End Month Performance of March (21st to 31st) - April 1st 2011

Traded the fourth week of March but not the last.


4th Week Performance -  March 21th - March 25, 2011

• Open Week - Long GBP/USD @ 1.6233 from last end week - Closed @ 1.63077 - March 21, 2011
• Open Week - Long WTI @ 102.28 from last end week - Closed @ 104.97 - March 22, 2011

WTI	GBP/USD	Total Cents	Total Pips
+269 cents	+74 pip	+269 Cents	74 pips

This was the performance from within the week though both these positions were initiated from two weeks ago and were unrealized gains.

The overall realized P&L:

WTI	GBP/USD	Total Cents	Total Pips
+27 cents	+198.7 pip	+27 Cents	198.7 pips

• As you see from the realized P&L my second crude trade for the month was timed extremely poorly. For about a week and a half WTI was in down trend for about 2 ATRs. I sat through 2 ATRs of uncomfortable volatility. The proper risk management would have been to set stop loss at 1 ATR reassess on the third week then sat through another 1 ATR of downside volatility and setting it wide enough to be able to catch the recovery that we saw end month. That strategy would have garnered at least 300 - 400 cents vs the 27 cents I realized.  In the end though I'm glad I stuck to my views and convictions of seeing the 105 squeeze I was looking for. The move going into April is another story on its own for another day to tell...

• GPB/USD trade was overall a very solid trade. I caught about 66% of the move up to about 1.64. I bailed early because I was going out of town and didn't want to manage my position when I was away. Also, wasn't sure how the UK inflation report was going to turn out. Even If I stuck through the inflation report which would have been about 100 pips more, the reversal was hard and fast and probably difficult to time. If anything I would have resulted in the same realized P&L. I sat through about Daily volatility of 100 pips or so before the move took off. 1 ATR risk management would have been sufficient but I was using broad 1.60 base support. 

So my total trades for the month of March realized P&L:

Total Cents	Total Pips
+981 cents	+32 pip

Majority of cents come from crude exposure on front month trades (Brent, WTI) and with one week trading the dollar index.

The reason why the pips are so low was because of my poor poor poor NZD trade. Talk about bad timing. Fundamentally I was right but was trying to fight the crowd. In the end the move I wanted came and again came much faster than I expected. The pound was an excellent trade and had I de-leveraged a bit on my NZD trade the pip significants would have been greater. Either way 32 pips is better than negative pips.

Overall a very good positive month thanks to energy trades. My second trade was almost a disaster but I stuck it through. Better risk management would have improved P&L significantly. Got to stick to the discipline...

Analyze Capital LLC

AnalyzeCapital(at)gmail.com 

Navigating Global Capital Markets

Trading FX is right now is like navigating the Amazon River, 'Grey Swans from Extremistan' lurk around every land mass..... As the often quoted John Maynard Keynes once advised, "The market can stay irrational longer than you can stay solvent."

Credit Default Swaps on Irish, Portuguese, Greek, and Spanish Debt continue to widen. Anglo Irish debt was downgraded by Moody's on Monday and now needs another lifeline of 5B Euros.  Yet, the Euro continues to strengthen.  Mr. Bernanke and Mr. Obama must be smoking a fine Cuban cigar at the moment because they are the only 2 policy makers of recent memory to weaken their currency without  significant lip service.  The Japanese MOF should take the lesson...start a trade war with China and watch your currency tank...There is much fear in holding US Dollars at the moment.  Mr. Guido Mantega of Brazil is right, we do have a full fledged currency war of devaluation and the U.S. is winning.

Also of note, Mr. Yu Yongding an advisor to The People's Bank of China spoke in Singapore  of a full fledged dollar crisis, to quote the man, "Such a huge amount of debt is terrible and the situation will be worsening day by day.  I think we are one step nearer to a US Dollar crisis."  Cheers to you too mate.

