07
Jul

Wrap – Week Ended 7/6/12

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Comments will be included in the Monday post. 

36 Responses to “Wrap – Week Ended 7/6/12”

  1. 1
    zman Says:

    BOP sent in this comment at the tail of the Monday post , thanks for taking the time to field that question BOP

    TD12 — why FCX comments make MMR move…

     

    1) JimBob Moffett is Chairman of both companies

     

    2)  FCX helped fund MMR's UD program by buying (i think it was) a good slug of MMR's converts about 2 yrs ago (or so) — so FCX already "owns" some MMR.

     

    3) FCX has said on conf calls that there are no more cheap copper/gold/etc mines left in the world… they might look to add some oil or gas assets.

     

    4)  FCX is generating cash… MMR needs cash.

     

    5)  There's probably a lot more… but those are the highlights.

     

    Don't mean to imply that a FCX/MMR combo is highly likely… just that it is not UNlikely.  Would have to get a heck of a "fairness" opinion… But when JimBob WANTS something, he can be a Force of Nature in persuing it.

  2. 2
    zman Says:

    OPEC special meeting may be gaining traction, 

    http://english.farsnews.com/newstext.php?nn=9103085488

  3. 3
    zman Says:

    Iran may sell oil via middle man to get around EU ban

    http://in.reuters.com/article/2012/07/07/us-iran-oil-idINBRE86607520120707

  4. 4
    brodway Says:

    re: 3
    who would have doubted this. let me guess the middle man is China and the oil doesn't get past hello.

  5. 5
    Zorgnak Says:

     
    S&P Futures Notes/Thoughts for the week ahead.
    S&P 1352
    Market  attempting consolidation above key support (1341.75). On Friday selling exhausted at support  (1341.75) and closed up into the confluence of long, intermediate and short term acceptance/congestion (1350-1358.50).This area frames the trading expectations going forward. Expecting choppy trading within this area with resistance at 1357 and a gap close at 1361.75 as the primary areas of upside interest. Far resistance at 1370. A rejection lower from this area will likely test key support (1341.75). Expecting a break of this area works considerably lower to 1321 and below with the major acceptance area at 1309 as the magnet.
    Bulls need to see continued two-way trading to establish value above 1341.75 and then new/aggressive buyers coming into the auction above 1357. The demand volume leading up to and following the latest European fix du’ jour is fading on the shorter term time frames .   
    CLVN=Low Volume Rejection Zone – CHVN= High Volume Price Acceptance and Congestion Zone
    1375     Congestion begins to increase. 1386 CHVN
    1362-75  CLVN, Low volume transition zone. Stocks can move easily on little volume.
     1358.50..CHVN ,Upper Volume Pivot. Wide acceptance zone 1350-58. Minor resistance 1357
     1350.75  Lower Acceptance. A rejection lower likely to test 1341.75
     1341.75..Key support for upper trading range. Break lower works to 1321.
     1330.50..Congestion, CHVN
     1321…..Key short term Low volume rejection area. Break of this support area leads back to major congestion/chop and increased volatility.
     1300-18..Long and short term volume pivot/acceptance. Previous newnews/rumor chop area.    

     1286.75..Short term volume void begins. A break here opens a test of recent lows, support at 1252.50.
     1252-58..Major Low volume area. Potential support and bottom of potential longer term trading range.
    S&P Futures Composite Profile
    http://www.charthub.com/images/2012/07/06/ES_Composite_2.png

  6. 6
    Zorgnak Says:

     
    Crude Oil Futures
     
    Settled at the confluence of long and short term acceptance around 84.  Demand volume turning negative after bounce from exhaustion buy setups.  Expecting  sideways/down trading to retest support levels . 81.50 key for bulls.
    86.75 Far Resistance
    85       Resistance
    84    Acceptance
    82.50 Minor Support
    81.50 Far Support
    Crude Oil Composite Chart
    http://www.charthub.com/images/2012/07/07/Crude_Composite_3.png

  7. 7
    Zorgnak Says:

     
    E&P Stocks 
    XOP   Low volume break above a 4 week volume base (48.73) to just short of long term acceptance at 52.88. Resistance at 52.37 with major supply overhead.  Key support at 48.73. Demand volume improved during the recent bounce from exhaustive selling but never went positive on the longer term time frames.  Expecting further testing/chop between 48.73- 52.37 until demand volume increases.  
    XOP Chart
    http://www.charthub.com/images/2012/07/07/Stock_Weekly_2_3.png

