Wednesday Morning Bounce

Posted on by zman

 

Market Sentiment Watch:  Weird markets.

Nicky's Voodoo Watch:

Rally came on even lower volume than yesterdays’ move down. That said thank god for a rally! Anyway resistance is at 1090,1100. I actually think we are going to make it back to the 1120 area before rolling over again. Thursday and Friday the voodoo is very bullish….

 

Topkill Watch Watch: If you have nothing better to do, BP has decided to keep the live feed going during the topkill procedure today if they in fact don't delay again.


In Today’s Post:

  1. Holdings Watch
  2. Commodity Watch
  3. Oil Inventory Preview
  4. Stuff We Care About Today – AEZ Brief, BEXP big wells, KOG gets its revolver loaded
  5. Odds & Ends

Holdings Watch:

ZCAT (Zman Catalyst portfolio):

  • $7,500
  • 99% Cash
  • Yesterday’s Trades:
    • None

 

ZIM (Zman Inefficient Markets portfolio)

  • $6,600
  • 42% Cash
  • Yesterday’s Trades:
    • HAL – Added (20) HAL June $26 Calls for $1.15 with the stock at $24.85 after another fall in the BP spill group. BP could try for a top kill of the well as early as tomorrow.

ZLT (Zman Long Term portfolio)

  • ROSE - Sold half of ROSE for average $19.30, up 65%.
  • AEZ - Swapped into AEZ at $5.37. I increasingly see the AEZ story unfolding as the next “good real estate in the Bakken, Brigham like play (in the sense that they will have catalyst after catalyst as the year progresses) in the making

Commodity Watch:

 

Crude oil fell $1.46 to close at $68.75 yesterday, an 8 month low.  Weak markets before the close of NYMEX and yet another fear based rally in the dollar were the culprits. After the close, the API released a bullish looking report (see below) sending futures up $1.30 by early evening. This morning crude is trading up $2. 

  • BP Can't Catch A Break Watch:  BP Alaska shut the Trans-Alaska oil pipeline curtailed to about 16% of normal capacity (of 667,000 bopd) due to a leak of "several thousand barrels". BP just can't catch a break. This may put a spring under the step of oil.

Natural gas bobbed back up $0.03  to close the day at $4.05 yesterday. This increasingly looks like bottoming action although I don't expect a significant departure higher from $4 before late summer. This morning gas is trading 9 cents.

Early Read On Natural Gas Storage: Street is at 102 BCF for tomorrow’s report.

  • Last Week: 76 Bcf Injection
  • Last Year: 106 Bcf Injection
  • 5 Year Average: 90 Bcf Injection
  • 10 year Hi: 106 Bcf Injection
  • 10 year Low: 49 Bcf Injection

 

Oil Inventory Preview


API Watch:

  • Crude: UP 616,000 barrels
  • Gasoline: DOWN 3.194 mm barrels
  • Distillates: UP 1.518 mm barrels


Stuff We Care About Today

AEZ Quicklook

  • Profile of a Nascent Bakken Player:

    • 68,000 net acres in Williams (Goliath Project) and Dunn counties, North Dakota, just west of the Neeson Anticline, in an area which would essentially be the north east corner of BEXP's Rough Rider area.  Running room for 150+ Bakken and 150+ Three Forks wells.
    • Focus is on Bakken / Three Forks and have sold down interests in Wyoming recently towards this end.
    • Production as of 1Q10: 171 BOEpd, so it's still tiny, but given early results should grow rapidly.
  • Balance Sheet:
    • $70 mm cash
    • No debt
  • Results To Date:(all three AEZ operated)
    • Tong Trust 1-25 H (Goliath area) (25% working interest) - 25 stage frac
      • IP 1,421 BOEpd
      • 7 day average of 962 BOEpd
      • 30 day average of 652 BOEpd
    • Ron Viall 1-25H - (Goliath area) - 30 stage frac, long lateral
      • IP 2,844 BOEpd (95% working interest)
      • 7 day average 1,748 BOEpd - fairly respectable given the initial rate.
    • Summerfield 15-15H (Dunn County) - 14 stage frac, short lateral, IP 2,799 BOEpd (33% WI)
  • Plan Going Forward:

