[drew]

Thank you so much, everyone.

And especially Mr Bill......

Mr Bill, You ROCK!


There, I hope that sounded appropriately juvenile...


Drew

[MrBill]

No worries, Drew. Always a pleasure. Looks like we spiked higher yesterday in NY time and then had a weaker close. It may well be premature, but my feeling is that was it. There was good volume on the bids and we still went lower. My feeling is now a deeper correction. Will need to see some follow through selling in order to swing a few models. Think if WTI climbs above $67.00 again that I may be wrong, but until then will try to sell into rallies. Good luck. Cheers.

[Typhoon]

I disagree with MrBill. Despite yesterday's weak close and today's continued weakness, I think WTI will climb above $68.00. If it manages to break resistance from the January highs, it might test $70.00. After that, I expect a substantial correction. Then, as we head into summer, oil might break out to new all-time highs if it turns out that supply will be very tight.

It already seems that there might be a problem; gasoline inventories are falling sharply when they should be rising. I'm curious whether this is indicative of a temporary issue like refinery maintenance or a more permanent issue like refinery capacity or lack of light, sweet crude for input into refineries. It'll be interesting to see the inventory numbers tomorrow.

If product supply turns out to be more of a problem than crude supply, crack spreads might rise without crude prices rising much.

[Marklar]

Can't remember what I read but they said the resistance is at $71 and support at $55. If it breaks over resistance then expect $85 and if it falls goes below $55 we can expect $47. Anyway they called last weeks rally but said use caution because a bear flag was present.

To me it appears the market doesnt want to stay below $66. And gasoline looks to have corrected as its above 190 now.

I remember looking at it last year bouncing around the high 50s thinking we wouldnt see $60 anytime soon.. Now we're seeing high 60's and , though cautious, I think we could test the $71 area again but with supplies building I wonder how long it can hold up.

[smiley]

$this->bbcode_second_pass_quote('', 'I')t already seems that there might be a problem; gasoline inventories are falling sharply when they should be rising. I'm curious whether this is indicative of a temporary issue like refinery maintenance or a more permanent issue like refinery capacity or lack of light, sweet crude for input into refineries. It'll be interesting to see the inventory numbers tomorrow.

[MrBill]

$this->bbcode_second_pass_quote('Typhoon', 'I') disagree with MrBill. Despite yesterday's weak close and today's continued weakness, I think WTI will climb above $68.00. If it manages to break resistance from the January highs, it might test $70.00. After that, I expect a substantial correction. Then, as we head into summer, oil might break out to new all-time highs if it turns out that supply will be very tight.

It already seems that there might be a problem; gasoline inventories are falling sharply when they should be rising. I'm curious whether this is indicative of a temporary issue like refinery maintenance or a more permanent issue like refinery capacity or lack of light, sweet crude for input into refineries. It'll be interesting to see the inventory numbers tomorrow.

If product supply turns out to be more of a problem than crude supply, crack spreads might rise without crude prices rising much.

[MrBill]

Metal comments by DRKW
$this->bbcode_second_pass_quote('', 'M')arket comment
Gold: Early April buying to new highs of 591.60 on Monday did not see further follow through yesterday as precious metals drifted lower on the whole. Trading sideways between 585 and 590, gold generally failed to move up on the USD weakness and some disappointment may be showing in today’s trading. Consolidation above 580 might be seen leading still towards a test of 600, however, light selling this morning has seen gold move from 584.30 towards 582 in early trading. A test and break of 572 could point to further range trading to come.

Silver: A similar pattern of sideways to lower was seen in silver with a 15c range between 11.80 and 11.65. Further reports released yesterday suggesting potential for weakness immediately following the ETF may be weighing on the market in advance of any indication of the start of trading and encouraging liquidation at still overbought levels. Any sharp move in silver is likely to impact trading in the other precious metals. Barring this, support might be expected at 11.40. Resistance appears in place ahead of 12.00.

Platinum: Initial new fiscal year buying in platinum dried up Tuesday as weaker USD (stronger JPY) pushed domestic prices lower and encouraged liquidation. 1,080 initial levels in Asia quickly gave way to 1,073, with the metal then trading a narrower range in the remaining trading sessions. Selling has been evident again overnight, bringing the metal back down to 1,060’s by European open today. The price action is perhaps not a surprise looking at the subdued level of consumer interest and after a month long speculative driven rally.

Palladium: After failing to surpass 348, palladium continues to range between the highs and 330. Losing ground for most of yesterday, palladium had another look at 340, but has since retraced again in line with the complex.

