year ago levels to 0.7 Bcfgpd
- Canadian volumes rose sequentially but were still down 0.7 Bcfgpd YoY coming in at 8.9 Bcfgpd
Coal Stocks Running Extremely Low In China. According to Apache, China's largest power plant has less than one week of coal stocks remaining. This fact is part of what's behind the past week's rally in U.S. coal, rail, and dry bulk stocks. By the way, China's economy grew at 11.4% in 2007, the highest rate since 1996 and is showing few signs of significant slowing despite all the talk to the contrary.
Refiners begin reporting today so when better to update cracks. Margins are still languishing but may be turning up a bit as seasonal factors and maintenance season come into play.
Earnings We Care About Today:
VLO Reports A Blowout Compared To Estimates. Reported 4Q07 EPS of $1.02 vs expectations of $0.64.It's clear that refining analysts have no clue how to model companies in this industry. Falling cracks have led to falling estimates without regard for the expanding sour and heavy crude discounts during the quarter. Just abysmal modeling and I'm glad to be out of the names as they report. (FTO) should benefit from this increase in the sour crude discount and I may nibble there. Conference call at 11:00 am today.
IOC Watch: I'll have a report out here during the day today.
Odds & Ends
Analyst Watch: nada.
Apologies for the short post. I have whatever plague is floating around and am barely here.
VLO up $5 which looks like too much of a bounce … yes they beat earnings by a lot but the performance was still pretty shabby and there’s nothing in the press release that says we’ll see anything like 2007’s margins any time soon.
DRYS up $4.60 – woo hoo
SII getting pounded on lackluster guidance
January 29th, 2008 at 9:35 amIn drybulk news:
EXM to buy QMAR for a 20%ish premium
January 29th, 2008 at 9:37 amknock, knock, this thing on?
January 29th, 2008 at 9:38 amgood morning…
January 29th, 2008 at 9:39 amI suppose it would be better if I’d have gotten back long the refiners…will listen to the conf call for VLO at 11 est….guess some other people thought FTO would benefit out of those wide heavy sour spreads too.
January 29th, 2008 at 9:41 amMorning all. Still waiting for energy to finish playing out this little correction before turning back down in v of A – it may be showing signs of doing so this morning. Something more bullish could be going on ie A may be done and we are in the process of B in which case we could go quite a lot higher.
January 29th, 2008 at 9:51 amBroader markets also tracing out a wave 4 correction which I expect to go on for a week or two more. Short term we should top out today or tomorrow and probably move back to somewhere between 11800 and 12000 on the Dow before attempting another corrective wave higher.
January 29th, 2008 at 9:54 amSPX has resistance at 1370 region.
January 29th, 2008 at 9:55 amAh Valero, the prodigal stock…where the h*** have you been?
January 29th, 2008 at 9:56 amSorry to hear you are ill Z – I was hit with something ten days ago which knocked me for six for about 5 days so know how you feel.
January 29th, 2008 at 9:57 amNicky – where do you see resistance on oil.
EXM/QMAR to make largest U.S. listed drybulker. Bill- any thoughts here. I’m staying long DRYS for now but getting tempted to take profits.
January 29th, 2008 at 9:57 amK – check out FTO, you’d have thought they reported that beat, not VLO, lol.
January 29th, 2008 at 9:58 amZTRADE:
IOC March 20 calls for $2.90. I’ll have a piece on this out shortly.
January 29th, 2008 at 10:22 amZ resistance above the overnight high of 91.94 is at 92.20 and then near 93.
January 29th, 2008 at 10:30 amIOC report out if you refresh your browser
January 29th, 2008 at 10:37 amNicky – do you still think we’re on track to hit Dow 12600 then back down to 11,000?
January 29th, 2008 at 10:43 amThanks Nicky on the resistance, where do you see support? And I second freeflow’s question.
January 29th, 2008 at 10:44 amIOC trade in a nutshell.
I posted a piece on these guys just a minute ago but in a nutshell.