This morning AUD is off its highs of .9780 levels seen in Tokyo trading overnight and has pulled back toward .9700 levels.The AUD continues to test new highs as it inches towards parrity with the USD and makes new highs against the JPY.  Though, the latter has internal economic issues of its own which continue to put downward pressure on any of the Yen's major pairs.  The appreciation in large is due to sustained demand for Australian base/industrial metals from China and ASEAN countries in general.  Also, Australia maintains the highest nominal interest rates, currently at 4.5%, of any G20 country and thus is perfect for a reverse carry trade involving the USD.  Ironic how times have changed.  I can remember the days when U.S. assets became the beneficiary of an Asia Pacific carry trade.  And then we had a realestate market collapse in correlation with all other asset classes for that matter....Low rates, continued AUD strength!

Meanwhile, the only commodities that want to rally are precious metals...Agri commodities crashed like the titantic yesterday and continue to hit icebergs today.   This is possibly due to the recent sanctions China placed on imported U.S. Chickens.  Chickens love grains as a main source of their diets.  Also, the recent run-up in Agri prices does justify a correction if prices are to move higher in the 4th Quarter.  Natural Gas is trading lower and Oil cannot hold on to any incremental gains.  Though API data from last night was somewhat bullish, and DOE data should help prices firm a bit, but their is no support in sight. Nat Gas is suffering from a lack of supply scarcity.  In fact new inventories appear every day and remain above our famous 5 year average range.  Yet, this makes little sense considering storage capacity and new LNG technologies make storage and shipment of the energy easier and cheaper than ever. I will note that Sugar, Cocoa, and Coffee performed well in yesterdays session largely attributed to you guessed it, dollar weakness.

Bill Gross published a grim outlook in his October outlook letter.  He highlighted Stan Drunkenmiller's retirement as a Harbinger of things to come in the fund management industry.  He argues that the days of double digit returns are over due to a lack of asset inflation, increased regulation, and deregulation.  Indeed these things are all true.  One must take Mr. Gross' comments with a grain of salt as he manages the world's largest bond fund in PIMCO.  His comments do coincide with a 10% workforce reduction at DE Shaw, one the world's largest Hedge Funds with approximately $21 B of assets under management.  HF's are struggling to produce alpha these days.  According to HFN Hedge Fund Aggregate Index funds are up only 0.14% YTD through June 2010.  The FT reports Hedge funds are up 1.45% YTD.  Times are grim when the best managers of money can't make a buck.

It is understandable that there is an underlying current of fear surrounding the developed markets of the world.  Emerging Markets were thrust into the spotlight during the most morbid of days during the credit crisis and have been in the spotlight since.  OECD economies continued to point to Emerging Market Demand and growth as the way of the future and how this shift is a 'structural' one that will change the way the global markets do business.  All I can say is, not so fast jack.  Without demand for emerging market exports from developed economies there will be no new growth.  Unless of course the ubiquitous Emerging Markets can create a sustainably contempory domestic demand system for domestically produced goods.  I doubt Malaysia needs all those those textiles and garments they continue to churn out.

Undoubtedly, big corporates still reside in developed markets.  Inventories have refilled after bone dry levels spawned a rampant increase in production over the last 2 quarters.  Thus, unless OECD demand returns to the global marketplace, emerging markets will not be able to maintain their 'robust' growth systems and will inevitably slow down.  Global 'Austerity' is in order.  We should all trade accordingly.

Patrick M. Ambrus
Contact: analyzecapital@gmail.com

Sources: Financial Times, The Gartman Letter, Bloomberg.com, HFN.com, The Black Swan, PIMCO.com

Black Gold

But eventually it's a question of access: Getting access to fields is on top of the oil companies' agenda. We see a substantial build-up of supply occurring over the coming years.

-Daniel Yergin


WTI Crude Oil traded higher up to $75.95/barrel during the morning session. However the commodity pulled back when the EIA data was released. The October contract currently trades at $74.10 Below, I compiled some of the key EIA data for your own synthesis & analysis.



Price Pressure
Why has CL1 traded in a range for the past month? There is a large contagion gap between the near month October Futures contracts and the November Contracts of 2.04%. As settlement date approaches, November prices will fall. In addition, supply levels in Kuching Oklahoma remain above historical levels for this time of year.

Macro View
Growth numbers out of China have been less than stellar. China PMI data was up only .5% from July to 51.7%, HSBC numbers were below 50. Also, the 'Deflation Story' in the U.S. and Japan will not help the perception of commodities. As money continues to flow into the bond market inflationary investments become less attractive. Lastly, there has been less conflict in the Middle East than normal. Thus, OPEC sour-crude supply is not in danger of shortages in the near-term.

