MAKING HAY

Banks are paying bonuses even as shareholders make losses. That is a problem...

A PERFECT STORM'S BREWING TO COOL CRUDE OIL

A perfect storm's brewing to cool petroleum demand Commodities Corner - MarketWatch

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Geithner Aides make Millions giving speeches to Wall St. pals

The advisers include Gene Sperling, who last year took in $887,727 from Goldman Sachs and $158,000 for speeches mostly to financial companies, including the firm run by accused Ponzi scheme mastermind R. Allen Stanford. Another top aide, Lee Sachs, reported more than $3 million in salary and partnership income from Mariner Investment Group, a New York hedge fund.

Crude Oil Jumps Above $75 to One-Year High on Demand Optimism

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PRICED TO PERFECTION

Equities and many commodities are priced for an Economic Nirvana.  Ask yourself this question:  you know at least three people out of work... how's their job search going?  That said, our view generally is equities are moving up on cheap money and Big Funds who missed the bottom, trying to drive the tape to year-end (making up for last year's lost bonus).  Commodities are following suite, driven by a deeply perforated US Dollar and unrealistic V-shape recovery.  Net, Net:  there is little chance Markets can exceed current expectations needed to drive this tape higher across the Boards.

While we think crude oil will go much higher 3-5 years down the road, don't be surprised if it drops $6 from current levels in the near-term:

CRUDE PUSHES HIGHER

"Crude and products futures increased in heavy overnight volume as European equities advanced and the dollar weakened," Addison Armstrong, analyst at Tradition Energy in Stamford, Connecticut, said in a research note.

GOLD WILL HIT $2,000

The dollar "is a terribly flawed" currency, says Jim Rogers. "Foreign debts are increasing rapidly every year, and I don't think Washington seems to care."

"There was very, very few new production capacity brought on line in the past 30 years for commodities," he said. "We have shortages developing throughout the world."

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JIM ROGERS: $200 OIL LIKELY

While we couldn't agree more with Mr. Rogers over the mid-term, in the near-term crude is very top heavy. Below, is an updated version of the crude oil futures chart we've posted previously. Classic negative divergence, e.g. price moving up on weaker and weaker momentum:

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David Malpass: The Weak-Dollar Threat to Prosperity - WSJ.com

David Malpass: The Weak-Dollar Threat to Prosperity - WSJ.com

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GOLD COULD REACH $1,500

“We believe gold has a significant upside potential into 2010,” the bank said, adding current prices “were off the charts”. In spite of a 40 per cent rally in gold prices since Lehman Brothers collapsed a year ago, few traders appeared to be taking profits or betting on a price fall.

CRUDE OIL DATA MIXED; PRICE DOWN

This morning's energy fundamentals were a mixed bag, but the tape (chart below) tells the Tale:

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COPPER LAGGING, TOO

Copper, while higher today, is still below 280 and appears to be in the process of rolling over.  Oversold, the bounce is to be expected.  If the surge in equities represents a recovered global economy, copper should clear 290 easily and make new highs... if not... well, the picture is considerably less rosy.

BULL TRAP

While the dollar news out of the Middle East and the Aussie rate change hit short equity players hard this AM, crude oil is lagging on a relative basis.  Gold continues to lead the bull charge.  Watch oil.  It will tell the story for equities.

DEMISE OF THE US DOLLAR

Secret meetings have already been held by finance ministers and central bank governors in Russia, China, Japan and Brazil to work on the scheme, which will mean that oil will no longer be priced in dollars...

The decline of American economic power linked to the current global recession was implicitly acknowledged by the World Bank president Robert Zoellick. "One of the legacies of this crisis may be a recognition of changed economic power relations," he said in Istanbul ahead of meetings this week of the IMF and World Bank.

COCOA SURGES TO NEW HIGH

December cocoa surged $239 to a new contract high of $3,240, blamed on fund buying and ongoing concerns about the upcoming 2009-2010 crop.  Nevertheless, fundamentals are bullish and are being magnified by a weak USD, expect higher highs.

 

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GOLD CHARGING; OIL FOLLOWING

Gold futures rose Monday for a second session, up more than 1% as the U.S. dollar continued to fall against most rival currencies, boosting gold's investment appeal.


