Oil Futures Outlook And A Beauty

"All factors considered, we see a strong possibility of a continued choppy, near-term trade well into next month as bearish fundamentals come into increasing conflict with a friendlier risk environment"

Jim Ritterbusch, head of oil research firm Ritterbusch and Associates

I agree with Jim about the directionless price action but I am not so sure about the continuing friendlier risk environment. I am closing my long oil futures position and my only speculative positive is a big bet on a dollar surge against the euro. That trade has been underwater for the last couple of sessions, but its coming back strongly though.

Check out this beauty:

Closing ES Shorts. The Market May Come Back.

“The U.S. is closer to a Japanese-style outcome today than at any time in recent history”

James Bullard, Federal Reserve Bank of St. Louis President

That comment has ignited the sell off.

I am closing shorts, the market may very well come back later today.

By the way, this also got my attention, "Mortgage rates dropped to the lowest level on record for the fifth time in six weeks, making homebuying and refinancing the most attractive in decades for those who can get loans."

Related ETFs: SPDR S&P 500 ETF (Public, NYSE:SPY) , ProShares UltraShort S&P500 (ETF) (Public, NYSE:SDS)

What`s The Next Significant Move In Oil Prices?

"Actually...not so much of upside and not so much downside, so crude may continue trading sideways this week"

Ryuichi Sato, Mizuho Securities

It was a bullish session for crude oil futures. Despite the negative inventory data and the initial sell-off, oil futures rallied and made a pretty bullish candle. Markets are quiet this morning, lets see if Initial Claims can set the tone for the session.

The eMini S&P Futures 5 points premium relative to fair value seems a bit fat.

I Have Posted The 1000th Post. That Is Quite A Mark, Isn`t It?

I just noticed by chance that this was the 1000th blog post.

That is quite a mark, isn`t it?

By the way, David Rosenberg is very bearish on stocks, “The market is overbought and there is a renewed sense of complacency in the marketplace that I think could get shattered pretty quickly”.

Its Time For The Big Short Bet On The S&P Futures

I think the upmove is over or near its end and the next significant move will be on the short side. I am putting my Red Ship in the water.

I am selling S&P calls and shorting the eMini S&P Futures.

I am also positioning for a dollar rally against the euro. As Roubini outs it, "It's been like a beauty contest where the issue is not who's the prettiest, but who's the least ugly". I agree but now its time for a dollar rally, after a 6 week and 4 days rally in the Euro.

It Was A Good Comeback To The Oil Futures Market

After being short, long and then short again I managed to grab over a full point per contract at the end of the trading session. After some initial trepidation, as my momentum indicators were jumping all over the place, I finally got the move right and it paid off. Two small losing trades, and a good run on the short side. This shows how you can come out ahead with only a 33% hit rate.

Anyway, I am even considering reversing the position and play oil from the long side tomorrow. I am going to wait for the API data and then decide what to do.

I bought a new fancy bed. It will be delivered tomorrow to my apartment. I think it will give the Simoes couple some quality sleep...

Marc Faber Explains The 2008 Oil Bubble

"The Fed doesn't seem to have learned anything at all from its mistakes. Their current policy of cutting rates to zero is designed to create sustainable growth, but they've created larger and larger volatility in markets. There are many unintended consequences of their actions.

The oil bubble of 2008 is a good example. In 2008, the price of oil went ballistic, but the U.S. was already in a recession [it began in Dec. 2007]. There was no rational reason oil should have gone ballistic. The Fed's easy money just fueled a bubble. It was like a $500 billion tax on consumers courtesy of the Fed. That's the added amount that it cost you, and it helped push consumers over a cliff in late 2008."

Marc Faber

My indicators have reversed again overnight, so I am long oil futures. Its the problem with highly sensitive momentum indicators, you have to adjust your position frequently.

Actually My Indicators Have Reversed. I Am Short Oil Futures Now.

These are pretty sensitive indicators. Fast and furious as I like them. I am now short from 78.98 USD.

I am also placing a short bet on eMini S&P Futures at 1106.

I have the sense that tomorrow will be a great day.

Going Long Oil Futures Based On My Momentum Indicators

Lets see if it can break the 80 dollar resistance. My momentum indicators are turning bullish but they are very short term based so can reverse on a dime.

I am using a composite momentum indicator, a mixture of 24, 48, 72 and 120 hourly bars.

