[tdrive]

Cold weather coming...

Cheers,

Edited: deleted the weather chart:

http://www.cpc.noaa.gov/products/predic ... mp.new.gif

[MrBill]

Hey, what happened to Canada? Is all that white snow? Why is it snowing in Mexico? Thanks. Much appreciated.

This market is so choppy, already given at $59.05 again after the test of $60.40 Shake out the shorts & the longs and then rally? Maybe, still not new lows in the products. Creaping bottom is my guess?

[CARVER]

Could someone give me a 101 on Technical Analysis?

My impression is that Technical Analysis is for those who do not know what the price should be, what is influencing the price. So they rely on what others are doing, they try to find patterns in what others are doing who hopefully do know what they are doing.

- Are there some figures on how much of total volume traded is based on technical analysis (an average percentage)?
- Does/can technical analysis cause self-fulfilling prophecies? If a lot of companies use the same technical analysis method they signal buy or sell signals at the same time. Does it exacerbate the price movements?
- How do they come up with support and resistance levels (especially for an index)? Is it based on recent history, or is it something they read from the current order-book, or maybe something to do with stop-loss limits?

- What happens when a big player suddenly starts unloading stocks without there being any reason (no rumour or news). Can it fool automatic trading systems. To create a bigger selloff so that the big player could buy them back at a lower price. (Or is this maybe not allowed)

- Any fun trading stories where somebody did something really smart or really stupid?

[ubercynicmeister]

$this->bbcode_second_pass_quote('MrBill', 'A')s for trading oil & gas it is an efficient means of price discovery and a means of transfering risk from those who don't want it to those that do. No one is forced to trade futures.

[tdrive]

$this->bbcode_second_pass_quote('', 'T')hus we're all forced to prop up this rather odius way of a few people making obscene amounts of money

[Marklar]

lol


anyway,

I was reading Joe Bastardi and he says the longer the wait for winter the colder it'll be.

Basically the cold arctic air will build up above the jet stream which is pretty far up north at the moment. The longer it stays up there the more cold air will build up and when the jet stream finally plunges we get a cold one.

One question I've been thinking lately regarding Oil prices.

What if the hurricanes didnt hit us? Do you think the price of oil would be cheaper than now, or more expensive? It seems there's alot of confusion in the market now. For instance today it was around $58-59 then it actually jumped up to $60 something and then it closes at $58.

I would look at the google news to see what the media says the reason the price went up to $60 and it was because distilliates are still low.... However I think the media makes up the reasons and draws their own conclusion and that doesnt help the confusion, imo.

[tdrive]

$this->bbcode_second_pass_quote('', 'W')hat if the hurricanes didnt hit us? Do you think the price of oil would be cheaper than now, or more expensive?

[tdrive]

Hear hear...

House suspends Alaska drilling push

$this->bbcode_second_pass_quote('', 'H')ouse leaders late Wednesday abandoned an attempt
to push through a hotly contested plan to open an Alaskan
wildlife refuge to oil drilling, fearing it would jeopardize
approval of a sweeping budget bill Thursday.

They also dropped from the budget document plans to allow
states to authorize oil and gas drilling off the Atlantic and Pacific
coasts -- regions currently under a drilling moratorium.

[MrBill]

$this->bbcode_second_pass_quote('', 'C')old weather coming...

Cheers,

[MrBill]

Well, I for one just wish it was ME making obscene amounts of money by trading commodity futures

However, the reality is that it is a very deep & liquid market and it is a constant battle of ideas between bulls & bears based on all available information. Unfortunately, not even with our BIG brains can we absorb all the given information as to world supply & demand and every economic indicator that affects them. And even if we could, the information would be stale as soon as we learnt it and therefore it would be a constant struggle to know everything all the time and then to act on that information. I am affraid it is a little too much for your average Joe Trader down there in the pits yelling & screaming, waving his arms and trying to sell or buy a few contracts during the open pit session.

Even we that have the luxury to sit at our computers and effectively trade electronically, there is only so much you can read and absorb in a typical 10-12 hour day. You certainly cannot know everything.

