Oil Prices Drop Further in Week as Euro’s Travails Continue - Guest Post

Submitted by OilPrice.com

Oil Prices Drop Further in Week as Euro’s Travails Continue

Oil Market Summary from: 05/10/2010 to 05/14/2010

Crude oil prices plunged nearly 4% on Friday and were off almost 20% from their 18-month high less than two weeks ago, as the euro continued to lose ground against the dollar and U.S. oil inventories continued to build.

Welcome Back Volatility, Where Does SPY Bottom? 200DMA, May Crash Low OR June 2009 High/Support (Charts/Videos) (SPY, DIA, XLF, VXX, LDQ, TLT, IEF, UUP)

In the short term it looks like SPY (SPDR S&P 500 ETF) broke the uptrend from March 2009 AND near term $115 support. So technically support is yet to be seen. That is the question of the day. Where will SPY (S&P 500 ETF) find confirmed support?  Today (Friday, May 14) $SPY closed down 1.80% to $113.90 on worries over Euro sovereign debt. Check out the flight to investment grade bonds (LQD), Treasuries (IEF, TLT), US Dollar Index ETF (UUP) and Volatility Index (VXX). Gold (GLD) closed down slightly.

Diaspora (Personally Controlled Social Web Server) vs. Facebook

Check out Diaspora, "an open-source, privacy-aware, personally controlled do-it-all web server". It seems like you're centralizing all your social data and have ultimate control on your own server. Is this a Facebook killa? Students at NYU are behind this and it looks like they raised $100,000. I'm down. Check out the introduction videos, presentation to ISOC-NY and recent articles.

GLD, SLV, GDXJ Above Resistance, Why Art Thou Lagging GDX? (Also Check Out Implied Volatility)

The fundamentals for precious metals continue to look good. The EU/IMF backstopped European sovereign debt with a trillion dollars of Euros, the Euro continues to sell off against the Dollar and gold (currency volatility), Freddie Mac needs an additional $10.6  billion in aid, Fannie Mae needs $8.4 billion and I'm starting to think municipalities might need help paying their bills as well (watching MCDX).  There is no doubt that fiat money dilution is putting a bid under precious metals, whether as a currency crisis hedge, inflation hedge or sh* hits the fan hedge.  Check out the charts of $GLD, $SLV, $GDX, $GDXJ, $HL and GLD, SLV implied volatility.

Jim Iuorio Likes Silver, Not Just Catch Up Trade to Gold (SLV, GLD)

Jim Iuorio of TJM Institutional Services (who called the massive US Dollar rally in November - video) had some words about gold and silver today on CNBC.

Irene Aldridge (Able Alpha) Explains High Frequency Trading Strategies and What Could Have Caused the Crash Last Week (BNN, 5/7/2010)

The Terminator Irene Aldridge, of high frequency trading firm ABLE Alpha, was on BNN (Business News Television in Canada) discussing high frequency trading, different strategies (market making, statistical arbitrage, event arbitrage) and what could have sparked the crash last week.  She thinks a giant order in the futures market by a human or computer was responsible, whether erroneously ("fat finger") or purposely to manipulate the market.  She said these trading algorithms are only as good as the person who programs them.  Go ahead, trade against her.... Make her day.
 
Irene Aldridge on BNN (5/7/2010 - link)

High Frequency Traders Are Like Hackers (Mark Cuban's Thoughts On Wall Street)

Read Mark Cuban's blog post about Wall Street, it is interesting.  What Business is Wall Street In? - BlogMaverick, May 9, 2010.

Gold, Dollar Futures Diverging With S&P E-Mini Future (ES_M, GC_M, DX_M, GLD, SPY, UUP, May 11 Charts)

Since April 27, the June Gold and Dollar Index future have been diverging with the June E-mini future.  This marriage looks familiar.  I'm charting out the gold and silver ETFs tomorrow and watching resistance (GLD, SLV).

E-mini S&P June Future vs. Dollar Index Future vs. Gold Future
(Snapshots courtesy of OptionsXpress)

Euro Going To 1.20 By 4th Quarter (FX Concepts John Taylor), EUR/USD Technicals (Chart)

John Taylor of FX Concepts, the biggest currency hedge fund in the world, thinks the trillion dollar European bailout will just delay the fall to 1.20 on EUR/USD.  He thinks it will hit 1.20 in the 4th quarter and potentially lower.  Taylor is a Dollar bull favoring US over European economic growth and I'm sure forward looking US/EU interest rate differentials are part of the equation.  The chart does not look healthy.