There's Still Plenty Of 200 USD Oil

"It's not that we're running out of oil geologically or physically. It's just that we're out of $40 oil. The cheap oil has been pumped. Now we're forced to go deeper and extract oil under more difficult, more expensive conditions.

It's the $40 oil that is disappearing. There's still plenty of $200 oil."

Rick Rule in Agora Financial

Related ETFs: United States Oil Fund LP (ETF) (Public, NYSE:USO), iPath S&P GSCI Crude Oil Total Return (Public, NYSE:OIL), ProShares UltraShort DJ-UBS Crude Oi ETF (Public, NYSE:SCO)

Related Stocks: Exxon Mobil Corporation (Public, NYSE:XOM), ConocoPhillips (Public, NYSE:COP), Marathon Oil Corporation (Public, NYSE:MRO), Hess Corp. (Public, NYSE:HES), Suncor Energy Inc. (USA) (Public, NYSE:SU), Murphy Oil Corporation (Public, NYSE:MUR),

The Europeans Don`t Seem To Impressed With The Stress Tests...

European indexes are not rallying at all this morning. That tells me that the europeans are not very enthusiastic about the stress tests and that the markets are probably ready to re-focus on "conditions", or "deteriorating conditions".

I am shorting the eMini Futures, trying another short raid.

I have been doing some research with short term momentum indicators, using 24, 48, 72 and 120 hourly bars. For those that trade mostly with the trend this may be a good set of indicators to gauge the short term market sentiment.

I haven`t linked much bands recently, so here here is one great, great band: Grizzly Bear

"Well. You know this is a bull market!"

"I think it was a long step forward in my trading education when I realised at last that when old Mr. Partridge kept on telling other customers, “Well, you know this is a bull market!” he really meant to tell them that the big money was not in the individual fluctuations but in the main movements-that is, not in reading the tape but in sizing up the entire market and its trend. "

Jesse Livermore

Livermore Quote: "The Game Taught Me The Game"

The game taught me the game. And it didn’t spare me rod while teaching.

Jesse Livermore

Crude Oil Futures Are Testing The 80 Dollar Mark

"Crude futures are approaching the high end of the recent trading range between 70 and 80 USD per barrel that has contained prices for several weeks. A rally in U.S. equities, which have led crude in recent months, helped push oil higher as well."

in WSJ

Winning Streak Is Over. Time To Think About The Weekend

Well, at the 17th session the winning streak is over. It had to end some day and in a way I am happy it ended because it was beginning to pressure me. I went long at mid session yesterday, expecting a full trend day with a close near or at the high. It didn`t materialize and I lost a couple of points per contract.

I will test the bear side today, but I will keep things light because I do not want to ruin my weekend.

European stress test results will come out later today but that will be a non-event.

Recommended reading for the weekend: Skill vs. Luck

I always tell my wife, "the most important thing in the world is to be lucky. Lucky not to be at the wrong place at the wrong time and lucky to be healthy."

Still On The Sidelines. Red Bull And Le Tour.

I am a bit surprised with the early strength on the equity futures and I am considering the possibility of a short trip. eMini S&P Futures were trading around 1062-1065 during the majority of the Globex session and they may reverse to those levels if Initial Claims disappoint.

I am still on the sidelines but I will begin scalping of the short side to grab a few "micro points". I am on a unprecedented 17 consecutive winning trading sessions. Most of it came from scalping the eMini Futures on Globex both from the long and the short side. I am also drinking Red Bull during the session. It seems to improve my focus, my performance and lowers my fatigue. They should pay me a few thousand for this endorsement...

There will be a fantastic mountain stage today in the Tour. Its the Tourmalet climbing and the last chance for Andy Schleck to beat Alberto Contador. Go Andy!

Goldman Sachs Remains Bullish On Oil

Goldman Sachs (GS) is still very bullish on oil and they see oil prices trading at 87 dollars per barrel in 3 months time. That is quite a rally, specially for such hard times economically speaking.

I have closed my long eMini S&P Futures futures position that I was carry from lower pre-market levels and i am moving to cash. New opportunities will arise sooner rather then later.

related ETFs: United States Oil Fund LP (ETF) (Public, NYSE:USO), iPath S&P GSCI Crude Oil Total Return (Public, NYSE:OIL), ProShares UltraShort DJ-UBS Crude Oi ETF (Public, NYSE:SCO)

Risky Trade: Buying The Down Gap

I am long ES futures ranging from 1054 to 1055.50. I am buying the down gap.

