High Inventories Keep Crude Oil Prices from Advancing on Week - Guest Post

Guest post by OilPrice.com.

High Inventories Keep Crude Oil Prices from Advancing on Week

Oil Market Summary for 04/05/2010 to 04/09/2010

Crude oil prices ended the week virtually unchanged from a week ago as optimism about demand warred with trepidation about historically high inventories in both crude oil and gasoline.

The benchmark West Texas Intermediate contract settled at $84.92 a barrel on Friday, only 5 cents ahead of the previous week’s Thursday close after surging above $87 a barrel early in the week and then declining for three straight sessions.

Bears noted that oil seemed unable to stay above $87 a barrel level, while bulls said that oil had tested the $84 level going down and found resistance.

USO (Oil ETF) Chart Artistry, Trends, Targets and Bull Put Spread

I'm watching $USO and did some chart artistry (USO LavaChart™) on the oil exchange traded fund at FreeStockCharts.com. I'm watching $42 resistance and the recent trend break just above $40, which could act as support.  You can see it's testing the uptrend from February which hits that support level.  What will happen?  Will USO slide slowly through the uptrend to $40, break out to hit (1) or breakdown at (2).  I think USO is very interesting here because it's been in a sideways channel for months.  If oil spot spikes it could tip the oil futures curve into steep backwardation and yield dividends for the USO roll.  There's definitely a risk the US Dollar spikes and commodities take a hit, we shall see.  I'll break down oil, gold, silver, dxy and e-mini S&P futures in part 2, continuing from part 1 on ETFs. I added interesting USO headlines below the chart.

Greenspan: Overseas Savings Glut Kept Long Term Rates Low, Fed Funds Rate Was Ineffective In Controlling Housing Inflation (Financial Crisis Inquiry Commission Testimony)

Continuing from my previous post on Michael Burry vs. Greenspan vs. Peter Schiff, I thought I'd provide deep thoughts by Alan Greenspan at the Financial Crisis Inquiry Commission hearing a few days ago.

He made an interesting case that the Fed Funds rate between 2002-2005 was ineffective in controlling long term interest rates which mortgage rates are priced on ("the conundrum"). He found that a savings glut in the developing markets, or lack of investment, kept long term rates down and had no effect on home price inflation at that time. Remember he was so confused about the yield curve in 2005? The curve started to invert in March 2006 if you remember.

Treasury Yield Curve March 2006 (Courtesy of StockCharts.com)

Below I embedded Alan Greenspan answering questions from U.S House Rep. Bill Thomas below and the PDF of his testimony. Should he have forced rates significantly higher even with the inversion? Here is Greenspan's Brookings Institute paper titled "The Crisis" if interested.

Gas Producers Go to the Dark Side (Oil Exploration) - Guest Post

Guest post by OilPrice.com.

Gas Producers Go to the Dark Side

It's finally happening. Gas producers are starting to crack.

With the natural gas to oil price ratio running at a nearly-unprecedented 21-to-1 ($86.80 per barrel for crude versus $4.12 per mcf for gas), gas producers are throwing in the towel. And switching over to the "dark side". Oil exploration.

Up until now, many die-hard gas producers had been sticking to their guns and continuing to drill gas plays. Particularly shale gas, where producers claimed economics are still attractive. Even at current depressed gas prices.

Videos of Anti-Government #Kyrgyzstan Riots and Protests

There is a revolution going on in Kyrgyzstan. The opposition formed an interim Government and seized control of the police. Rising prices, unemployment and authoritarian rule are responsible.

Pfizer Call Options Active On ISE at 38.2% Fibonacci Retracement, Are Price Multiples Priced In For Lipitor? (PFE, XLV Chart)

What's going in Pfizer's options?  Today I was on my decent looking 3-column blog and saw that $PFE was most active on the ISE (International Securities Exchange) Put/Call widget on the right sidebar.  It updates every 15 minutes.  The ISE widget shows customer opening calls vs. puts which then creates the ISEE call/put ratio.  In this case opening activity on the ISE was skewed towards calls: 41,830 calls traded compared to 113 puts netting an ISEE ratio of 37,018.

Alternative to Nabucco Gas Pipeline Undercuts Potential Disruptions to EU Energy Supplies - Guest Post

Guest Post by Yossef Bodansky at oilprice.com.

A Floating Alternative to Nabucco Undercuts Potential Disruptions to EU Energy Supplies

In late February 2010, Romania, Azerbaijan, and Georgia finalized an agreement on the direct export of Azerbaijani natural gas to Romania. This has profound ramifications for halting Turkey’s ability to hold the EU hostage to energy supplies via Turkey, and offers far more rapid easing of European energy pressures.