They drilled a very big well in the fall of 2006 and the stock shot up. The well was gas in Papua New Guinea which tells you it needs to be big because there’s no local market so its LNG or nothing. They drilled a second well last year to try and prove up the aerial extent of the find, it came in wet but with high porosity. They’re drilling a third well now. There should be some news out here in the next few days as the well should be nearing or in the pay zone at this point. The outcome of this well will probably send the stock to either 10 or 30 from its current 19. By mid to late February they should be able to test the well at which point success would yield another leg up. I’m long the calls but asked Phil of Philstockworld to come up with some more complex plays which I’ve included in comments at the bottom of the IOC post.
January 29th, 2008 at 10:52 amIOC interesting story….alternately just go long (small position?) in common and marry with a March put? Premium for latter looking abit expensive though.
January 29th, 2008 at 11:02 amcheers-K
K – I’d say yes except the premiums are a bit expensive. Did you check out phil’s plays? They take advantage of those steep premiums.
January 29th, 2008 at 11:03 amRam – Aubrey buys another 90,000 shares of CHK
January 29th, 2008 at 11:08 amHAL starting to work
VLO call uneventful so far
see higher margins soon
continue to see wide heavy sour crude discounts —this is what is launching FTO this morning. I’ll be in on a pullback there.
go DRYS go
January 29th, 2008 at 11:16 amZ- I followed you on HAL calls, do you have an exit point in mind?
Similarly for DRYS, what’s your re-entry criteria?
January 29th, 2008 at 11:33 amWTI – support is at 89.95 and then 88.78.
Freeflow – we are tracing out an abc correction for a wave 4. Its difficult to know at this stage what shape 4 is taking. It is possible that we have done a and b and we are now in c straight up which could in fact go up to about 13200 or only as far as 12600 – 700 (not helpful I know!)and 1434 on spx. Alternatively we are still in the b part which itself is 3 waves and we need to see the (c) wave down before we see C up.
January 29th, 2008 at 11:34 amIf it plays out like that then we could see a correction starting anytime now which would take us back towards 12000or lower before we make the final corrective move higher towards the levels stated before.
A move above 1371 spx would confirm we are in C up.
ased on what I’m hearing on the VLO call, California market shaping up to be very interesting this Spring. May take a little TSO on a pullback. I’m here if any body has questions but otherwise since the site is pretty dead today I’m going to catch up on some reading.
January 29th, 2008 at 11:34 amSorry Z, one more…OXY call today? Any plays?
January 29th, 2008 at 11:36 amZMAN- Any thoughts on FSLR $170P’s?
January 29th, 2008 at 11:36 amK – re HAL – its just starting to work…despite the beat on the quarter. Exit depends on price and time but I’m thinking of selling closer to 35 this week or 34.50 next.
DRYS – I’m long now and would be getting long here if I weren’t…Chinese New Year approaching, the anecdotal comments re China coal stocks very interesting…demand for shipping about to pop. I may take profits soon and add longer , higher soon.
January 29th, 2008 at 11:37 amNicky:
Alternative count for DJ-30. We may have completed the first leg down, an ABC from Oct high. A move above 12724, (11/26 low) would tend to confirm, I think. Otherwise your count is correct with a 5th wave down to come from Oct high.
January 29th, 2008 at 11:41 amWTI just seems to be following the DOW – feels like it should be a lot lower.
January 29th, 2008 at 11:41 amK – RE OXY I’m not close enough to that one for my thoughts to be very valuable.
Scoop – I’m waiting…not sure if this is a over-reaction to the earnings of others or a broker comment or what but what a rally. I was thinking of letting it run higher, lets see if it can get through 200 and if that, then through 220 before taking a put. If you are very fast you might me able to score on a day trade but that’s pretty vegassy, lol.
Nicky re WTI vs Dow – agreed, this is pre rate cut trading. Last I saw, most are still expected a 25 bps cut tomorrow, right?