Its a risky trade, but the futures are predicting a 130 to 150 down opening in the Dow Jones. I think we will recover some ground till the open or right after it.

This is an intraday play.

Related ETFs: SPDR S&P 500 ETF (Public, NYSE:SPY), SPDR Dow Jones Industrial Average ETF (Public, NYSE:DIA)

Roubini On Oil Prices

Interesting comments from Nouriel Roubini on oil prices:

"And one cannot exclude the possibility of an Israeli military strike on Iran in the next 12 months. If that happens, oil prices could rapidly spike and, as in the summer of 2008, trigger a global recession."

in seeking alpha

Related ETFs: United States Oil Fund LP (ETF) (Public, NYSE:USO), iPath S&P GSCI Crude Oil Total Return (Public, NYSE:OIL), ProShares UltraShort DJ-UBS Crude Oi ETF (Public, NYSE:SCO)

Closing Shorts. Thoughts On The 2 Year Treasury Notes.

An interesting passage about 2 Year Treasury notes on the Prag Cap:

"FORGET THE NEAR-3% PLUNGE in stocks Friday or the 10-point collapse in consumer confidence in June. The important number to contemplate is 0.569%, the lowest yield ever attained by the two-year Treasury note.

What is extraordinary is that the two-year Treasury didn't reach its (thus far) nadir in late 2008, when financial Armageddon seemed at hand. It came last week, during the early days of the jolly time called earnings season, when—as in Lake Wobegon, where all children are above average—practically all earnings are "above expectations."

This will be a fantastic long term play. I mean, to trade the reversal of this historical low. Stay tuned.

I am closing my short emini S&P Futures position for now, because I am a little concerned with Shanghai`s 2 percent rally, the euro rally in the european session and the strength on european indexes. I am also closing my EUR/USD trade (that was a poor trade) and moving to cash. new opportunities will arise soon.

Shorts Paying Off. Finally.

My short line is paying off finally after so many market hesitations. Even the EUR/USD trade is looking a lot better.

Markets are going to close near the low today. There will be no end of day rally. I am staying short.

Goldman Sachs (GS) Ends The Bear Party. Or Maybe Not!

The Goldman Sachs`s settlement ended the bear party on Wall Street yesterday evening. I was expecting some follow through on the downside but it could not see that coming nor could I react because I was in a model casting with my baby son.

Its the price to pay for not being in front of the trading desk when you have a trading position.

I am moving to my beach house for the rest of the summer and I am going to trade from there.

Have you been watching Natural Gas? It been rallying quite nicely.

PS: Still on the wrong side of the EURUSD trade; I will make a decison on that later today;

Still Short S&P Futures. Tripled My EUR/USD Short After Being Stopped Earlier Today

I am making a risky move on EUR/USD. After being stopped earlier today, I stepped back for a few hours and then after talking to a few friends and collegues that were also stopped out today, I decided to triple my position. I am not heavily short at 1.2910 and I am pretty optimistic about that trade.

On the eMini S&P Futures its a rosier picture. Economic data gave a help and we are drifting lower. No need to worry there, at least for now. Still short, but not adding.

Have you read the last post?

Precision, timing and power are the main trading vectors in my view. You need the timing that comes from experience, you need the precision that comes from talent and you need the power that comes from the courage to step up trading size whenever its needed. I used power today.

Power Is No Substitute For Precision And Patience

"Investing is no different. It is a game of repetition where hundreds of small actions result in one larger result. But most importantly, it is a game of risk management. It is not the home run hitter who wins in the long-run. Rather, it is that strategist who devises the best long-term plan who ultimately wins. While hitting home runs is sexy it is rarely a recipe for success in the investment world. Aim high, but play small. Over time, good risk management and patience wins. Power is no substitute for precision and patience. The same is true in the world of investing."

in The Prag Cap

I really enjoyed reading this passage and I would like to share it with you. I specailly liked this part, "Power is no substitute for precision and patience."

I am still short, taking my time to read the market properly. I am caught on the wrong side of the market for the first time in many months but I do not have a full position on yet. I will wait for today`S data and decide what to do next. Maybe I will just close out and take a few days off. Its summer time and a 3 day vacation is always an alternative.