[MrBill]

I could have sworn we were headed a little lower yesterday when we broke down through the $66.00 area again in the WTI, but we found support at $65.75/80 ahead of the DOE numbers which once again showed larger than expected draws in the gasoline and the distillates, and so up we went to close well above $67.00!

It has been a good time to buy on dips versus sell on rallies. Perhaps this is a spill over effect from the metals and the weaker dollar as well, but mostly those product draws plus the uneasiness over geopolitical supply disruption concerns, and the path of least resistance.

There is no doubt that it is NY that is setting the tone. Europe chops around in a range ahead of the US exchange open, and then follows their lead, although the volumes themselves speak to the success of the electronically traded contracts on the ICE. And, as always, those last 20-30 minutes on the open outcry of the NYMEX are the busiest and most volatile. Yesterday, late bids came in and pushed us up for a strong close.

Yesterday's DOE inventory numbers were

Crude +2.1 mio bbls to 342.8 mio
Gasoline -4.4 mio bbls to 211.8 mio
Distillates -2.6 mio bbls to 121.6 mio
Weekly product imports +2.78 mio bbls


Refinery utilization -1.1% tp 85.9%, which was a surprise slowdown
Total demand was -0.3% at 20.66 mbpd of which
gasoline demand was +0.8% to 9.08 mbpd that remains seasonally strong, and
distillate demand was -3.8% at 4.16 mbpd, which was also more than expected.

Obviously, the conclusion the market reached is, yes, the market is well supplied now, but demand for gasoline is strong against larger than expected draws in gasoline for the second week in a row, and with refinery use down on the week, there is less product being put through the system. Against the backdrop of higher commodity prices, and actual supply disruptions from Nigeria, plus uncertainty over Iran, the market shot higher and held onto gains. This morning we opened at $67.11 and have already tested $67.69 in the WTI.

There is little to suggest we are going to suddenly reverse today, so likely the buy the dip strategy is still the way to play it.

[MrBill]

Market summary for Q1'06: Up
Market forecast for Q2'06: Up
Any questions?

Heavy metal comments via DRKW:
$this->bbcode_second_pass_quote('', 'M')arket comment
Gold: Yesterday gold was bumping up against resistance at 590 again. Today a new 35 year high was again set as technically driven buying pushed the yellow metal to 594.50. A quieter morning trading session yesterday saw gold play the range between 585 and 580, until technical buying took us back up to the recent highs and resistance at 590. Helped by relative strength in EUR and weakness in JPY, gold opened higher in the Asia session this morning and TOCOM also set multi decade highs, boosting the dollar gold price above 590. 600 should not be far away now, but the psychological level may encourage some profit taking and eyes are turning to ECB today and non farm payrolls tomorrow.

Silver: Shooting higher yet again, 12.00 resistance is now behind silver as, like gold, a quieter trading day yesterday and consolidatory trading this week gave way this morning to new 22 year highs. Early dips yesterday to 11.60 gave way in the afternoon to a speculative rally back to 11.78 as copper, oil and gold all moved higher. As with gold, buying continued overnight and early this morning 12.04 rolled around as the month long uptrend continued. Next upside targets 12.40/60. Watch out for further ETF news.

Platinum: 1,060-1,075 contained the market yesterday with the initial sell off reversed later in the day as buying from gold and silver spilled back into the PGM markets. Asia again proved positive for platinum with FX moves helping to support and push the domestic price and encourage further purchases. 1,080 again a point of resistance though even as gold and silver set new highs, platinum needs another $13 to reach the same point.

Palladium: Ranging yesterday, palladium has found buyers again in the overall positive precious metals environment. This morning, moving back to 350, the white metal has again reached new highs since August 2002.

[Marklar]

The new silver ETF will be under the ticker SLV and each share price will represent 10 ounces. So silver at $12 should make SLV around $120 a share.

[MrBill]

$this->bbcode_second_pass_quote('', 'S')orry could not access this website at all yesterday, so no comments. A fairly strong close to the week. Up on the week. Enough to keep the rally expanding. However, Thursday and Friday's price action may point to the rally losing some of its momentum unless there are new inputs from the geopolitical supply disruption concerns or more data as to the true gasoline situation as we go forward. Against this backdrop think the price movement to end the week was not as constructive as the bulls might have wished for. A break of $68.20 in the WTI is needed to keep the rally alive next week. Have a nice weekend and speak to then. Cheers.