January 29th, 2008 at 11:43 amCLB:
January 29th, 2008 at 11:47 amQ4 earnings after close on Feb 13
Call scheduled for Feb 14 8:30 am
Stepping out with you on DRYS, technically (for last three months anyway), its pulled back everytime its approached middle BB….lets hope China coal situation and iron ore contract neg.s are a catalyst. Go read and recuperate. (Rx: Old GrandDad will scare the hell out of most cooties.)
January 29th, 2008 at 11:51 amK – ok, I’ve got to know what Old GrandDad is, lol.
Dman – thanks will add to the list.
I am so kicking myself for not scooping FTO this morning, had in the post and everything as a beneficiary of the trends that helped VLO to a beat. aaaarrrrgggg.
IOC drifting higher.
RE DRYS – I show it just through its sma (mid way between the bolli bands) which you are quite right in point out have been the top for it since October.
January 29th, 2008 at 11:57 amEDT Frontier Oil-FTO upgraded to Buy from Neutral, target $52@GSCO :theflyonthewall —-today
January 29th, 2008 at 11:57 amDMH – you saying the first leg is done and we are now in 2 up? Not quite sure why a move above 12724 would negate the other count?
January 29th, 2008 at 11:57 amHAL moving up nicely
January 29th, 2008 at 12:01 pmYou’ll find OldGrandDad on a much lower shelf than Wild Turkey and Makers Mark…within easy reach from my usual position. LMAO
January 29th, 2008 at 12:04 pmNote On the IOC Post: I posted an early draft by mistake. The updated version is on the site now. My apologies for any confusion this may have caused.
K – right next to the Mad Dog 20/20?
January 29th, 2008 at 12:11 pmgas failed 8, warm weather in the south at least, plus warm forecast for the northeast. whole market looks to be deflating a bit.
January 29th, 2008 at 12:46 pmIOC calls have deflated – stock basically unchanged
January 29th, 2008 at 1:35 pmZ – re #31 – market seems to have priced in a .50 cut. Not quite sure how it is going to react if we only get 0.25.
January 29th, 2008 at 1:36 pmFF – Re 41. So much the better for those who haven’t bought it yet and for those who have, if the news is positive, this won’t matter at all.
January 29th, 2008 at 1:39 pmwti seems to be pricing in a 0.50 cut too!
January 29th, 2008 at 1:41 pmWhat I have found from my past 24 months of trading is that once the Fed does whatever it decides to do – the market reverses the gain – or loss – the next day.
January 29th, 2008 at 2:10 pmRIG down $3 today – any thoughts Z?
January 29th, 2008 at 2:59 pmMarket is way too optimistic about a 0.50 cut tomorrow…
January 29th, 2008 at 3:10 pmRig off $3 or $2.50 is just noise in this market pre earnings. Weakness in all the offshore deepwater drillers today…don’t see any reason for it. A rumor is going around about another acquisition in the group but it won’t involve RIG. Most likely DO for ATW.
January 29th, 2008 at 3:14 pmNicky – the market has a very short memory. Oil is just following it around by the nose too.
January 29th, 2008 at 3:20 pmDid anyone see if Goldman raised any other refiners besides FTO today?
January 29th, 2008 at 3:21 pmZTRADE:
BTU FEB $60 Calls for $1.75 on $2.50 pullback in the common today. Earnings Thursday.
January 29th, 2008 at 3:29 pmIOC – seeing some nice pick up on bid side volumes in the feb and march calls.
January 29th, 2008 at 3:35 pmLine in the sand tomorrow is 1371 for spx. If we should take this out then any subsequent pullback is going to be shallow until this correction has played out in the next week or so. If we hold 1371 then we could see a very steep move to the downside….