My EUR/USD trade is nearing my stop at 1.2875.

Nice Overnight Reversal

I was quite surprised with the overnight reversal despite being short. I am holding shorts for a bit longer to see if we can gain some downside momentum. Anyway I was very impressed with Intel`s results and I do not plan to have a big short line on.

I will probably lighten up today and try to re-assess the market over the next couple of days.

Retail Sales were unimpressive and decreased a more-than-projected 0.5 percent following a 1.1 percent May drop. Excluding auto dealers, demand fell 0.1 percent, matching the median forecast of economists surveyed by Bloomberg News.

I will leave with a fantastic quote from Rousseau, "The ability to foresee that some things cannot be foreseen is a very important quality".

Just Added To eMini S&P Futures Shorts.

I took advantage of this early strength to add to my shorts.

Alcoa (AA) has lost most of its overnight gains, so I think its safe (it is never safe, you know what I mean) to add to shorts now. I linked Dave landry`s Market In A Minute to the last post`s comments section.

Take care.

Le Tour, L` "Euro" And A Rising Market

Futures are up again in pre-market. I will probably have to reconsider my short position and not commit any more funds to it just yet.

The euro trade is acting a lot better, and its trading at the best levels since I have opened it. Its around 100 pips in the money. As I said I have a stop near entry, so I am riding a "market money" position.

I will take the market`s pulse later today to find out what to do with the S&P trade. I basically have 2 options, to bail out and close the trade or to increase it to a meaningful short position.

For the cycling fans, there will be a fantastic mountain stage in the Tour de France. Lance lost a lot of time in Sunday`s stage and is out of contention. That is a shame.

Futures Are Printing Red. Euro Is Down. Still Short.

I am still short ES Futures and EUR/USD. It seems that the US market is going to open lower and if it opens around the present levels my short line will be in profitable territory after being underwater for the last part of Friday`s sessions.

Regarding the EUR/USD short, we already have a reasonable margin, the position is gaining around 80 pips. I have placed a stop near the entry point, so I am riding a "market money" position.

I would like to congratulate Spain for their World Cup win. I think they deserved it overall, but I have to say that this was one of the worst World Cup`s ever, maybe even worse then 2002`s Korea-Japan.

It`s Time To Consider Reversing Longs And Shorting Again

After a 3 day rally, the risk reward has shifted again to the short side of the market. I am establishing a new line of shorts around 1065-1067 on the eMini S&P futures after being able to catch a little over than half of the last rally from the lows.

Of course we always want to buy the low and sell the high, with a double sized position. That isn`t possible and we must be happy with our sucess even if we can`t reach perfection.

As Salvador Dalí once said, “Have no fear of perfection - you'll never reach it.”

Sold Some EUR/USD Near Important Resistance

I sold some EUR/USD at 1.2660 near important resistance. I am off by a dozen ticks or so at the moment but I think this trade has some potential. The Euro Currency has been rallying for 21 sessions and managed to rally from 1.1875 to nearly 1.2700.

We are now trading on an important resistance level from the mid May high.

I am giving it a try.

PS: Mas que partidazo de Espana. Yo creo que Espana va ganar la Copa.

Closed All Longs. Sitting On Cash Again.

I closed all my ES futures longs and I am sitting on cash again. I am a bit tired and I am going to take the rest of the day off.

Its a good day for one of those wine bottles. I am going for a 200 USD wine bottle to celebrate my eMini S&P Futures raid.

Don`t forget to watch the World Cup semifinal later today. I think Germany will go through.

Still Long ES. Shorting 2 Year Treasury Notes.

Excellent reading on VIX and More: Chart of the Week: Record Low Yields for the 2-Year U.S. Treasury Note

I am shorting 5 Year Tresuries via ZF Futures and I will short 2 Year Treasury Notes Futures (ZT) today. Its the perfect medium term play with fantastic risk/reward.

I am still holding to the ES futures that I bought on Globex early Tuesday at prices ranging from 1012 to 1003. I am willing to lose all my gains on this trade to make a home run if the market rallies from here as I expect.

Doug Kass thinks the market has made its low for the year, "We have reached a yearly low for the market for the year. This business is going to be fun again and it's going to happen sooner than most people think." I would not go that far, but a multi session rally is probably under way.

Have a great trading day.