So the two basic schools of thought are fundamental and technical analysis and they are not mutually exclusive. Fundamental analysis looks at supply & demand factors. However, trying to trade on supply & demand factors alone is inherently difficult if you do not know exactly where you are? Also you have the interplay between exploration, development, extraction, refining, distribution, end consumer behavior, the physical market and the futures market and all other related markets such as ocean freight and infrastructure. Like a spider's web, if you tug at one end, it will move parts of the entire web. Small, insignificant events can in combination with other factors effect the overall price out of proportion to their individual importance.

It is like trying to read a roadmap which is sized 1:1. It is hard to get an overview. However, every trader should understand the factors which are driving the market. A basic understanding of supply & demand is essential. But, even fundamentalists use technical analysis to see where the support and resistance levels are to plan their entry and exit points. A train may be on the wrong track, going the wrong direction, but it is still not wise to stand in front of it. Last summer's rally was a classic example. Inventories were building and yet the price was grinding relentlessly higher. It was like subconsiously the market was expecting a big supply disruption and sure enough Katerina provided that event. How did the collective psyche of the market know? Simply, demand was strong & growing, there was very little extra capacity and no cushion should there be an interuption. As oil & gas demand are somewhat inelastic, you need a big move in price to effect demand destruction and bring supply & demand back into line. The huge run up in price this past summer was just such a rationing in action.

But, back to technical analysis. It is very important because at every price there is a buyer and a seller. So at every price one trader made money and one trader lost money. When the price returns to that level the market has memory. When the price returns to that level the trader who made money at that level, say by buying, may try to buy again. The trader who lost money at that level, by selling, may be reluctant to sell again, and may even decide to buy. So at major turning points it does become a self-fullfilling prophesy.

Also, say you wanted to sell at $60.00, but the price only went up to $59.95 and then went down quickly. Well, next time up you may put your sell order in at $59.90 to make sure your order gets done. This starts to build resistance, a number of sell orders, between $59.90 and $60.00. Similarly, if you have seen oil rally from $49 in May to $70.85 in August and you have been chasing the market, you may move your price expectations up. That is put in bids higher and higher until you are able to buy. $50 looks expensive until you get used to $60 and then $70 and then you think $50 is cheap. This would form the basis of support as buyers look for good levels to buy in the expectation that we may go higher.

Of course, as at every level there is a buyer and a seller, the overall chance of success or failure is always 50%. It is gambler's fallacy to think we went up, therefore we must go down. Anyone who was happy to sell oil at $30 because it went up in price from $15 would be nursing their wounds when the price went up and up to $60. There are no magical numbers, which is sometimes technical analysis gets a bad name from the uninitiated.

Basically, I thought the range yesterday would be $58.60-$60.40, which it was for yesterday's trading session. However, now we have broken support today at $58.60 and have moved lower to $58.40. The old support of $58.60 is no longer valid, but the resistance level at $60.40 is as it was tested yesterday and held. It proved a great place to sell.

Well, that is Technical Analysis 101. I hope it helps?

As for me, I am a great teacher and a lousy trader. Yesterday I really got whipped and had I just kept my short at $59.77 I would have been much happier this morning. I actually has a sell order at $60.35 which I cancelled before we got there! Instead I am short at $58.60 ($56.50 in the Brent) and looking for a move lower on the break of $58.60 and the bearish close below $59.40 on the daily chart. If I am correct, we should now see a move down to $57.60-70 in the WTI with $55-56 as the ultimate goal ($54.50-55.00 in the Brent)? However, this will also depend on the products.

With supply & demand analysis it is easy to convince yourself you are right and the market is wrong. But, with technical analysis you always have levels which invalidate your opinion. That is another reason they are useful.