Also helping gold, holdings in the biggest gold exchange-traded fund rose in the previous session, and crude oil rose above $70 a barrel, raising gold's appeal as a hedge against potential inflation.

NO SELLERS

As we head into the bond market close, majority of stocks are up or near highs for the session.  That said, the Diamonds Trust (Dow ETF) needs a weekly close above 97.50 to indicate this Bull Run still has legs to make another high for the year.

CRUDE TRADERS BRACE FOR HARD LANDING

Phil Flynn, an analyst at PFGBest in Chicago, said oil prices are due for a downturn after ignoring ballooning inventories amid lower demand. "Eventually, massive oversupply will take its toll," he said. "We maintain our bearish outlook and look for the market to come down hard" by year end.

CRUDE DECLINES ON RECOVERY CONCERNS

“Oil seems to have been caught in a trap,” said Mark Pervan, senior commodity strategist at ANZ Banking Group Ltd. in Melbourne. “It has been wanting to see a correction but a weakening U.S. dollar and firmer equity markets have made that difficult.”

The above statement certainly matches this chart of DIG, Ultra Oil & Gas ProShares ETF.  While the channel and the current pullback (with more to go on the downside) is clear, so is the longer term trend:  a glide path UP.

DOLLAR GETS A PASS FROM G-7

“Excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability... ”

JOB CUTS EXCEED FORECAST

“This has the potential to put a big stop sign on the road to economic recovery...”

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CRUDE OIL DOWN ON BAD JOBS DATA

NYMEX-Crude ends down on jobs data, recovery worry | Reuters.com

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S&P PENETRATES KEY 1040 LEVEL

ES futures are bottoming this AM, but the much watched 1040 level has been violated.  The close will be telling, as well will be the weekly close:

CRUDE OIL UP IN ASIA DESPITE INVENTORIES

Oil prices rose above $67 a barrel Wednesday in Asia despite an increase in U.S. crude inventories for a third week, which suggests consumer demand remains weak.

U.S. oil inventories rose last week, the American Petroleum Institute said late Tuesday. Crude stocks increased 2.8 million barrels while analysts had expected a jump of 2.1 million barrels, according to a survey by Platts, the energy information arm of McGraw-Hill Cos.

"There's no doubt that we still have very high levels of inventories, and that's probably going to prevent oil from breaking above $75," said Christoffer Moltke-Leth, head of sales trading at Saxo Capital Markets in Singapore.
 

 
The above chart shows the overall market respects the inventory fundamentals, despite momentary price blips in Asia.  $60 per seems to be the next stop for this elevator down.
 
 
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EQUITIES VIEW CONFIRMED

With the Dow closing just above 9700, RIMM getting pummeled in the after-hours and Asia getting crushed at the moment, our view from last Friday has been confirmed.  This chart shows the breakdown clearly:

OIL REMAINS UNDER PRESSURE

Oil shows little recovery after the bond market close.  DEC contracts in YM, ES, GC all under pressure as equities show wide spread weakness.  The last hour of the equity markets will tell the tale.

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CRUDE OIL, CRUSHED

As we posted previously, Crude Oil leads the way for equities.  This is a beautiful chart for traders:

STOCK RALLY IS DOOMED

Unlike the "legitimate bull markets" of many foreign markets, Peter Schiff believes the U.S. is merely experiencing a "rally in a bear market," and is lagging the rest of the world "for a reason."

The worst is not over, according to Euro Pacific Capital's Schiff, who predicts the Dow will fall another 90% from current levels when measured against gold.


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RANGE BOUND

This morning's YM / ES opening gap was reactionary (vs. professional accumulation) to a "not so bad" unemployment number.  Long positions should only be enter and held above 9750 / 1064, if at all.  Prepare for a downside break in equities.

IS JIM ROGERS WRONG?

While it pains us to even ask the question given our deep respect for Mr. Rogers and the fact he always answers our e-mails, sometimes curtly, nevertheless... all kidding aside, Richard Bookstaber has it just about exactly right in this interview (below).

In full disclosure, we suffered the acute pain that Mr. Bookstaber mentions.  Having said that, enough time has passed to allow for unbiased judgement.  But, then again... who doesn't talk with their (trade) book ;=)


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OIL DROPS ON SURPRISE BUILD

"Oil dropped nearly 4 percent to below $69 a barrel on Wednesday after U.S. government data showed a big jump in crude and products stockpiles, stirring concerns about demand in the world's top energy consumer.