Nothing Fazes Barton Biggs, Next Move in US Market is Up 15-20% Led By Technology, Sees Lower Euro

Nothing fazes Notorious B.I.Ggs (Barton Biggs of Traxis Partners) when it comes to US stocks. He was on Bloomberg last Monday thinking 2010 S&P EPS would hit $88-90. That translates to $1424 with an average 16 multiple. That's also 23% above today's close ($1159). $PG broke through the March low 3 days later (lol) and that didn't even faze him (see chart).  On Bloomberg Biggs said the next move in the market is 15-20% higher led by technology stocks.

Greenland Proceeds with Plans for Offshore Drilling in Arctic Waters - Guest Post

Guest post by OilPrice.com

Greenland Proceeds with Plans for Offshore Drilling in Arctic Waters

While the oil spill from a sunken drilling rig in the Gulf of Mexico threatens to become an environmental disaster, plans are proceeding for opening up new drilling territories in the iceberg-infested waters off Greenland.

Rep Alan Grayson: Federal Reserve Owns Red Roof Inn Through Bailed Out Bear Stearns Commercial Mortgage Securities Trust

This is interesting, we own a hotel chain. Watch Rep. Alan Grayson explain how the Federal Reserve owns the Red Roof Inn through a bailed out Bear Stearns CMBS.  I remember on 3/31/2010 Crain's Chicago reported that a Chicago (Streeterville) Red Roof Inn was hit with a foreclosure suit and the debt was part of a $455 Billion CMBS in default.  I did a search and found the actual mortgage in a Bear Stearns CMBS Trust:  Bear Stearns Commercial Mortgage Securities Trust, Series 2007-PWR17 (sec.gov) and Bear Stearns Commercial Mortgage Securities Trust, Series 2007-PWR18 (sec.gov). The New York Fed recently disclosed their holdings and BSCMS_07-PW17 A4, BSCMS_07-PW18 A4, BSCMS_07-PW18 A3 were on the list. Also remember in October 2009 I blogged that the Fed owned and was trying to sell the Crossroads Mall in Oklahoma for $24 million?

Insuring USO From Oil Volatility Monster w/ Put Options ($OVX) - Reflection of April Complacency Capitulation and Failed Breakout (May/July USO Puts)

Look how put options on the Oil ETF $USO actually made long portfolios MORE money on the failed ceiling breakout. In other words, if traders were trying to time an oil spot spike above that 6-month ceiling resistance level and hedged against oil volatility monster risk ($OVX was at 2 year lows, as far as the chart can see), they not only protected their capital (depending on hedge ratio) but made more money on the other side of their own trade, Goldman RMBS desk style!

Reading: David Rosenberg on 3,000 Gold, JPM Silver Probe, Squawking the S&P Crash, Copper Pierced 200DMA, Venezuela Inflation Hits 30%

News you can use for Sunday May 9, 2010

Venezuela inflation rate hits 30%, highest in Latin America - USA Today h/t @futureshock
JP Morgan silver probe by CFTC, DoJ - Zero Hedge
EU Preps Euro Fund to Fight ‘Wolfpack,’ Debt Crisis - Bloomberg
Britain rejects Eurozone bailout fund - ABC.net.au (h/t market ticker)
Indonesia Hit by Magnitude 7.4 Quake, USGS Says - BusinessWeek
Copper future pierces 200DMA - chart at Pragmatic Capitalist
Ben Lichtenstein of TradersAudio squawking the crash from S&P 500 pit! - Zero Hedge (mp3)
David Rosenberg: The Case For Gold Going To $3,000 Is Getting Stronger - BusinessInsider
ECB advises Spain to make tough economic reform - Reuters
BP Oil-Collection Chamber Clogs, Removed From Leaking Gulf Well - Bloomberg
Oil at $65 a barrel may sound alarm bells for OPEC - Reuters
Rogers, Faber Advise Paring Investments as U.S. Stocks Slump (5/7) - Bloomberg