PS: I will try the Google (GOOG) rebound again today. I bought a few shares "Market on Close" yesterday evening. Its on a 13 day losing streak for the first time since it went public...

I Am Long ES Futures.

It seems like we will have an opening gap on the S&P 500. I am long eMini S&P 500 futures and took advantage of the low prices during the early globex hours to build my trading position.

I am also looking to play AK Steel (AKS) and Google (GOOG) during the trading session.

My music suggestion for the day is one of my favourite bands, DMB. You can listen to a few concerts and to the full albums on the website. Amazing stuff from Dave.

Have a great trading day.

The Buzz On Oil Trading Desks

“The market’s displayed some uneasiness about recent macroeconomic Chinese data. But oil demand there has been very strong, and barring a sharp slowdown similar to 2008, we forecast that will continue.”

Mike Wittner, head of oil market research at Societe Generale SA, London

Crude oil traded near its lowest level in three weeks. NYMEX Oil Futures fell 8.5% last week. It was the biggest drop in eight weeks.

"Drunk" British Oil Trader Moves To Switzerland

"Former PVM Oil Futures Ltd. broker Steve Perkins will resume his trading career in Switzerland after being banned from working in the U.K., the Daily Telegraph said, without citing where it got the information.

Perkins met yesterday with commodity brokers Starsupply Renewables SA, the Telegraph said. On June 29, he was fined 108,000 USD and prohibited from trading for five years by the U.K. Financial Services Authority for trading $520 million in oil futures while drunk, the newspaper said."

I always said that one glass of wine helps trading. But maybe he got a little bit more then one...

Saudis Will Stop Exploring for More Oil

An interesting article on oil, "Saudis Will Stop Exploring for More Oil".

If that is true, oil prices will stage a big rally over the next months.

Related ETFs: United States Oil Fund LP (ETF) (Public, NYSE:USO), iPath S&P GSCI Crude Oil Total Return (Public, NYSE:OIL), Energy Select Sector SPDR (ETF) (Public, NYSE:XLE)

Markets Are Always Changing

As I was reading Thomas Busby`s Trade To Win I came across this quote:

“I have been trading for decades and I am still standing. I have seen a lot of traders come and go. They have a system or a program that works in some specific environments and fails in others. In contrast, my strategy is dynamic and ever evolving. I constantly learn and change.”

Its one of the best trading quotes that I have read this year. As Ed Seykota said many years ago, "The markets are the same now as they were five or ten years ago because they keep changing-just like they did then.” I cannot agree more.

Money And Happiness

"Money won't buy happiness, but it will pay the salaries of a large research staff to study the problem."

Bill Vaughan

BP Spills Coffee

The best video I have seen in a while...

Enjoy.

Related Stock: BP plc (ADR) (Public, NYSE:BP)
Related Reading: I wrote about BP a few days ago. It would have been a fantastic trade: Buying BP Is The Pure Contrarian Play.

Google (GOOG) Will Snapback

"Google (GOOG) is currently on an 11-day losing streak. Since its IPO in 2004, this is the longest losing streak Google has had. The second longest was a 9-day losing streak that ended on June 18th, 2009. The stock has had one other 7-day losing streak, and seven other 6-day losing streaks. "

It was a pretty wild ride yesterday. I was long, I got stopped, I tried again, bought near the lows and had a great day. I was completely exhausted last night...

Its going to be a busy day again today. The Employment Report will come out at 8.30 am ET.

Playing The Bounce

This was an headline that caught my attention as I read the daily papers:

"China’s benchmark stock index dropped for a seventh day, the longest losing streak in 18 months"

I am playing for a bounce in the S&P 500 Index after scalping it sucessfully from the long side yesterday. I have 1045 as a primary target on the eMini S&P Futures. It is not a big trip, but I am carrying a lot of futures contracts, so it will be a very profitable trade if it materializes.

S&P Futures fair value is 1026 so we are still below it. I managed to open a few contracts at 1021 and 1019 on the Globex overnight session and I am sitting on them now (only slept 3 hours). I have a mental sell stop at 1015 but the market will not go there today.

Investors sentiment is also coherent with a short term rally in stocks:

"Given the recent market weakness, it's not surprising that bearish sentiment among newsletter writers is near a 52-week high. According to the weekly survey from Investors Intelligence, bearish sentiment rose to 33.3% in the latest week which is the highest level since July 2009."