The U.S. Energy Information Administration reported commercial stockpiles of crude rose 2.8 million barrels in the week to September 18, against analysts expectations of 1.5 million barrels fall."



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OIL DROPS ON BUILD

Crude oil finished the trading session on a weak note today, closing under the daily pivot.  Continuing with the chart we've posted recently, it is obvious overhead supply remains intact with professional distribution (selling) taking place before the key $73 level:

More importantly, fundamentals have shifted with inventories starting to build:    chart

DOW FLUCTUATES, SLIPS OUTSIDE OF CHANNEL

Currently @ 9803, DOW remains vunerable to the downside:

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MARKET CONTINUES IT'S LEVITATION ACT...

USA DOESN'T HAVE ENOUGH DEBT !?!

I refuse to mention the charlatan's name who said we (the US) doesn't have enough debt, but Dr. Marc Faber has it exactly right:


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BIG BANK REMAINS TROUBLED

While we don't trade individual equities, this article on Wells Fargo highlights the mirage that is the S&P500 presently... caveat emptor.  The 26 level is a clear breakdown point:

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WALL ST RISKS RED OCTOBER

"Financial markets are off to the races and Wall Street has all but declared victory.

A surge in prices for both risky and safe assets is alarming some analysts who say emergency rescue measures that helped markets rebound may be setting them up for a new fall.

But most institutional investors just aren't listening."


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CRUDE OIL AT CRITICAL JUNCTION

Once this chart resolves itself, north or south, it will be obvious where the Markets are headed:

GOLD WEAKENS

Friday, gold showed fairly significant weakness into the close.  The GLD ETF closed well below the previous Friday high.  While gold has been strong, it is our view the overhead resistance will remain intact, for now.  Based upon our proprietary models (not seen on chart), last week should prove to be a turning point for gold, oil and equities.  Expect weakness in these markets for the remaining part of SEPT.  It remains to be seen if this is a trend change or just a normal breather in what has been an extraordinary bull run.

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BALTIC DRY INDEX HITS LOW

The Baltic Dry Index has fallen today to the lowest level since mid May, down for a 6th straight day at 2,356. It still remains 255% off the Dec lows but is now down 45% off the late May ‘09 high and is 80% below the record high in May ‘08. To give perspective on how much of an outlier though the May ‘08 high was at 11,793 and compared with today’s level, the 20 year average is about 2,300.


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SENIOR INVESTOR ALL BUT EXITS STOCKS

Charles Allmon "...call caught the post-March rally pretty neatly. The rally still seems to be going on, but without Allmon. In his latest letter, he announced the sale of all but three stocks, putting him 82% in cash."


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JIM ROGERS: I'M WORRIED

"... protectionism is getting worse and worse... U.S. Dollar is making new lows for the year... well, a 50% rise (in the stock market) is usually something to worry about..."

"...I own the Yen and the Swiss Franc..."


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IS THE RECESSION OVER?

Nassim Taleb says NO.

"Central bankers have no clue. In the first place, the financial crisis was not a black swan. It was perfectly predictable. They ignored the phenomenal buildup in leverage since 1980. They acted like airline pilots who'd never heard of hurricanes.


After finishing The Black Swan, I realized there was a cancer. The cancer was a huge buildup of risk-taking based on the lack of understanding of reality. The second problem is the hidden risk with new financial products. And the third is the interdependence among financial institutions."

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OIL BREAKS $72

"Overall, we see this week's EIA report as bearish for products but bullish for crude, with refining margins under selling pressure as a result..."

Oil is poised to make another run at $75.  As long as the fantasy that is the S&P 500 continues to rise, the $75 level should get taken out.


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HOW RELIANT IS U.S. ON FOREIGN OIL?

"For every dollar of US GDP, the amount of GHGs and CO2 emissions that are produced in the process has been slowly falling. When countries develop and prosper they create more efficient means of production. As a result, American economic growth has brought more energy efficiency and less pollution per GDP dollar."

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MANPOWER REPORT NEGATIVE

"Among U.S. employers surveyed, 12% expect to add to their workforces, and 14% expect a decline in staff levels during Quarter 4 2009. Sixty-nine percent anticipate no change in the hiring pace, while 5% are undecided about their October – December hiring plans."