Highlights from EIA Report



-U.S. crude oil imports averaged 8.9 million barrels per day last week, down by 794 thousand barrels per day from the previous week.
-Over the last four weeks, crude oil imports have averaged 9.5 million barrels per day, 500 thousand barrels per day above the same four-week period last year.
-U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) decreased by 1.9 million barrels from the previous week.
-At 359.9 million barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year
-Distillate fuel inventories decreased by 0.4 million barrels, and are above the upper boundary of the average range for this time of year.
-Total products supplied over the last four-week period has averaged 19.6 million barrels per day, up by 0.7 percent compared to the similar period last year
-Jet fuel demand is 0.8 percent lower over the last four weeks compared to the same four- week period last year.
-During June and July of 2010, the Gulf oil producing region was impacted by two storms: Alex and Bonnie shut in a cumulative total of about 1.6 million barrels of crude oil production.


Patrick M. Ambrus
Twitter: AnalyzeCapital

Empirical data is courtesy of eia.gov

Crude Oil Inventories & Commentary

Oil is falling sharply in reaction to large builds in weekly inventory data. Oil stocks rose 4.1 million barrels with gasoline stocks up 2.3 million and distillates up 1.8 million. The data are for the August 20 week.

Gasoline demand slowed to a 3.0 percent year-on-year pace vs. 3.5 percent and 3.3 percent in the prior weeks. Distillate demand has been slowing abruptly for nearly two months, now at plus 4.9 percent year-on-year. Supply has been heavy the past year but signs of trouble on the demand side may now begin to shift the picture for oil which has been narrowly rangebound all summer.

Bloomberg.com

Has Crude finally found a bottom to this downtrend? It is hard to say. To quote Alex, " 50/50 chance crude ticks up." I do concur. Supply levels of NYMEX WTI are out of control. However, as long as emerging markets demand remains robust, crude should not fall below $65/b. I need to see price movement above the $75-76 line before I turn bullish once again. For now the tape is range bound. Until supply witless down and the EUR/USD pops, I expect crude to trade between $70.50 -$74.

In case anyone was wondering, I was stopped out of My USO calls. Extremely poor trade on my behalf. At least I learned a valuable lesson. Don't buy calls without protection. I will be trading futures for the foreseeable future.

Related ETFs: PowerShares DB Crude Oil Dble Long ETN (DXO), UltraShort Oil & Gas ProShares (DUG), iPath S&P GSCI Crude Oil Ttl Ret Idx ETN (OIL)

Sports: Team USA smacked Greece 87-59. Eric Gordon led the way with 18 points, 4-7 from the promise land.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: Analyze Capital

EIA Oil Inventories & SPX Trade

EIA Data
U.S. crude oil refinery inputs averaged 15.6 million barrels per day during the week ending July 30, 113 thousand barrels per day above the previous week’s average. Refineries operated at 91.2 percent of their operable capacity last week. Gasoline production decreased last week, averaging 9.4 million barrels per day. Distillate fuel production increased slightly last week, averaging 4.4 million barrels per day.

U.S. crude oil imports averaged 9.6 million barrels per day last week, down by 1.5 million barrels per day from the previous week. Over the last four weeks, crude oil imports have averaged 10.0 million barrels per day, 494 thousand barrels per day above the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 1.2 million barrels per day. Distillate fuel imports averaged 187 thousand barrels per day last week.

Energy Information Agency

SPX Trade
Yesterday I entered a short position on some SPX E-mini futures. Today I was stopped at around 1125. This was a poor trade overall. I mistimed my entry point. From here my trade unravelled. However, I maintained discipline and did not get emotional. Sometimes you learn more about trading from losers than winners. Although, I did have that 30 point gainer last week, so I should not be too disappointed. Overall, I need to re-evaluate my thoughts on the SPX going forward (short-term movements). The lack of volatility in this market cramps my trading style.