[rockdoc123]

MrBill a question for you......how much of the oil market ...including the energy companies are moving according to fundamentals (whether it be supply and demand or various risks associated with those key elements) versus that driven by momentum and technical trading? It seems that lately the movements seem to make a lot less sense to me based on the underlying fundamentals .......is the market being created and driven by the guys who would rather watch bolinger bands than baywatch?

[highfructose]

The thing that makes me a bit cautious about the direction in the next couple of months is that we already had a nice run up during January as if there was earlier buying this year to top up inventories. Also maybe some of the run up during the last month was in anticipation of the new USO ETF. So crude heads downwards here to about 60-61. This would make a wedge formation on the chart where the bottom would be made during June or July.

[MrBill]

$this->bbcode_second_pass_quote('rockdoc123', 'M')rBill a question for you......how much of the oil market ...including the energy companies are moving according to fundamentals (whether it be supply and demand or various risks associated with those key elements) versus that driven by momentum and technical trading? It seems that lately the movements seem to make a lot less sense to me based on the underlying fundamentals .......is the market being created and driven by the guys who would rather watch bolinger bands than baywatch?

[MrBill]

Some follow through buying here this morning. Now waiting for NY to come in and confirm the direction. Pulled this off www.prudentbear.com. I am not sure who they marry a collapsing US economy with higher commodity prices, but I guess they feel that a weaker dollar will help fuel the rise? In any case, always good to see others point of view. Take care.
$this->bbcode_second_pass_quote('', ' ')

The five-year commodity price boom that has catapulted metal, energy and some agricultural prices to record highs is set to extend further, driven by global economic growth, tight supply and rising inflows of investment, according to investors, mining groups and sector analysts.

Commodities - from copper and zinc to orange juice and refined sugar - reached fresh nominal highs last week. But, instead of signaling a top of the market, hedge funds and some mining executives believe prices have further to rise because they remain far from their highs in real price terms.

But the upward spiral is also being fuelled by conservative planning prices among mining companies, which have held back mining investment, say analysts and hedge fund managers.

In the case of copper, global inventories have fallen because, even though demand is outpacing supply, many mining companies remain skeptical that current prices will last....


Most copper miners base investment decisions on a long-term planning price of 80-90 cents a pound. However, the price has quadrupled in the past four years to about $2.70 a pound.

But investors argue that mining companies' conservatism is merely helping fuel higher commodity prices.....

"You have this standoff between the producers who think these commodity prices are not real, and are therefore not investing enough in new supply, and the hedge funds who are putting more money into the commodity market because they see that the producers are not reacting quickly enough by bringing on new supplies," said one hedge fund manager.......

He added that commodity price inflation is also partly due to increased production costs. The cost of producing copper, where the price last week reached $5,825 a tonne, had risen because of higher energy prices and the fact that new deposits lay in more remote and deeper locations.

[MrBill]

Stronger here today. No let up in momentum since yesterday. No pullbacks to buy into. Reaching terminal velocity.

$this->bbcode_second_pass_quote('', 'M')arket comments from DRKW

Gold: 600 yesterday finally for the first time since December 1980 and gold still seems set to push further ahead. Early Asian buying yesterday morning lifted the price from 590 to 595 for European trading which ranged between 598.15 prior highs and 592. However the afternoon brought renewed speculative interest at these levels and the price steadily increased to reach 599.20 before easing back to 598.90 on the close. Steady investor interest, lack of new mine programmes and a reasonably strong jewellery market despite the price strength look set to support gold in the near term as do record prices in copper (6,001) and silver. Asian trading this morning brought highs of 604 and the price has remained above 600 in trading so far. Look for 612, 621 on the upside and for support at 598, 582 on the downside.

Silver: One way traffic in silver too yesterday as the metal built on demand from Asia yesterday to open in Europe at 12.35 and make a beeline for 12.50 in early trading. Ranging then between 12.30 and 12.50 until the afternoon, silver burst higher again on the break of 12.50 to close on the highs at 12.70. Again follow through buying from speculators and Asian customers overnight saw the price lifted to 12.90 before retracing all the way to 12.70 and then surging back to new highs this morning at 13.00. Look now for 13.60 May 1983 highs unless ETF demand changes the picture. Support 12.70, 12.20.

Platinum: The more industrial precious metals were not forgotten yesterday either as platinum pushed ahead from 1,070 in Asia to 1,080 in Europe and 1,095 new all time highs (just) in NY. Prices remain firm around these levels today, but are not shooting higher like gold and silver so far.