[MrBill]

$this->bbcode_second_pass_quote('', 'W')here will WTI close on December 31st, 2005?
less than $60 14% [ 8 ]
around $60 12% [ 7 ]
around $65 29% [ 16 ]
around $70 21% [ 12 ]
more than $70 21% [ 12 ]

Total Votes : 55

[shakespear1]

Good analysis Mr. Bill. The education is appreciated

[MrBill]

$this->bbcode_second_pass_quote('shakespear1', 'G')ood analysis Mr. Bill. The education is appreciated

[Doly]

My observations so far have been that doomers are too gloomy, while optimists that say that oil prices will go down are often wrong. My impression is that taking the doomer price with a correction downwards for doomerosity of about 20% is often about right. With this calculation, I took the standard doomer prediction of 80$, corrected by 20% and arrived at 64$, or about 65$, which is what I voted. Of course, this is anything but hard science. I may have been too gloomy anyway. I'm glad I don't put my money on this.

[MrBill]

$this->bbcode_second_pass_quote('Doly', 'M')y observations so far have been that doomers are too gloomy, while optimists that say that oil prices will go down are often wrong. My impression is that taking the doomer price with a correction downwards for doomerosity of about 20% is often about right. With this calculation, I took the standard doomer prediction of 80$, corrected by 20% and arrived at 64$, or about 65$, which is what I voted. Of course, this is anything but hard science. I may have been too gloomy anyway. I'm glad I don't put my money on this.

[MrBill]

Not much by way of news this morning. Here are Refco's comments.

$this->bbcode_second_pass_quote('', 'N')ews:

· NYMEX will offer electronic trading of Brent crude oil as an alternative to live transactions on the floor of the London exchange. Volumes have only averaged 1% of those on the ICE.

· Louisiana reports 104,723-bpd or 51.6% of daily capacity has been restored

· MMS update reports 737,136-bpd or 49.14% of US Gulf oil output still shut-in with cumulative lost production since 8/26 of 81.999 million barrels or 14.977% of annual Gulf output. There were also 191 platforms and 5 rigs evacuated, or 23.32% of 819 manned platforms and 3.73% of 134 rigs currently operating in the Gulf.

[shakespear1]

Well in my case I see us ( World ) to be on a wave of bad news.

The weather for sure is not going to make an about face change and give us "quieter" hurricans. So if this last season was bad, and if the climate studies are correct ( this is almost certain from my travels around the globe) then next year we will have more of the same. The platforms are duck and they know it.

Middle East is not looking to be quieter. Russia just told Poland that they want to renegotiate the gas contract with Gazprom ( blow back from Poland meddling in Ukraine ). George will continue to do damage. Last trip to Houston, Dallas and Boise tells me that the average American knows little of the real issues. Thus I vote for higher prices or a crack in the economies.

[MrBill]

$this->bbcode_second_pass_quote('shakespear1', 'W')ell in my case I see us ( World ) to be on a wave of bad news.

The weather for sure is not going to make an about face change and give us "quieter" hurricans. So if this last season was bad, and if the climate studies are correct ( this is almost certain from my travels around the globe) then next year we will have more of the same. The platforms are duck and they know it.

Middle East is not looking to be quieter. Russia just told Poland that they want to renegotiate the gas contract with Gazprom ( blow back from Poland meddling in Ukraine ). George will continue to do damage. Last trip to Houston, Dallas and Boise tells me that the average American knows little of the real issues. Thus I vote for higher prices or a crack in the economies.

[shakespear1]

I have worked/lived in Russia and now find my self in Poland observing things here. However you info is very intersting because this is not the SPIN that is offered for the crowd here.

$this->bbcode_second_pass_quote('', ' ')The problem is that Poland was getting cheap nat gas in return for transit fees on pipelines crossing Poland on their way to Germany and western Europe.

[MrBill]

$this->bbcode_second_pass_quote('shakespear1', 'I') have worked/lived in Russia and now find my self in Poland observing things here. However you info is very intersting because this is not the SPIN that is offered for the crowd here.

$this->bbcode_second_pass_quote('', ' ')The problem is that Poland was getting cheap nat gas in return for transit fees on pipelines crossing Poland on their way to Germany and western Europe.