    • 2 rig continuous program
    • Next 2 wells set for late June and Mid July completions. Both will be long lateral completions (9,600') with 30+ frac stages, with high working interests.
    • After these two wells expect another 5 wells before year end.
    • Planning at least 1 Three Forks well on their acreage during 2010.
  • Valuation:
    • P/CF 8.9x in 2011, not at all unreasonable for a what is essentially a Bakken startup.
    • For point of reference, BEXP until recently traded as high as 21x 2011 numbers and it is much further down the learning / development curve.
    • KOG trades at 5.8x 2011 numbers but honestly has not yet produced the higher rate and presumable higher return wells as they just have assets in different zip codes of the Bakken. 
    • $3,700 / acre. Not exactly cheap but you'd have trouble buying a contiguous block of acreage this size and in this part of the play for less than $4,000 to $5,000 / acre if recent lease sales are a guide.
  • Nutshell: Results to date show consistency but it is still early in the lift of this one. My sense is that this no debt, cash rich, player holds good real estate in the Bakken and that the name will be catalyst driven through the remainder of 2010 and beyond as it works to prove up its large (for it's size) acreage position. I missed the initial run up in this name and had comment that I would work it up following 1Q earnings. Yesterday I added an initial position in the ZLT. While I do believe the name will be catalyst driven I would also add that AEZ would be a suitable takeout candidate as larger players look to add scale in this oily onshore play. This brief will be book marked on the Reports tab.

 BEXP Announces Two More Big Bakken Completions

  • Jack Cvancara 19-18 #1H - IP 5,035 BOEpd -  this was the 36 stage frac in Ross we've been waiting on and would be the second highest IP in the Bakken, the first being BEXP's Sorenson well at 5,133 BOEpd.
  • Tjelde 29-32 #1H - 3,171 BOEpd - this was a 30 stage frac well in south central Rough Rider, more evidence that big wells can be found across the entirety of the Rough Rider acreage.
  • more details below table

 

 

  • 5 rig program (up from 4 rigs recently) drilling ahead.
  • 1 well fraccing now and 5 more waiting on completion ... the stock catalysts just keep coming.
  • In late June or early July two key wells, their first Bakken test at their Pale Rider play in Montana and the first TFS for them in Rough Rider will likely prove to be the most significant events of the year for them.
  • Nutshell: Due to market conditions I was not anything significant in the ZCAT (some way out of the money June calls) but I do continue to hold the common in the ZLT and will very likely play in the ZIM today.  Valuation has recently fallen away from nosebleed territory to a much more bargain like 15.4x 2010 and 7.4 x 2011 CFPS. Estimates should continue to meander higher with better than expected drilling results.

Other Stuff:

  • SSN - Gary #1-24 well (their 4th Bakken well) spud on schedule. Look for results in about 6 weeks and weekly updates on drilling progress.
  • KOG - $200 mm revolver is finalized with a $20 mm borrowing base - better than expected. 

Odds & Ends

Analyst Watch:

  • END initiated at Buy at CK Cooper with $2.50 target.

 

111 thoughts on “Wednesday Morning Bounce”

  2. Given that BEXP has made significant and recent higher highs than current levels, the stock has a better than average chance of running today. JB can probably tell you what the phenomenon is called but stocks find it easier to move into areas they have previously ventured into, especially recently. JB, when you get a chance could you look again at HAL and BEXP? Thanks.

  4. Morning Ram and thanks. Fingers crossed the top kill works. I had originally heard 10 days to two weeks to know if it had, now they are saying 2 days. Could start today or tomorrow.

  5. Echo the “weird mrkt” comment.

    TED Spread not flashing the All Clear Sign yet… still out at 11-month wides of 37.2 bps. Want to see this market FEAR metric drop back below 25 bps.

    Meanwhile, credit indices en fuego this a.m. Bears feeling the pain, CDS Trading Desk very busy. High Yield debt is running harder than Investment Grade, as investors are actively buying riskier assets (covering shorts?). Nobody thinks the world is full of unicorns and puppy dogs, frolicking in a field of rainbows… but, there is a little less terror on the Trading Desks today.

    IG -8 bps tighter (wow)

    HY +1 3.8 points higher (wow-wow)

    Prayer to the Oil Gods today… please please please, let BP cap Macondo. We get the point. We will be more careful, promise. [We went 41 years between major offshore oil spills in the U.S. this time… let’s hope it’s at least 41 more years until the next one. We can — and do — learn from our mistakes.]