"Employers across all regions anticipate a considerable decrease in hiring activity compared to one year ago."

CENTRAL BANKS BUYING GOLD

"Central banks are set to become net buyers of gold this year for the first time since 1998, according to GFMS, the metals consultancy.

This reverses the trend of the past decade when central banks... "


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COPPER FALLS AGAIN; GOLD HOLDS $1000

" Copper fell for a fourth day in New York, the longest losing streak in almost a month, and London as swelling inventories stoked concern that demand might weaken. "

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OIL DROPS BELOW $69

" By midday in Europe, Benchmark crude for October delivery was down 59 cents to $68.70 a barrel in electronic trading on the New York Mercantile Exchange. On Friday, the contract tumbled $2.65 to settle at $69.29. "

As equities pullback this week, expect crude oil to follow.  A close below $65 would accelerate the pullback and indicate something more significant is happening.


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SO, PEOPLE ARE GIVING UP...

"They were left out of the latest unemployment rate, as they are every month: millions of hidden casualties of the Great Recession who are not counted in the rate because they have stopped looking for work."


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GOOG SEES POSITIVE DATA

" In March, the number of Google users searching for information about unemployment benefits or employment centers began to drop, Hal Varian said. Overall unemployment has continued to climb, of course, but new jobless claims have declined since peaking earlier this year. "

Of course, the alternative explanation is people have given up and are making whatever they can in CASH only type enterprises until they find a job.

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MV Weather Report: It's Raining Gold-Minyanville

MV Weather Report: It's Raining Gold-Minyanville

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OIL RISES IN LONDON ON OPEC AND IEA

"The big change in the IEA report was that they made a pretty big upward revision for demand..."

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RUSSIA RAMPS UP

Russia is surpassing Saudi Arabia in oil exports for the first time since the Soviet Union’s collapse as Prime Minister Vladimir V. Putin exploits OPEC production cuts to gain market share.

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CRUDE OIL SOARS

(RTTNews) - Crude oil prices soared above $71 an ounce, boosted by a weaker dollar, as traders looked ahead to the Organization of Petroleum Exporting Countries meeting. Light sweet crude for October delivery rallied to $71.10 per barrel, up $3.08, its best close of September. Prices touched as high as $71.95 earlier in the session. OPEC members will meet tomorrow in Vienna. All indications show the cartel is likely to leave production at the current levels and continuing to enforce sharp cuts from late last year.

On Tuesday, the dollar plunged to its lowest level of this year against the euro, falling to 1.4500. The greenback saw weakness against the pound, yen and others. The Energy Information Administration's weekly inventory report is coming on Thursday, a day later than usual because of the holiday. Last week's data showed crude oil inventories decreased by 400,000 barrels in the week ended August 28. There was no major economic news on Tuesday's calendar. The Fed's Beige Book is expected to be released at 2 p.m. ET tomorrow.

DEBUNKING PEAK OIL DENIERS

The risk of peak oil... remains badly mispriced.

http://money.cnn.com/news/newsfeeds/siliconalley/green-tech/dont_waste_your_time_reading_the_peak_oil_deniers_2009_8.html

GOLD HOVERS NEAR $1000

"Today's recovery in ( gold ) prices is bullish and with this morning's US government report indicating the highest unemployment in 26 years, the buck appears poised for a fall..."

http://business.theage.com.au/business/gold-hovers-near-us1000-mark-20090905-fbp3.html

CRUDE OIL STEADY

OPEC likely to maintain output... All 26 analysts surveyed by Bloomberg News said OPEC will keep its target at 24.845 million barrels a day when ministers gather on Sept. 9.

http://www.bloomberg.com/apps/news?pid=20601086&sid=a7Lhb8PHKY1Q

PEAK OIL REALITY

Crude oil pauses, finds support at $68... demand destruction is hype... still not expensive... world-wide recession and usage drops only 2.7%... still remains biggest threat to economic recovery

http://seekingalpha.com/article/158635-peak-oil-a-reality-or-a-lie

CRUDE OIL PRICE SCARE

Crude Oil reaches 8 month high... suffocates economic recovery... still not expensive... long awaited emergence of improving fundamentals... $85 a barrel would still be cheap.

http://www.ft.com/cms/s/0/120e125c-573a-11de-8c47-00144feabdc0.html