Going back to this post, one reason given for continued lower prices in Nat-Gas, was the high price of oil: with Nat-Gas being a by-product of oil production.
Since that post, oil prices (USO) have dropped, and Nat-gas prices are on the rise.
Natural Gas UNG, Daily
The two dashed black lines are trend and channel.
There’s also a ‘W’ bottom formed; if broken to the upside, targets the ‘Measured Move’ as shown (not advice, not a recommendation).
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
We’ve gone form “Not Happening” to this morning’s action; ‘maybe it’s happening?’
As was done with Oil & Gas exploration XOP, we’ll now take a look at the oil patch itself and proxy, USO.
Oil tracking Fund, USO, Close
“What do you see?”
Marking up the chart.
We either have the ‘tradable bounce‘, or a potential contact point for the right-side channel line (not advice, not a recommendation).
The Fed announcement is just out, essentially accommodating a rate cut in September.
There was talk of some ‘cooling’ in the market (Ya think?).
With that, demand for oil seems like it would take a hit putting it lightly (not advice, not a recommendation).
Positioning.
The market itself is telling us where to go and what to do.
The important item for the day; what is the market not doing? Specifically, the Semiconductors, SOXX.
The SOXX, has not made a new (daily) high (at least, not yet) after the Fed’s announcement; it can even be seen as the ‘proverbial gut-check’, a la David Weis.
With that, all other positions have been closed save the short in the semiconductors via inverse fund SOXS (not advice, not a recommendation).
Danger Ahead
The ‘rate cut’ has yet to happen and September is a long way away.
It can’t be re-iterated enough how dangerous is this environment; prices stretched via a narrative that’s false (not advice, not a recommendation).
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Weren’t we supposed be forming some kind of ‘tradable bottom’ because the sellers were accumulating?
That kind of bottom-think may have worked under more ‘normal’ conditions.
However, it should be obvious to all (with some still clueless), we’re not in normal conditions.
Hedge funds dumping oil, giving a heads-up, demand collapse is either coming or is already here.
Great Depression 2.0
Presented many times on this site (click sidebar ‘Great Depression 2.0’, for a list of posts) that we’ve likely gone straight past ‘recession’, into depression (not advice, not a recommendation).
If that’s even remotely true, we should see demand collapse in heavy duty areas of the economy like trucking, right along with job implosions.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
That’s hardly the hundred years or so, one would infer without digging deeper.
The Bond Model
Let’s not forget, bonds had a similar ‘maximum short‘ condition back in 2020.
Back then (like now), the ‘max-short’ was supposed to result in some kind of history making squeeze.
The result? It never happened.
Instead, bonds collapsed, rates launched higher and here we are today.
With that, let’s look at oil proxy, USO.
U.S. Oil Fund, USO, Daily
As of today’s action, it’s not looking too good for the bulls (not advice, not a recommendation).
It’s somewhat self-explanatory.
Price action is in Wyckoff ‘up-thrust’ position and with today’s reversal, appears to be confirming (not advice, not a recommendation).
As the earlier post stated, I’m already short the sector, DRIP-24-01, with a definitive stop defined as yesterday’s XOP high (not advice, not a recommendation).
If the ‘max short’ for oil really is the pre-cursor to an upward squeeze, we may be about to find out very soon.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Every day, the tape prints one more clue to the next probable direction.
The next probable direction.
Part of an experienced speculator’s pre-market prep is to know from the prior session, the ‘correct’ answer for the current session.
That is, if a set-up has materialized, then subsequent price action will have a specific or variation of a specific pattern.
If the pattern posts on the tape, we have the ‘right’ answer. If not, probabilities are saying ‘no’ at this point.
Of course, the hard part and according to Wyckoff, it laterally takes many years of observing and working with price action to know what to expect.
Real Estate, ‘Wrong’
This morning’s session in real estate, IYR did not post the ‘right’ answer from a short standpoint. A lower open and lower print was the expectation.
Therefore, DRV-24-02, was exited with just over a 2%, loss (not advice, not a recommendation).
However, oil and gas XOP, gave the ‘right’ answer.
Oil & Gas XOP, Daily
The circled price action is what we’re looking for (not advice, not a recommendation).
There’s a lot going on with this chart.
If XOP continues lower and short, DRIP-24-01, is not stopped out or exited, we’ll re-visit this action with further updates (not advice, not a recommendation).