  7. OECD raises growth projection

    http://www.businessweek.com/news/2010-05-26/oecd-lifts-growth-outlook-as-emerging-nations-rebound-update1-.html

    The economy of the OECD’s 30 members will grow 2.7 percent this year, more than the 1.9 percent predicted in November, the Paris-based group said today in a report. Including non-members such as China, the global economy will expand 4.6 percent this year and 4.5 percent in 2011, compared with an average of 3.7 percent during the decade through 2006…..“A first substantive risk is related to developments in sovereign debt markets,” OECD Chief Economist Pier Carlo Padoan wrote in the report. Elsewhere, “a boom-bust scenario cannot be ruled out, requiring a much stronger tightening of monetary policy” in some countries, including China and India, he said.

  8. What barometer are they looking at to show success when they insert various components to slow down the oil?

  9. Thanks BOP and MP

    Ram – they’ll be pumping mud and cement with the top kill. Flow should cease if it works. If not they go for the junk shot, trying to jam up the BOP. The BOP pressures are lower than they expected so the theory is that the well is actually partially obstructed now, either by something in wellbore or by partial closure of some the rams on the BOP. If the pressure becomes too great the BOP could fail more significantly increasing flow. So I more than understand the caution being taken here.

  11. Adding to #9 … understand the caution, especially since President Obama will give a press conference himself on the well and cleanup on Thursday before traveling to the Gulf Coast on Friday. If they succeed Obama will focus on the cleanup, if they fail, and this is like Mars Rover type stuff so there is a 30 to 40% chance of failure according to BP, they will get lambasted all the more as the President tries to keep from getting blamed himself.

  12. Thanks. I was wondering if it was a specific flow rate. If it is 200 – 225 gpm now, that they can finish off if they can slow to 25 gpm.

  14. #2 Good morning…HAL, is similar to the technical structure of the S&P, first resistance at $27, if HAL can get above this level, the next test is 200 day SMA resistance at about $29…looking at the 30 min, HAL should find first support at $25.25, working on BEXP…

  15. Z: The HK comments from CSFB after analyst day show a PT of $30/sh. That is based on $80 oil and $7 NG. At current strip NAV @ $25/sh

  18. ZTRADE – ZIM – BEXP

    BEXP – Added (50) June $20 calls for $0.25 on the mid and easily with the stock at just under $17 on news. See site comments for details.

  19. Bakkens soaring as a group. Nice to see KOG bouncing back. AEZ extending 5% early. They are on the opposite side of Rough Rider from the well announced this morning but clearly in some good real estate. No debt, lots of cash and a two rig program are hard to not like.

  20. Oil numbers in an hour, given the recent drop in oil and the lack of demand for gasoline in the numbers reflected last week for demand two weeks ago, the bar is set pretty low for today’s number. I expect a bounce back in demand this week as filling stations fill up in front of the 3 day weekend. Also looking for another big distillate number to confirm that 3 weeks of big demand numbers are not simply a statistical correction for past errors at EIA. 1 week is not a trend. 2 weeks is interesting. 3 weeks is hard to deny. 4 weeks would be a trend change. My rules but I think they are worthy.

  22. Morning all. Resistance is at 1090. Support at 1074, then 1060 – 65.

    Under any of my oounts we should run a bit higher and then see a pullback.

  23. Thanks Nicky, love the end of the day voodoo call. You still thinking bullish thoughts as we head into the weekend?

  24. BEXP came just short of kissing the 50 day and retreated from the opening run, I think if we get through about 17.20 we are good to leg up into $18 – $19 but I defer to JB on this one.

  25. Natural gas up 17 cents. Flat to up on down days in the market and up on up days. That’s new.

    HK up 4%.

  26. Yes Z – still feeling bullish! Best guess here – a move to around 1090, down to 1065 (fake all the bulls out and make everyone think we are going back down), then back up on our way to 1120 (fake all the bears out!).

  30. Energy stocks getting the typical pre inventory pull back off the highs. Oil numbers in 10 minutes.

  31. If you’ll entertain the questions, why didn’t BP crimp or pinch the leaking pipe to at least reduce flowrate? Are tube walls too thick? No way to get that much clamping force out of an undersea vehicle?