Palladium: Inching higher to new 4-year highs, palladium made most of its
move yesterday in Asian time reaching already the mid 350’s when Europe opened. Fixing then steadily between 355 and 357, palladium reached highs of 358 and should look for higher is the leading metals gold and silver hold strong.

[MrBill]

Yesterday, I really got lucky. My model told me to buy dips, of which there have not been a lot of recently, so yesterday I had the chance. Bought at the 13-hour and 21-hour moving average as we corrected lower in the June Brent. Was long from an average of $6948 as we dipped to $6872. I actually has a stop limit sell order at $6874, but as I was at my desk, I was able to pull it and monitor the price movement once we got down there. I kept myself alive instead of being stopped out at the very bottom. Then on the way up, I had an order in to sell at $6993, which was below the daily high of $7007. Near the close, some others had joined my offer in size, so just before we got there, I moved my offer down to $6991 and got done, while $6993 was never paid. We closed down near $6972. A lot of risk for little profit. Plus had I not been here personally to monitor my orders, I would have either missed the sell at the top or been stopped out at the bottom. Of course, this can always happen. But lately it seems maximum pain for limited gain if you trade interday.

To be honest, from up here, will get scary. All the news (Iran, Nigeria, Iraq, drawdowns in unleaded) are already in the price, and we will need fresh bad news to maintaim upwards momentum. In the meantime, we may have 150-200 pts. corrections to the downside, without changing the overall direction or market sentiment. From here I will try to avoid a directional bias, and just follow my models with reasonably wide stops, but then I may get lucky like yesterday or have bad luck like last week when I was stopped out at the absolute high before we dropped 150-200 pts.?

Here is something different, compliments of JP Chase.
$this->bbcode_second_pass_quote('', 'B')ooming profits growth in the US, Japan, the Euro area, and the UK has kept corporate saving high even as corporates have turned expansionary. Profits have surprised to the upside due to moderate gains in labor costs, interest expense, and taxes.

This corporate sweet spot is likely to last a while longer, as cost developments remain moderate; profit margins on average in the G4 will continue to expand both this year and next. In the US, profit margins are likely to peak in the middle of this year; in Japan and the Euro area further margin expansion is likely into next year.

Strong profits will deliver strong corporate spending and hiring, providing strength and resilience to the global business cycle. In the US, where the corporate expansion is furthest advanced, capital spending growth this year is expected to be the strongest since 1998.

This corporate sweet spot will not last forever. Over time, competition will increase as the capital stock grows, labor’s bargaining position will improve, and interest rates will rise. But, the forces eroding corporate performance are moving slowly.

Corporate saving will start to decline, but very gradually and the level will remain high in an historic context. In aggregate, corporate saving is expected to average 1.4% of GDP this year and 1% next year. This aggregate level is dominated by Japan and the UK: corporates in the US will see saving decline to close to zero next year, and corporates in the Euro area look set to start borrowing again from this year.

The slow shrinkage of corporate saving reduces the threat to bonds from monetary tightening. Our fair-value assessment for the 10-year UST yield stands at 5% at end 2006, and 5.5% at end 2007.

Bonds in countries with rising national savings –– such as Japan and the Euro area –– should outperform where savings are falling –– US, UK, Sweden.

High profits growth extends the equity rally beyond its normal due date. There is further near-term upside, but by next year, investors will recognise that margins will eventually be eroded and equities should fall 10%-15%.

G4 corporates have deleveraged dramatically in recent years on the back of strong earnings and debt buybacks. Debt-to-asset ratios, at book, have fallen to 1980s levels in the US and 1950s levels in Japan. In Europe, in contrast, debt-to-asset ratios have actually risen over the past 5 years on strong borrowing.

In the US, we expect leverage to rise slowly in response to low equity risk premia. As a result, we see credit spreads widening gently this year and next.

[MrBill]

Does anyone have any good COAL plays? Anyone invested in any coal mines? Just wondering. Thanks.

[donshan]

$this->bbcode_second_pass_quote('MrBill', 'D')oes anyone have any good COAL plays? Anyone invested in any coal mines? Just wondering. Thanks.

[MrBill]

Thanks Donshan. Appreciate your comments. Hard to buy in when prices have gone up so much, but think that coal is the next best substitute for natural gas and maybe able to buy shares and then use natural gas futures to hedge the macro risks? Will see, but thanks for the tips. Cheers.