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer herexop
‘ … we’re at the 161.8%, projection and USO is hesitating; at the same time, Nat-gas, UNG, appears to be forming a long-term bottom’
The implication was: We’re at a Fibonacci level in USO, while the ‘herd’ has positioned themselves (massively) long and Nat-Gas appears to be reaching a (potential) long-term low.
Three trading days later, we have this:
Oil Tracking Fund USO, Weekly
If you look closely, the grey dashed line, the Fibonacci 161.8% projection, is just visible and extends out of the green line, highlighting that level.
A possible, nascent reversal.
Way back in 1902, after studying the markets intently, Wyckoff, discovered the following (paraphrasing):
‘Forces were at work, moving prices around, independent of any fundamentals, not connected to any valuations.’
Nearly, a century later, Prechter says this as well in one of his many interviews (paraphrasing, again).
‘If somehow, I was able to give you the newspaper headlines for tomorrow, you would not be able to tell me if the market was going to go up or down’.
The media is presenting oil (gasoline) and Nat-Gas prices as inversely correlated. Looking at the topping chart of USO and the bottoming chart of UNG, it’s believable … for now.
Downward thrust in Nat-Gas UNG, appears to be exhausting itself after a 20-month, bear market.
Risk is never zero, but currently appears to be at a low for UNG (not advice, not a recommendation).
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Storage facilities in Texas are paying to have someone take excess Nat-gas.
As this link says, the ‘reason’ for negative Nat-gas, is high oil prices prompt drillers to increase oil production, along with (by-product) Nat-gas, driving down the price.
We’ll cover Nat-gas (UNG) in a separate update which by the way, on Friday, posted another Wyckoff spring set-up.
The question du jour is, ‘does oil go higher from here?‘
If oil is going higher (or likely to go), then Nat-gas may be pressured downward for longer.
International Chaos
The amount of ‘pontificating’ from the media on what oil is, or is not going to do, is mind-numbing.
Wyckoff himself said, we’re attempting to find out ‘the next probable direction’ for the market, which of course, can never be known for sure.
With that, let’s go to the truth of the matter, the chart.
Oil Tracking Fund, USO, Weekly
Shown on the chart, is a Fibonacci projection from the lows of March 2023, to the first wave high of April ’23, then back down to the wave low, in May ’23.
It might be hard to see, so the first waves are highlighted with green dashed lines.
At this point, instead of asking the question ‘where’s oil going?’, a better question may be, ‘is the chart of USO “respecting” the Fibonacci projections?’
Looking at the chart, it’s an obvious, yes.
Right now, we’re at the 161.8%, projection and USO is hesitating; at the same time, Nat-gas, UNG, appears to be forming a long-term bottom (not advice, not a recommendation).
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
The Put entry on Chevron CVX, was admittedly, late to the party.
From a trading and strategy perspective, when CVX, announced its ‘buy-back‘ program, that was the appropriate time to go short (not advice, not a recommendation).
With that in mind, the Put option detailed in the above link was closed towards the end of yesterday’s session.
Chevron could still collapse from here and that may ultimately be the outcome.
However, before that happens, as shown below, the more probable event is to come back up for a test of underside resistance.
Chevron CVX, 4-Hour
Note how thrust energy (blue arrow) to the downside is dissipating.
The chart below shows a potential outcome, if (and it’s a big if) CVX, is still in a significant reversal.
Examples presented on this site are just that: Examples
They show one “old-timer’s” perspective on the market and current events.
The examples can be used (or not) to aid in understanding market behavior or to show a different perspective on how to approach the current environment.
To paraphrase Dr. Alexander Elder:
‘There are many ways to make money in the markets … and even more ways to lose it’.
It’s about 20-minutes before the open. Let’s see what happens next.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
Events like this, tend to indicate the end of a move.
Then today, Chevron (CVX) cracks.
In keeping with Elder’s method of trading options, as was done with the Delta Airlines (DAL) trade, the chart is documented below.
Note: The Delta Put expired with no revenue on the trade. This is how the method is implemented. Many small losses that are peppered by a significant gain (not advice, not a recommendation).
Chevron CVX, Daily
Over the next week, CVX could get ahold if itself and stabilize … or it could completely fall apart (not advice, not a recommendation).
We can already see, it appears to have posted a double top with a swift reversal.
Note: Posts on this site are for education purposes only. They provide one firm’s insight on the markets. Not investment advice. See additional disclaimer here.
The Danger Point® 