  32. #24 BEXP, interesting chart, BEXP prints a huge new P&F buy signal with a print of $17.50, this is the price to watch… right now BEXP is trading on a gap higher sandwiched between resistance at the 20/50 SMA, say $17.35 and 100 day SMA suport at about $16.30, I’d sure love to see the buy signal print….it looks like BEXP ran into first resistance today right at the 200 period moving avg on the 30 min… major support at the gap closure at $15.50

  33. EIA Oil Inventory Watch

    Oil before report: up $1.80 at 70.55

    Inventories:
    Crude: up 2.4 mm barrels (imports remained high)
    Gasoline: down 0.2 mm barrels
    Distillates: down 0.3 mm barrels

    Demand:
    Gasoline: 9.1 mm bpd, no boost from last week.
    Distillates: 4.021 mm bpd, still elevated, roughly in line with last week.

    …

  34. Kaman – they could have put a weight on the riser which is laying on its side, that has been suggested, don’t know why not tried.

    Crude still up 1.75 after that report.

    Cushing inventories fell slightly which is helpful in supporting prices. That was a pretty mixed bag of a report as product inventories fell unexpectedly but demand for gasoline was nothing to write home about.

  35. Crude traders so far breathing a sigh of relief, crude up $2. Given the fall we have had in prices, the expectation bar was pretty low for what would be needed to move crude up. I’d like to see a close over $71.

  36. Thanks JB

    Oil up $2.60.

    Salazar talking out of both sides of his mouth now, defending plans to implement “use it or lose it” lease plans.

  37. E21 — Spoke with a buddy who was in a small group mtg with E21 at UBS y’day. He is not currently an owner… but came away very favorably impressed. It helped him to see the maps of DavyJones to understand how the geology actually works here. Several other engineering-types in the mtg were focused on the mechanics of flow-testing/production from DJ and it sounded like people’s fears were put to rest. This is not “new news.”

    What is new news is that Schiller spoke coherently to a plan that would keep E21 alive and kicking, even if the MMR goes off the deep end with permitting. The fact that so many of E21’s planned drilling locations are classified as infill, offsets, or re-entry wells means that E21 can shift capital to those projects, until the dust settles with exploration and “riskier” wells to be permitted. It’s good to hear that senior management has a well-thought-out plan to deal with a changing world. Very good to hear.

  39. Geno – That amazingly daft bobblehead is speaking on CPSAN3. Typical “not my fault, it was the prior admins fault” babble. Bush to blame for everything. I wonder when these guys are actually going to actually take office because it would be nice to know when they can be held accountable.

  40. Congressman calling for a claw back of all leases granted in the Gulf since the new administration took over.

  42. ship building stocks along with everything else got hammered. BDI however has been strong recently.

  43. I wonder what kind of law suits will come about against BP with the government cancelling leases all over the place.

  44. AAA – Ha!

    Geno – good question, a mess in every since of the word.

    Petra is tired of hearing my rants but congressman asking why technology is the same as it was for cleanup of the Santa Barbara spill. I’ve been asking for days why EPA doesn’t have approved dispersants and procedures in place?! Instead they tell BP to find one. What if this had been a NFX run well. They’d be bankrupt already and wouldn’t have the resources to fight this on all fronts. It boggles the mind.

    Salazar just repeating this is the biggest response to a spill in U.S. history. Blah, blah, blah.

  45. I think that offshore oil is going to take a long time to recover. That is why the Bakken and tar sands in Canada are worth more now than ever.

  52. Choice – yeah, went through it, didn’t see anything that made me want to jump onboard at the moment.

  54. #52, thanks Z, tend to agree, particularly with the anvil hanging over the head of all involved-I guess my question, maybe premature at this point, is this dead money for the foreseeable future-lawyers, environmentalists etc fighting on for years-I “think” IMHO that a strong case can be made for BP negligence (and gooberment) but I cannot quantify that in any kind of resolution-RIG was up strong yesterday, not much today-maybe RIG escapes-

  55. re 49 – the pullback we have seen since 1090 may have only been a wave iv. If so we need a higher high. Resistance at 1095,1097.