  8. 8
    Zorgnak Says:

     
    PVA   Looks to me like it wants to go sideways for a while below resistance in the 7.43 area. Demand volume rolling over on the daily and intra-day time frames on the last run at 7.50. Minor support at  7.10. far support at 6.62
    http://www.charthub.com/images/2012/07/07/Stock_Weekly_2.png
    REXX Looks to work sideways above  11.44 Support . If  11.44 fails, far support at 10.85 is above  recent 4 week volume  base. 12.09 resistance. A volume break above 12.09 begins to clear long term supply. Demand volume is  flattening short term but positive in all time frames.
    http://www.charthub.com/images/2012/07/07/Stock_Weekly_2_4.png

  9. 9
    Zorgnak Says:

     
    EXXI  Traded to well defined resistance at 33.41 and back to support at 31.62. Suspect choppy  sideways trading in the low volume zone between long and short term acceptance waiting catalyst and or sector rotation  Demand volume is flattening in the short term but remains long term positive.  
    http://www.charthub.com/images/2012/07/07/Stock_Weekly_2_10.png
    MMR Ran up to major long term acceptance/congestion and now showing exhaustion setups on daily and intra-day time frames. Near support 13.47 Support12.55 and then 11.17. 15 is the MOA resistance with major supply above. Daily and intra-day  demand volume peaked  7/3 in anticipation of a catalyst. Long term demand volume positive.
    http://www.charthub.com/images/2012/07/07/Stock_Weekly_2_6.png

  10. 10
    Zorgnak Says:

     
    SJT    Hitting short and long term supply around 16. Daily and intraday demand volume positive though beginning to flatten. Longer term demand volume has improved with the stock beginning to move much more easily in all time frames.  
    http://www.charthub.com/images/2012/07/07/Stock_Weekly_2_7.png
     
     RRC  Support 59.68 Resistance 63 Long term demand positive

    http://www.charthub.com/images/2012/07/07/Stock_Weekly_2_5.png

  11. 11
    Augusto Meoli Says:

    StockCharts.com posted the chart of a potential very bullish double bottom in oil $WTIC and positive MACD divergence. It is a two year double bottom at $77.5. As usual, with technical analysis the double bottom holds until it holds. If it breaks below….oh well watch out for much lower prices.I do not know if I can re- post the chart. So I am just reporting the view of the author.

  12. 12
    zman Says:

    Norway strike talks said to continue for next several days. If strike is resolved and Iran remains quiet I would expect a near term test of $80 again before we gradually move up on higher seasonal demand and reduced OPEC output. 

  13. 13
    zman Says:

    The WIOWIO has been added as a link at upper left

    http://zmansenergybrain.com/subscriber-data/wiowio-2/

  14. 14
    zman Says:

    If you want your somewhat anonymous Bio posted here:

    http://zmansenergybrain.com/subscriber-data/bios/

    Send it to us at zman@zmansenergybrain.com

  15. 15
    zman Says:

    A "The Plays" tab has been added at upper left. 

  16. 16
    ram Says:

    Thanks BOP for TED response.

  17. 17
    nrgyman Says:

    Love the WIOWIO comments and the new link.  Very useful nuggets of information on each position.  Great to refer to.  Thanks for that!

  18. 18
    life’s-a-gas Says:

    re 5:
    Zorg, are CHVN, CLVN automated (if so, how) and/or hand annotated?
    What's the color scheme for the volume bars along left, right axes, and weekly composite (including special bars such as VPOC, etc)?

  19. 19
    nrgyman Says:

    According to this article, shale oil development to pressure world oil prices:
     
    http://www.rigzone.com/news/oil_gas/a/119174/Study_Shale_Oil_to_Pressure_World_Prices

  20. 20
    zman Says:

    re – that's a summary of the Harvard piece rom a couple of week's back. The pricing expectations are overly optimistic at current service costs.  At those prices only the cores of some of he plays like the Bakken / Three Forks work, which would me growth would be constrained.  I did not read the entire original piece but the executive summary was full of similar sweeping statements that don''t exactly match up with experience. To some extent we've already seen prices become pressure by shale with the growth we have seen in US production however, at lower prices, that growth stalls. 

