An interesting question from yesterday’s Father’s Day BBQ from non-traders.
First, last week’s price action on August 2013 Crude Oil opened the week at $96.36 and closed the week at $98.07, with the biggest moves coming Thursday and Friday. The media spin on the $1.97 move up was the unrest in the Middle East, more specifically the Syrian crisis. Now, last time I looked Syria is not a huge oil producing country, but the media said the unrest there could cause a problem for shipments. Exactly how much crude oil does the United States receive from the Middle East? See the 2013 graph below. I think you can see if we angered Canada that that would be a much more serious crude issue.
NOTE: Keep an eye on the U.S. dollar — as it drops crude will rise.
Proceed to Page 2 for the latest COT Data...
COT Data
Of course on the weekly chart we see how “big” money is posturing. From the COT-Disaggregated Swap Dealers (now the sell side of crude) increase their net shorts from -277,940 contracts to -290,115 contracts. Managed Money increased net longs from 199,735 contracts to 215,957 contracts and Producers (the past sell side) dropped their net longs from 30,522 contracts to 22,249 contracts. If Producers once again become net short and add to these, that will help push the price of crude oil up. And at the same time, if Swap Dealers continue adding to net shorts, there is a very good chance we see the break over $100 and retest $110, which we have not seen crude trading at since February 2012. OPEC seems to like the price of crude oil at $90-$100. That is clearly reflected in the price action since the beginning of 2013.
If you need help understanding how to understand how to use the NEW COT report to your benefit get instant access to my new e-book "What Lies Beneath ALL Trends". It is filled with eye opening information.Commercial Net Tracker instructions: This form tracks the Commitment of Traders (COT) data for the commodity futures market. This form "looks" at the most recent five weeks of COT data and provides visual indications of the data. A) If the current value is at a 12-month low, the cell will display a red/burgundy background. B) If the current value is at a 12-month high, the cell will display a green background. C) If the current value went from net negative to net positive, the cell will display a blue background (indicating a bullish condition). D) If the current value is both a 12-month high and also went from a net negative to a net positive, the background will be green. You should view the data with green backgrounds to determine if they also went from net negative to net positive.
Proceed to Page 3 for this week's detailed fundementals...
Technicals
On the daily chart below, you can see ADX at 23.6 and rising, reflecting strength developing to what is still a weak trend. We see Stochastics now in deep overbought territory, which does have this trader a bit concerned, and MACD is bullish with increasing divergence from above the signal line. I will be watching DI Differential very closely now.
Click to enlarge.
On the weekly chart we see ADX at 23.7 and rising telling me the weak trend is starting to show signs of strengthening. Weekly Stochastics are in deep overbought territory like on the daily chart. On the weekly chart you can see the price action has not closed below the 20-period EMA (94.35).
Have a prosperous trading week.
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