  56. Alternatively top is in for the wave and if that is the case obviously we roll over between here and 1090.

  57. nicky -so u’re saying if it goes above 1090 again it should keep going, and if it goes below 1080 we;re going down???? thks

  58. These guys up on the hill continue to amaze me. Fleming’s from my district. How can you possibly expect an immediate response to such big issues. A reasonable person should know this.

  59. tiny ESPH put out a release this morning saying they are moving some of their equipment to the gulf area.

    http://www.ecospheretech.com/

    See the recent news links on the lower right hand side – there is a link to some video too.

    I know BP did a pilot program with them earlier this year. SWN has been using their tech in the FS.

  60. full disclosure on ESPH – i am talking my book. Company has a debt problem resulting from lack of revenue for a number of years. It has been interesting to learn more about them though.

  62. re: 61, no kidding…decided to keep the plume monitor up on my desktop for the day…like a bad screensaver.

  63. K – yeah, and don’t think I don’t have one-third of an eyeball on it. If it were to sputter and run dry of a sudden there are always BP calls.

  65. Andy re 57 – if it gets back above 1090 then I would have us in wave v of this first wave up and be looking for some sort of retracement. There are some bearish counts which say we could turn down hard again but I see this move up lasting a bit longer and so would be looking for the move off the wave v high to be corrective.

  66. An aside – with regards the voodoo for tomorrow – the early part of tomorrow is bullish and then it fades. Maybe coincide with the end of v up of this wave? We will have to watch the pullback after that v up to see whether we have the top of maybe just the first wave up or whether something more bearish is going on and we are heading back to the lows.

  67. sorry to go on but….very short term I don’t see much more upside, myabe a pop to a new high, maybe not. If a new high isn’t coming its possible we reverse this afternoon.

  69. Thanks Nicky, I think I get what you mean.

    Energy yield names jumping back up again, strong outperformance … you’d think they had all drilled 5,000 boepd Bakken wells.

  70. Tom – I still have not bought a share myself but I may if when I do the kid account contributions.

  72. ZTRADE – ZIM – BP

    Added (5) BP June $42.50 calls for $2.50 with the stock at 42.85 as the company starts the top kill procedure. High risk and quick trade.

  79. PHYS did what it could to reduce its high premium: did a secondary today priced at $11.25, PHYS closed at 12.46 yesterday, now trading at 11.57.

  80. On that trade, not that they are out of the woods if they stop it by a long shot but just figuring the market will bounce it and the other names when the leak is stopped. Sooner the better. Daily and weekly charts of BP shows the pounding they have taken.

  82. BP’s june calls showing fairly high volume today, jun 42.5 puts also fairly high with relatively large op interest-50/50 bet

  85. choices – a close here recaptures the 10 day MA and should bring some momo buying back to gold. I would like to see a consolidation here or slightly higher for the rest of the week.

  89. #85, agree, v, Gold has been extremely strong in all of this turbulence with euro, dollar.

  90. Woops re 85: Pits closed already… small move above todays highs and some churn to the end of the week would be a perfect set up.

  91. Like I wrote this morning, weird market. Indexes all red. Oil still up over $2 but back below $71 in the after market session.

  92. Nicky spot on re#26 “…..Best guess here – a move to around 1090, down to 1065 (fake all the bulls out and make everyone think we are going back down), then back up on our way to 1120 (fake all the bears out!).” 🙂

  93. Prichard has a mini Bakken conf. in Chicago tomorrow: AXAS, AEZ, BEXP, CLR, CRR, KOG, NOG, PDC and TPLM.

  96. #7 I tend to think that if the world was *really* growing at 4.5%, crude would be at about $120. Just seems at little rich to me.

  98. simple solution for future wells

    leave mud in pipe

    Do you think gom stocks pop with the bp well killed? I do, bot some more exxi

    NM reports tomorrow,i think they will meet or beat.. im long the calls

    They got the spac done (NNA) and the warrants now have a 3 year life. The stock sold off 3 bucks while the warrants more or less held price. This alone created 50 m in value to nm 50 cents a share. 6 m founder shares worth 42m and 7 m warrants worth 8m

    If you are bullish on tanker prices, nna gives you a play on the assets acquired at todays depressed price which is below replacement costs. Earnings will be driven by products demand which currently are weak

    I’m not in NNA but it looks intersting in the 6’s

    Someone mentioned BALT New entity that acquired bulker assets on the cheap and trading below current depressed book. I bot some of that as well but there is no rush on that

  99. Bill – yes, but it may be brief. I think the admin is going to extend the time to start permitting wells beyond May 28. Saw XOM say today they now had one well that was planned for the Gulf that will be delayed. Soon there will be a lot more.