  21. 21
    Zorgnak Says:

    re #18 The CHVN/CLVN lines that I post here are done by hand. It is possible to program the software to find them automatically for a given profile but I don't use it for a couple of reasons. A mechanical chart becomes unnecessarily busy for posting and because I'm looking for as much confluence as possible between major and minor volume formations, some of which can go back years. As far as I know the chart package can't do that yet without putting a distracting maze of lines on the chart. Main reason for manually placing the lines is that the process of reading and marking  the chart day by day forces me to look at the situation in a discipline way which helps to develop a feel for what is relevant on the chart and  to get some clarity top down on the market, sectors/stocks as a whole. The whole process is to come up with at least 2 or 3 scenarios for a chart is so that I know where I want to do business or manage risk.
    The color scheme I use is a sort of heat map to show the intensity of volume at any given price level. The bright red denotes the highest volume at price. The dark indentations are the lowest volume levels.  I generally see those most intense colored areas as likely major influences on trading. The other colors are just  gradients between the major high and low volume nodes. The far right volume profile is the longer term, big picture composite of all volume traded at price, generally over years of data. The profiles to the left I create to encompass more recent volume looking for possible confluence in the short and intermediate term. Not shown is an intra-day profile that I use to develop some clarity on how a given day is most likely to unfold and to find confluence with the longer term. 
    If I make it sound complicated, it's not. It's dirt simple, but the jargon is confusing until you understand what it implies. For example I use "support and resistance" at CLVNs  to communicate but it isn't really accurate . Even rejection doesn't necessarily mean reversal. I use congestion,value or acceptance at CHVNs depending on the context of the market.  It's the reaction though to the levels that is important.  I  put out contradicting scenarios daily, especially when clarity is scarce because I never know what is going to happen but it allows me to have a plan in advance of the market reaction to these areas of interest. 

  22. 22
    Zorgnak Says:

    #18  VPOC = volume point of control on the profile(daily,weekly, monthly) as it develops. It is the most accepted price/value in the time period. It has a number of uses. For this room I use it to see when value is trending up or down over time and when it is likely to act as a magnet in lieu of a catalyst. It's placement on the profile is a useful tool in determining how to view the market context.

  23. 23
    brodway Says:

    Zorg, did you come up with this charting technique on your own or did you modify an idea that had already existed? from what little i've seen you use this system, it has had pretty good results as far as predicting certain moves, but more importantly making one aware of important points in trading activity and when these points turn a certain direction, you could be ahead of the curve as far as being long or short. charting by hand sounds awkward given we are in the 21st century, but if it works, won't knock a good thing.

  24. 24
    Zorgnak Says:

    #23  I learned most of it from another trader and have adopted it to how I like to trade. The hand part isn't that onerous with a swing trade time frame using the limited number charts relevant to this room's interest.  The method is dirt simple and gets simpler the longer term your horizon. The hard part is the behavior modification needed to trade in line with the method or any method that matter. This method isn't really a system but a way to frame the market in order to get some clarity on the most likely scenarios and then areas of interest that confirm or negate them. 

  25. 25
    life’s-a-gas Says:

    Very helpful Zorg.
    How do you pick the first trading day to include in the composite? For example, 4/30 in the ES composite detailed in #5?

  26. 26
    DaveH Says:

    This is an interesting article that indicates new electric generation plants will probably be nat gas powered because coal will not meet the new EPA regulations.   And gives some information on why the new EPA regulations are beneficial.  http://www.nationofchange.org/coal-industry-wants-you-dark-1341758875 .   This trend could affect both nat gas and coal stock prices.

  27. 27
    Zorgnak Says:

    #25..I try to pick time frames that are relevant to where the market is trading now. For the long term composite on the right edge of the chart I go back to 2010. For the intermediate term I went back to the swing high at 4/30. For the short term I use the period that encompasses the most recent areas where the market has establish balance or two way trading over a couple days to weeks depending on how it unfolds. 
     Within the long , intermediate and short term market swings I'm looking to discover where  trade is most and least facilitated, where  value is considered most "fair" by buyers and sellers and where it  is considered "unfair".  One attracts price, one rejects it. 
     