January 29th, 2008 at 5:26 pmNicky:
January 29th, 2008 at 6:24 pmRe DJ-30 count. If the move from Oct high is panning out as a 5 wave move:
i ended at 12724 on 11/26
iii ended at 11634 on 1/22
if iv is in progress it cannot overlap the end of i at 12724. If it does then the whole move from Oct-Jan 22 counts as a probable completed 3 wave ABC, not a 5 wave move.
I was wondering what was causing the big rise in energy since the close and found this:
Weather condiions have caused the shut-in of some 350kbd of oil from tar sands production, in Canada.
January 29th, 2008 at 6:44 pmIt is not yet known how long the outage will last.
Nicky – just saw that. Given the push of this arctic system quickly across the mid west and into the south I’d also say that the CPC has yet again underestimated HDDs for this week. Notice you don’t see Al Gore much when its this cold, lol.
January 29th, 2008 at 6:47 pmdmh – you are quite right regarding that count. However last weeks low could be (i)(first wave of lesser degree) placing us now in (ii) which would likely rally higher than the wave 4 target, say towards 12900.
January 29th, 2008 at 6:54 pmSame old problems with Elliott wave – too many counts!
That said as lower cycles are still expected into March I do not think we have seen the bottom yet.
Z –
Whilst this is a significant shut in of short haul imports to the US it is likely of no longer term impact than the Enbridge pipeline closure of a few weeks ago. Therefore it seems to me it will cause a temporary spike in prices. Shows how keen the bulls are to take control again though doesn’t it?
January 29th, 2008 at 6:56 pmN –
Market is looking for anything concrete, no matter how thin, to hold on to. The completely unpredictable “recession, no recession” trading is getting pretty annoying.
January 29th, 2008 at 8:56 pmAgree Z – the swings are so wild its absolutely crazy.
January 29th, 2008 at 9:28 pmSo its 25 or 50 bips for tomorrow as of the latest opinion polls? I don’t see 25 making anyone happy and the Fed seems to want to make people happy these days. But then again, didn’t they just get fooled into the 75 bip cut making 25 more likely tomorrow?
January 29th, 2008 at 9:29 pm0.50 is absolutely priced in by the fed funds futures and everybody is saying they must do .50 as the market is expecting it.
Thing is surely one could argue how the heck bad are things if they need to cut another .50. These are the same people who only went 0.25 in December – so what has changed so drastically that we don’t all know about? This is more drastic than the cuts around 9/11.
So if they do .25 the market could fall hard UNLESS the language infers they are ready to cut again. But remember they don’t meet for another two months.
That said the funniest thing I heard today was Jeff Mackie on Fast Money who when asked said they would do 0.25 tomorrow and another 0.25 on Thursday when the market starts to fall apart!
If the following is the real story – then I hate to think where this is all going to end:
http://www.financialsense.com/fsu/editorials/willie/2008/0124.html
January 29th, 2008 at 10:13 pmDoes he dare disappoint the market too? He must know the expectations and what the result will be. Funny thing is even if he cuts by 0.50 isn’t that priced in now anyway. ie too many expectations for a huge rally? economic data really isn’nt supporting a .50 cut either.
January 29th, 2008 at 10:43 pmThe silver lining is if you are quick you can get a nice refi rate this week.
January 29th, 2008 at 10:52 pmwell chances are rates are going to go even lower yet. he will keep going until there are no bullets left!
January 29th, 2008 at 10:55 pmToday may be a good day to take on the APA for earnings.
What is up with service?! SLB just dragging everything lower. Anybody see a sector downgrade today. I’m reading a lot of positive stuff on the deepwater obviously and HAL’s call went swimmingly to no avail and I’ll bail soon if this doesn’t correct in the afternoon…stinks to be right and have the stocks go against anyway… RIG bleeding off as well….I must be missing something.
January 30th, 2008 at 11:26 amLike I said, Ben is our pimp and unless he keeps upping the dosage this market is going into the dry heaves.
January 30th, 2008 at 11:27 amDo you think this stuck down 40 dow is just worry that he’ll do the 25 bips and not the 50?
January 30th, 2008 at 11:27 am