The new agreement calls for transporting the Azerbaijani gas via pipelines to the SOCAR-owned Kulevi terminal on the Georgian coast of the Black Sea. From there, the liquified gas will be shipped across the Black Sea by tankers to new terminals in the Romanian port of Constanta. From Constanta, the gas will be distributed through the Romanian pipeline system. “In five years’ time, Romania will become an energy hub in its geographical region thanks to this project,” predicted Tudor Serban, the Secretary of State for Romania’s Ministry of Economy, Commerce, and Business Milieu.

Greek Stock Index Below 50-Day Moving Average, CDS at 450bp

The Dow Jones Greece Stock Index and Greece (Athens) General Share index both broke below their 50DMAs.  The next stop could be the lows from February as support.  Charts courtesy of Stockcharts.com.  See below for updates on Greek debt and CDS.

ETF Technical Analysis Update on SPY, GLD, SLV, UUP, USO [Part 1]

Gold, silver, S&P 500, oil and the US Dollar Index are all at interesting levels.  I thought I'd chart out GLD, SLV, SPY, USO and UUP tonight and do gold, silver, E-mini S&P, Dollar Index futures and ETF ratios tomorrow. If I'm all wired up on guarana and ginseng I'll throw in Treasuries and yields.  Charts below are courtesy of StockCharts.com. By the way you can watch the ETFs stream live on the widget above.

GLD (Gold ETF):  If GLD takes out 114 resistance from January it could rally to 119 which is the next major inflection point.  RSI is above 50 and pierced through the previous high plus the MACD is above 0 line. There was interesting volume on a few GLD call strikes today, 24,980 April 114 calls traded with 31023 open and 11040 May 114 calls traded with 5450 open. There was also activity in March 2011, courtesy of CrimsonMind:
"Late in the trading session today 11,250 March 110 calls traded at $11.20 (bid:1.10 ask:1.30) and 22,500 March 140 calls traded at $3.15 (bid:3.05 ask:3.20)."

Here is a closer look at GLD.  It needs to break above 114 to prove it can test 119.

SLV (Silver ETF):  It is interesting that GLD broke to new highs but SLV didn't.  You can see that 20 is the ultimate ceiling resistance level to conquer.  A near term $19 break could be a decent hedged bet though, imo.  It just broke above a downtrend it looks like so all eyes are on precious metals.  SLV relative strength (RSI) is decent and the MACD is above 0 (also see post on GLD:SLV ratio on 3/17).

Fiscal Condition of Detroit (CRC), Paulson & Co. March Results, LA Bond Rating Cut, Thoughts On Maiden Lane III, Yahoo and Foursquare?

Interesting articles mostly from my Twitter feed (April 6 and 7, 2010).

Moody's cuts L.A.'s bond rating, warns of further downgrades - LA Times
Fiscal Condition of Detroit by Citizens Research Council of Michigan PDF (ht @pkedrosky)
Report: Detroit bankruptcy looms without drastic change - Detroit News
Paulson & Co. has a good March - MarketWatch (ht @morgan03)
S&P 500 and all ten sectors overbought - Bespoke Financial Group (ht DailyCrux)
Food Stamp Usage Hits Record 39 Million, 14th Monthly Increase - Mish (ht @mika2k1)
Peak Oil Theorist Now Thinks We're At Peak Demand, Oil Won't Break $100 - Business Insider
Unvarnished: New Social Network Could Ruin Your Reputation - PC World
Calacanis: Here's My 48-Point iPad Review - Business Insider
Thoughts on Maiden Lane III - Aleph Blog
U.S. Regional Mall Vacancies Climb to Decade High, Reis Says - Business Week
China Central Bank Said to Resume 3-Year Bill Sales - Bloomberg
Euro's reserve standing may be hit by Greek crisis - Reuters
Hyatt, Starwood eye Indian hotel market - Reuters
Yahoo Considers Buying Foursquare For ~$100 Million - Business Insider, VentureBeat
Macarthur rejects Peabody's $3.3 billion offer - Reuters
Thousands May Lose Rental Vouchers - NY Times (ht @future_shock)
Business software maker CA to cut 1,000 jobs, consolidate offices in restructuring effort - AP

Australia Raises Rate to 4.25%, Japan Stays Put At 0.1%, Statements and AUD, JPY Reaction

The Reserve Bank of Australia raised the cash rate by 25 basis points (0.25%) to 4.25%.   Here is a quote from the RBA statement by Governor Glenn Stevens 4/6/2010.
"Interest rates to most borrowers nonetheless have been somewhat lower than average. The Board judges that with growth likely to be around trend and inflation close to target over the coming year, it is appropriate for interest rates to be closer to average. Today’s decision is a further step in that process." [read full statement at rba.gov.au]
The Bank of Japan left its overnight rate at 0.1%. Here are some quotes from the monetary policy statement.
"The Bank of Japan will encourage the uncollateralized overnight call rate to remain at around 0.1 percent."