    Will be on the NM call, thanks.

  100. Hearing some industry buzz about already permitted AND DRILLING wells being told to shut down. This would be very disturbing, if true.

    The BP disaster looks to be human error (and the real truth may never come out)… But something like 60,000 wells have been drilled in the GoM and we have this one (albeit HUGE) blowout in a well in ultra-deep water. Why shut down everyone else? Cool Heads are not prevailing yet, it seems.

  101. End of Day Overview:

    Markets Update – stocks were higher for the much of the day but started a descent lower at around 2pmET (sp500 hasn’t had back-to-back green closes since 4/28-29). The desk noted a change in tone Tues morning, w/HFs looking to cover and some vanillas stepping in on the long side – that trend kept up in the morning but we started to see more sell orders come in this afternoon. For the most part however, the tape remains very technical and futures driven (technically, we bounced off the high 1060 support levels). The euro was under pressure for most of the day but moved to lows around 11amET (due to NBG/National Bank of Greece reporting earnings below expectations) and was hit again at 2pmET (due to an FT article discussing how China was reviewing its holdings of Eurozone debt) – this latter FT article contributed to the selling pressure in equities. MSFT was a notable laggard in trading today too – the stock alone subtracted nearly 1 whole point from the sp500 (weakness stemmed from cautious comments out of CEO Ballmer, who expressed concern to Reuters this morning about the European sovereign debt crisis contagion spreading; also for the first ) – see below for a full MSFT update. The financials came off their best levels today, hurt by the NBG earnings and also reports (on American Banker and DJ) that the FASB draft on expanded mark-to-market accounting rules will hit tonight (this has been expected to come but will prob. get more attention in the next 24 hrs and could be an incremental neg. for the group).

    Equity sectors: Industrials were the only space higher today, up 0.25% on strength in machinery and airlines. Utilities were off slightly, getting support as investors shed risk late in the day in preference of low beta stocks. Energy was off 0.25% as a spike in crude and nat gas rallied services, drillers, E&Ps, and coals, although weakness in integrateds weighed on the space. Discretionary was off 0.25% as weakness in retail stores more than offset gains in autos and auto parts. Healthcare was down with the tape as weakness in biotechs offset gains in a few pharma names. Financials were off 0.65%, lagging the tape a bit on weakness in GS and a few regional banks. Materials were off 0.75%, led lower by weakness in integrated steels, ag/fert names, and packaging stocks. Staples were off close to 1% on weakness in grocers and beverages (KO and PEP). Tech was off over 1%, lagging due to weakness in software and internet stocks, while the SOX outperformed (-0.2%). Telecoms were the worst space in the market today, led lower by S, after outperforming the past few days.

    Commodities: Crude Oil closed off its highs, and finished right around $71, up ~3.4% on the day. Natural Gas finished near $4.15, up >2.5%. Gold traded flat for the latter part of trading, ending around $1210, up >1%. Copper finished near its lows of the day in choppy trading, though still up ~0.7%.

    FX: USD (DXY) strengthened into the close and finished nears its highs of the day, up ~0.45%. The dollar came off its lows vs. the pound and finished flat. The dollar sold off near the bell vs. yen, ending down ~0.2%. The Euro continued to weaken during the latter part of the day, and finished near its lows below $1.22 (the euro was hit after the FT said China was reviewing its portfolio of Eurozone gov’t debt). The euro also finished near its lows vs. the Yen, closing down ~1.5%.
    Corp. Credit: Corp Credit continued to outperform stocks; IG 14 finished tightening 2bps while HY 14 gained 5/8 of a pt.

    Treasuries: The 5 year auction continued to show some weakness in demand for safer assets; the auction had a yield of 2.13% – higher than the 2.11% forecast, and a bid to cover ratio of 2.71, down from 2.75 at the last auction. [Bloomberg] Even with auction coming in weaker than anticipated, treasuries rallied – the 2s finished yielding 82bps. The 10s finished yielding 320bps. The 2-10 spread flattened a bit from the afternoon to finish at 237bps.