Related ETFs:ProShares UltraShort S&P500 (SDS:US), Consumer Discretionary Select Sector SPDR Fund (XLY:US), Oil Services Holders Trust (OIH:US)


Books: Ken Rogoff and Carmen Reinhart's This Time is DIfferent gives great insight into the relationships of banking crises, sovereign defaults, inflation, unemployment, stock market crashes, and currency crises.

Sports: The Diesel to Bean Town. Good move for both parties.

Patrick M. Ambrus
Analyze Capital LLC
Twitter: AnalyzeCapital

Oil Update- 07.08.2010

Yesterday afternoon I bought some CL futures at a price of $72.60/barrel. My call has paid off thus far as crude is floating to $75/barrel. I will take some profits in the morning and re-evaluate from there. I may wait to see the EIA data before I make my trades for the rest of the week. Stay tuned!

Related ETFs: PowerShares DB Crude Oil Short ETN (SZO:US), United States 12 Month Oil Fund LP (USL:US), PowerShares DB Crude Oil Double Short ETN (DTO:US)

Patrick M. Ambrus
Analyze Capital LLC
AnalyzeCapital@gmail.com

Crude Trade Pays

Last Thursday I posted that if crude dipped to about 72.50 it would signal a buying opportunity. If one bought at this juncture or entered a bit lower, there was a nice profit waiting for the trader this morning. From my previous post:"I will stay cautious and watch the tape closely on this. If I see $72.50-73.00 buying may be a viable option."

WTI Light Sweet is off about $0.27/b sitting @ $72.33/barrel. If there is a dip before closing today I will jump back in and look to stay long up until $74.00.

Related ETF's: Goldman Sachs Crude Oil Total Return ETN (OIL), United States Short Oil Fund (DNO), ProShares Ultra DJ-AIG Crude Oil ETF (UCO)

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
Twitter: AnalyzeCapital

Crude Oil Inventories

A drop in imports made for a 2.0 million barrel draw in oil stocks for the June 25 week. Imports fell to an in-trend 9.5 million barrels per day, down from last week's 2010 high of 10.1 million. Refineries increased output, feeding a 0.5 million barrel build for gasoline stocks and a 2.5 million build for distillates.

Gasoline demand is a plus for the report, at a year-to-date best of 9.3 million barrels per day for a plus 1.5 percent year-on-year rate. Distillate demand softened slightly to 3.8 million barrels but continues to show a strong year-on-year rate of 10.9 percent that reflects industrial activity

Bloomberg.com

Oil is selling off in early Globex trading. I did not see WTI touching $74/b again until a new high of $83/b:

Reasons for pull-back:

1. Supply issues in Kushing, Oklahoma still remain a large concern.
2. Couple this with bad economic data and/or fear of stagnant global growth
3. Strong Dollar vs. Loonie, Aussie, and Sterling


I will stay cautious and watch the tape closely on this. If I see $72.50-73.00 buying may be a viable option.

Related ETFs: iShares S&P GSCI Commodity Indexed Trust (GSG:US), PowerShares DB Oil Fund (DBO:US), United States 12 Month Oil Fund LP (USL:US)

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
Twitter: Analyze Capital

Oil Near One-Month High

Bloomberg:
Crude oil traded near a one-month high in New York as gains in U.S. equities restored confidence that fuel demand will increase.

Oil earlier extended yesterday’s 2.4% jump after the dollar index dropped 1.7 percent in the past two days, increasing the appeal of commodities as an inflation hedge. The Dow climbed 2.1% while the S&P 500 gained 2.4%.

Crude oil for July delivery was at $76.92 a barrel, down 2 cents, on the NYMEX at 10:52 a.m. Singapore time. The contract surged $1.82 yesterday to $76.94, the highest closing price since May 6. Futures are up 9.2 percent from a year ago.

Crude broached a closely watched pricing point yesterday, closing above the 200-day moving average of $76.94 a barrel for the first time in a month.

Oil’s gains yesterday were tempered after the industry- funded American Petroleum Institute reported that U.S. crude-oil stockpiles rose 579,000 barrels to 358.7 million.

The Energy Department will probably report that U.S. gasoline inventories were little changed last week, the Bloomberg News analyst survey shows. Stockpiles of distillate fuel, a category that includes heating oil and diesel, are forecast to climb 1 million barrels. The department is scheduled to release its weekly report at 10:30 a.m. EST.