"The Bank recognizes that it is a critical challenge for Japan's economy to overcome deflation and return to a sustainable growth path with price stability. To this end, the Bank will continue to consistently make contributions as central bank.    In the conduct of monetary policy, the Bank will aim to maintain the extremely accommodative financial environment." [read full statement at boj.or.jp PDF]
Interesting movement going on in AUD and JPY pairs from 12:30-3:30a.  You can see the various uptrends, downtrends, channels and triangles.  I want to see how oil and gold react as well.  Chart source:  FreeStockCharts.com.

Fed Minutes: Conditions Warrant Low Fed Funds Rate, Thomas Hoenig Votes Against Action (3/16/2010)

From the FOMC Minutes on 3/16/2010, the Fed Governors (minus Thomas Hoenig) see "exceptionally low levels of the federal funds rate for an extended period". I'm going to chart out gold and oil contracts next to see if they sense inflation or deflation (or fiat money-flation).
"Committee Policy Action

In their discussion of monetary policy for the period ahead, members agreed that it would be appropriate to maintain the target range of 0 to 1/4 percent for the federal funds rate and to complete the Committee's previously announced purchases of $1.25 trillion of agency MBS and about $175 billion of agency debt by the end of March. Nearly all members judged that it was appropriate to reiterate the expectation that economic conditions--including low levels of resource utilization, subdued inflation trends, and stable inflation expectations--were likely to warrant exceptionally low levels of the federal funds rate for an extended period, but one member believed that communicating such an expectation would create conditions that could lead to financial imbalances. A number of members noted that the Committee's expectation for policy was explicitly contingent on the evolution of the economy rather than on the passage of any fixed amount of calendar time. Consequently, such forward guidance would not limit the Committee's ability to commence monetary policy tightening promptly if evidence suggested that economic activity was accelerating markedly or underlying inflation was rising notably; conversely, the duration of the extended period prior to policy firming might last for quite some time and could even increase if the economic outlook worsened appreciably or if trend inflation appeared to be declining further. A few members also noted that at the current juncture the risks of an early start to policy tightening exceeded those associated with a later start, because the Committee could be flexible in adjusting the magnitude and pace of tightening in response to evolving economic circumstances; in contrast, its capacity for providing further stimulus through conventional monetary policy easing continued to be constrained by the effective lower bound on the federal funds rate." (source: federalreserve.gov)

"Voting against this action: Thomas M. Hoenig.

Peshawar Suicide Bomb, Bond Yields vs Market Correction, CBOE Put/Call Ratio, Office Vacancy Rate Up, Rents Less Bad (REIS)

Matt Tiabbi on banks toxic swap deals with Jefferson County, Alabama - Rolling Stone
Wilbur Ross with Virgin Money bid for Royal Bank of Scotland - Dealbook
Rick Bookstabber (SEC Senior Policy Adviser) on the Municipal Market - Rick Bookstaber Blog
China Construction Bank - China GDP Growth >9.5% would be problematic - FT
CBOE Monthly Equity Put to Call Ratio Nears All-Time Low -VIX and More
Could Rising Bond Yields Trigger An Equity Market Correction? - DKMatai
Deflation on the prowl as Bernanke shuts down his printing press - Telegraph
Office vacancy rate hits 16-year high - Reuters
Net Yen Shorts Surge Even As Euro Shorts Hit Fresh Record (CFTC) - Zero Hedge
Philadelphia Sells Debt as Muni Issuance Rises From Low of 2010 - Bloomberg
Related: Treasury Says Build America Bonds to Save Issuers $12.3 Billion - Bloomberg
Suicide bomber kills 38, wounds 100+ at NW Pakistan party rally in Peshawar - Telegraph
Triple blasts hit northwest Pakistan capital near U.S. consulate - CNN
Iraq bombers target embassies, killing at least 41 - LA Times

Watch oil.... Three Blasts Hit Saddar Area Peshawar - April 5, 2010 (Video)

Alan Greenspan Responds To Michael Burry's NYT Op-Ed, Peter Schiff Wants A Public Debate

Watch Alan Greenspan on ABC News (1st video) respond to Michael Burry's NYT Op-Ed (I Saw the Crisis Coming. Why Didn’t the Fed?). Michael Burry (a 1-man hedge fund) was first in on credit default swaps or insurance on sub-prime MBS (see the 60 Minutes story).