    SP500 cash technicals — The Equity market has ended the first phase down (per the arrows on page 3 of our last piece), of the larger 2-5 month correction from the 1220 top. We had thought that 1044 to 1020 would end the first leg down….note that 1037 was 15% down from the top (low yesterday was 1041). Many breadth gauges are extremely oversold, so a reflex rally can work those off. This market is tactically buyable for more upside retracements, with key support holding at 1067-1075. Upside minimum is 1104 to 1115 (former is the 200 day MA). I would view 1150-1185 as a major ceiling. Monthly and weekly momentum, however, suggest that more correction in time is due into this Summer. I still favor another downleg to 950-1000 before Labor day, which would be investable for the next bull leg to the 1300s. Risky assets should have some lift into June. Note that Treasury Tens rejected this years major 3.00-3.10% resistance yesterday (3.06%). We’re 25% short there. Closeing Tens through 3.26-3.31% support would mark an interim yield low. Next US Equity report on Tuesday.

  102. >Hearing some industry buzz about already permitted AND DRILLING wells being told to shut down. This would be very disturbing, if true.

    Agreed, and you can bet its coming. Does anyone think otherwise?? This is perfect for them. Drive up the price of gas and blame bp

    if i were i gom player and recently won leases, i would tell the guvment i wasnt paying due to the uncertanties caused by the disaster. How can they collect on upfront payments, penalize them for not drilling and then put road blocks up to get permission to drill

    let them sue me

    they like to blame big oil but the govt is in partnership with them

    From a financial perspective

    -they get up front lease payments
    -royalties
    -34 % taxes on profits on all oil companies and subcontractors
    -payroll taxes for everyone involved
    – social security payments and match

    and dont share the costs when things go wrong

  103. BEXP…not crazy about the bearish shooting star candle close on the daily chart at 100 day SMA support level…weakness in the mkt tomorrow will probably have BEXP testing the gap at $15.50…but this may set up another buy opportunity, mkt conditions permitting…

  104. >The BP disaster looks to be human error

    Most disasters are caused by human error and not just one factors but a series of factors that all have to line up to cause the disaster.

    I’ve studied a number of aviation accidents and its amazing the number of things that have to happen to cause the problem.

    Im sure the BP guy in charge wanted to move things along so they could move the rig, shortcuts were taken, the cement job, the bop, the annulus within the bop, the battery, the seawater, the presure test, the subcontractor yielding to bp, lack of mms oversight There are a number of other factors not mentioned, they all had to happen for the thing to blow out.

    Wouldnt it be ironic if a safety test caused the problem. ie if they didnt test the bop they wouldnt have damaged it and the bop would have worked and the problem wouldnt happen. That brings up the quality of workers on these rigs and the industry turnover.

    Its amazing to me this hasnt happened more often

    Its prudent to take a time out and figure what went wrong and take new measures to avoid the 1 in 65,000. It means higher costs for the industry but im not sure anything they do will make the odds better from 65,000 to 1

  105. bill #104 — well said. It IS prudent to take a step back, take a deep breath, learn from this, adjust what needs to be adjusted so it “never” happens again. I just don’t think prudent heads are involved… when the GGG turns his steely eyes in your direction, you have no idea what he is going to do… and it doesn’t have to resemble “rational.” But, he’s the 800-lb Gorilla… so he always wins. (NB “just sue me” doesn’t work so well when used on the govt.)

  106. 100…IF true, seems some deep water driller Puts would be in order….

  108. Saw Matt Simmons on PBS (Nightly Business Report) tonight and he flatly said he thinks BP was rushing completion. And that it is a disaster for offshore drilling. And that oil peaked about 5 years ago and can only go up.

  111. JB, thanks for the great charts and another vote for you and all your hard work. A question if you happen to see this message. Most of the charts have broken down from long channels or triangles . Do you have something specific or a signal that you look for as a reversal sign to go long. ie, a candlestick hammer on large volume or a p&f 3 X reversal. On a shorter time frame when we hit the bottom side of the channel this will act as resistance depending on the strength of the move. Do you use trailing stops or are you able to watch the market daily, if the up move fails at the bottom of the channel? If you have time, thanks again.

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