     
    .I go back to the previous swing high to low to get a feeling where the intermediate areas of interest are. I chose 4/30 as the swing high. I could have gone back into March to get more information and I may if I need more information. (More information isn't necessarily better though. The more confirmation you seek the more price risk is entailed, so I try to use the minimum amount to get the job done). 4/30 looked like a good intermediate period . Mainly I'm looking for two things, where in this major  swing is trade most and least facilitated. Where is value considered most "fair" by buyers and sellers and where it  is considered "unfair".  One attracts price, one rejects it. 
    I pulled out a bit to show the swing high that I chose…
    http://www.charthub.com/images/2012/07/08/ES_Composite.png

  28. 28
    elduque Says:

    Thanks Zorg for the time taken to educate us. 
     
    Being prepared for the next day is a huge advantage. Doesn't mean it is always going to play out the way you see it, but thanks to you I am trading a lot better, by simply taking the time to set up support and resistance zones for the stock that I am trading. 
     
    It is extremely valuable when you can apply the above with the long term fundamentals of a stock. Especially important right now, as there are several stocks that people seem to be willing to buy if they get back to major support lines. 

  29. 29
    Zorgnak Says:

    re #28 thanks…
    #27 was a rather jumbled reply. I started it and then was interrupted and then restarted it and forgot to erase the first attempt…but I think it says most of what I was trying to say

  30. 30
    life’s-a-gas Says:

    Zorg,
    My dim light bulb is now burning a little brighter. I'm looking forward to following your daily analysis with much better understanding. And hopefully more refined questions.
    Given where we're at today, I can 'now see' that the gravity of of the S&P 1308 area as confirmed by the intermediate and long term composite is going to make it exceedingly difficult to work higher, especially since there is significant low volume rejection just above. In fact, we look to be at a very unstable price level and one should expect a near term move.

  31. 31
    nrgyman Says:

    RE 19-20: That was my thought about the article as well.  The article did not mention Canada or Brazil as producers that will be growing production over the next 5-8 years.  At the low oil prices anticipated those two producers would also shut down most new operations.  At current world oil demand levels, the rapid production growth from the US and Iraq along with the production ramp-up by Saudi Arabia have all contributed to the recent oil price decline.  If China were not building up their strategic oil reserves then oil would probably be even lower.  Given current supply characteristics, this points out to me that world oil demand needs to pick up from current levels or oil will stay low–maybe even drop further.  Just as stock markets need future economic growth to improve, oil markets need economic growth to increase demand so oil prices can rise.  There is currently a high correlation between oil prices and stock market prices, which should remain until oil prices rise enough to destroy demand.  
    Of course, all of this assumes a constant risk premium–which is not an insignificant part of the equation.  Iran saber-rattling seems to always jolt the oil price upwards.  This has obviously become a strategic method for Iran to boost revenues.  The Arab spring and other oil producer instabilities could also factor in once again.  The expansion and contraction of the risk premium has a big effect on world oil prices.  By nature risk event materialization is unpredictable, except that it has become very predictable that if oil prices drift too low for producer's comfort, something will happen in an attempt to boost prices upward.  It could be something as simple and obvious as Saudi/Kuwaiti production cutbacks.  But even this is not certain, given Middle East turmoil and politics.
     
    Finally, the substitution effects of using natural gas instead of oil could play a big role in curbing oil prices going forward.  If the broad transportation sector were to adopt natgas in a meaningful way, oil prices would be affected.  Already the petrochemical industry is investing to use cheaper NGLs instead of oil by-products.  Natgas has shown that it can devastate competing energy sources in the power generation market, as the coal, solar and wind markets will demonstrate.  If it were to enter the transportation market in a big way there is no doubt that oil prices would be pressured as well.  Without incentives to encourage the switch, however, such changes in the transportation sector could be a long, slow process and oil prices might only be marginally affected.

  32. 32
    choices Says:

    OII-summary article on ROV's
     
    http://oilprice.com/Energy/Energy-General/ROVs-A-High-Tech-Win-Win-Investment-in-the-Offshore-Drilling-Boom.html

  33. 33
    zman Says:

    Sable please check your email. 

  34. 34
    zman Says:

    Norway talks = no progress

    http://www.cx-portal.com/wti/oil_en.html

  35. 35
    Zorgnak Says:

    #29  Life ..your questions are right on the money. 

  36. 36
    Zorgnak Says:

    #30…My read is much the same as yours from the chart. I see more risk than reward unless we get new buyers willing to step in to create acceptance above 1341.75, preferably above 1350. As always anything can happen.  

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