ALAN GREENSPAN, the former chairman of the Federal Reserve, proclaimed last month that no one could have predicted the housing bubble. “Everybody missed it,” he said, “academia, the Federal Reserve, all regulators.” But that is not how I remember it. [read at NYT]

30 Year Rally In Bonds Over? Bill Gross, Jim Grant Bets House Plant's Life, TYX (30-Year Treasury Yield Index) Chart

The 30-Year Bond yield ($TYX) could be reversing its 30 year secular downtrend.  Check out the chart.  It is interesting that Bill Gross, the biggest bond fund manager in the world at Pimco, prefers stocks over bonds (CNBC Video).  Gross also mentioned that the US, UK and Japan have the ability to default through money printing (devaluation/reflation) which "produces lower prices in bonds and negative returns" and "there's an estimated $40 trillion present value of entitlements in the United States, and the recent health care reform has added about $500 billion to that... a trend nonetheless that suggests it's going higher and higher and higher" (Bill Gross Bloomberg Radio interview).

It would be interesting to see a big re-balancing out of bonds and into stocks going forward.  It wouldn't surprise me to see bond volatility soon (watch the $MOVE Index).  Look at the 30 year chart of the CBOE 30-Year Treasury Yield Index (symbol: TYX at FreeStockCharts.com). Technically, watch the downtrend resistance level closely and a potential base of support.

30-Year Treasury Yield Since 1980

Also Jim Grant (Grant's Interest Rate Observer) would bet on his houseplant's life that US Treasury Yields are likely to rise and he takes on the US Dollar (video below courtesy of Bloomberg).  Grant downgraded US Treasuries (see video).  If interested Jim Grant debated with David Rosenberg on Treasury Yields (link). David Rosenberg thinks Treasury yields are headed lower, taking the other side of Gregor Macdonald, Jim Grant and Bill Gross.

Interviews w/ Chatroulette Founder Andrey Ternovskiy, 20 Million Unique Visitors Last Month!

Chatroulette clocks 20 million unique visitors a month according to Andrey Ternovskiy, the 17-year old founder.  It was created only 3 months ago!  Scobleizer on CinchCast interviewed him while waiting in line for the iPad.  Andrey is currently talking with VCs.  Gotta love the black swans in internet land.

Prechter: Between Now and May is 3rd Best Selling Opportunity Since 2000

Robert Prechter of Elliott Wave International thinks between now and May is the 3rd best selling opportunity to sell stocks over the past 10 years.  First in 2000, second in late 2007 and third "between now and a few weeks from now".  What do you think, will there be a third wave down from the 2007 peak (Wave C)?  Prechter thinks we're in for another deflationary episode, even after the trillion in stimulus.
"I think you can short just about everything, somewhere between now and May we're going to have a real rollover. Think about this progression. In October the bond market topped out. In November the Dollar bottomed. In December Gold and Silver and the utilities average, go figure that one, topped out. In January the CRB Index of commodities topped out. The US stock market is the last domino holding up. The best trade on the board, the one I've been bullish on for the past six months has been the US Dollar....."

For more watch the full interview below or find it through Bloomberg Video.
Deflation Wave vs. Printing Press

Chicago Commercial Real Estate Updates (April 3, 2010)

Articles from ChicagoRealEstateDaily.com.

3/31/2010:  Apple Store on North & Clybourn finds buyer [read]
3/31/2010:  Streeterville Red Roof Inn foreclosure suit (in $484 Million CMBS) [read]
3/29/2010:  Downtown office vacancy rate at 17.1% [read]
3/24/2010:  Mirvac must must refinance $123.5M in industrial loans [read]
3/22/2010:  Local office values to keep falling: survey [read]
3/19/2010:  Two steak houses coming to River North [read]
3/17/2010:  Allerton Hotel has $72 million in overdue loans [read]
3/15/2010:  Level of distressed local property jumps [read]
3/10/2010:  Bank of America forecloses on Silver Tower condo project [read]
3/8/2010:  Delinquent mortgages, construction loans rise in Chicago [read]