Thoughts:
At the moment, I am leaning toward being bullish on crude until the end of the summer. However, I do not want to make a definite stance until I can find more information relating to supply. I am convinced that demand will continue to grow in the U.S., due to increased gasoline usage during the summer and slow economic recovery, and in emerging economies, due to continued economic growth. If supplies show strong signs of decline, then crude will continue its rally.

Daniel A.
Summer Analyst
Analyze Capital LLC

Oil Rises Along With Chinese Exports

Reuters:
Oil settled more than 3 percent higher to top $74 on Wednesday after a report of buoyant Chinese exports eased concerns over the pace of growth in the world's No. 2 oil consumer and data showed a drawdown in U.S. crude inventories.

Chinese exports grew about 50 percent from a year earlier in May, sources told Reuters on Wednesday, in a sign the economy of the second-largest oil user was roaring ahead.
The export figure in the Reuters report, which came ahead of Thursday's official release, far exceeded expectations and fueled a rise in stock markets globally.

Further support came after the U.S. Energy Information Administration reported a 1.8 million barrel drop in crude inventories, confirming an earlier report by the American Petroleum Institute of a hefty crude draw.

U.S. crude for July delivery settled at $74.38 a barrel, up $2.39, off earlier highs of $74.96.

July ICE Brent settled at $74.27 a barrel, up $1.97


China’s economic growth remains strong and is a significant factor in determining oil prices. Demand from China and the US may be key in determining oil prices this summer. However, it is important to note that factors from the supply-side are equally important. OPEC recently lowered is estimates for world oil demand in 2010 and has refrained from changing its output quotas. Currently, OPEC members are supplying more than the set quota.

Daniel A.
Summer Analyst
Analyze Capital LLC

OPEC: 2010 Demand Picture Uncertain

AP:

The Organization of the Petroleum Exporting Countries said world economic growth this year was revised up to 3.8 percent in June from the previous month's 3.5 percent forecast. The gain was driven mainly by improved performance in the Japanese economy which it forecast to grow by 2.7 percent this year compared to last month's 1.5 percent projection.

"While the global economy seems to be enjoying solid momentum in the first half (of 2010), concerns about growth in the second half remain due to euro-zone sovereign debt problem, the ability of China to avoid overheating and the still high unemployment" in industrialized nations, OPEC said in its June Oil Market Report.

Although OPEC had a lower expectation on the increasing rate of demand for oil in the second half of 2010, China reported a higher demand for oil mostly in transportation.


Liz T. Liu
Summer Analyst
ANalyze Capital LLC

Market Recap- 06.08.2010

Equity Indexes
INDU- 9939.61 123.12 (+1.25%)
NASDAQ- 2170.57 -3.33 (-0.15%)
SPX- 1062.00 11.53 (+1.10%)

Commodities
WTI Crude Oil- $72.43 0.44 (+0.61%)
Brent Crude Oil- $72.30 0.180 (+0.25%)
Natural Gas- $4.790 -0.018 (-0.37%)
Gold Spot- $1237.200 -8.400 (-0.67%)
Silver Spot- $18.270 -0.207 (-1.12%)

Bonds
10 Year UST- Price:102.63 (-0.03) Yield: 3.19% (+0.05)
10 Year Gilt- Price:110.51 (+0.21) Yield: 3.46% (-0.02)
10 Year Bund- Price:104.28 (+0.46) Yield: 2.51% (-0.05)
10 Year Oats- Price: 103.63 (-0.14) Yield: 3.06% (+0.02)
10 Year JGB- Price:100.63 (+0.01) Yield: 1.24% (-0.00)

Foreign Exchange
EUR/USD = 1.1963
GBP/USD = 1.4448
USD/JPY = 91.4250
USD/CAD= 1.0509
EUR/JPY = 108.9350

Equity Index Futures
Nikkei 225- 9,460.00 -70.00
Hang Sang- 19,498.00 +163.00
SPI 200 - 4,401.00 +7.00

Thoughts
Today I made my entry into the SPX via June 17 calls. My position closed the day with a 3% pop. I'm going to ride this one for the rest of the week. My Nat Gas position came back a bit today due to cooler weather forecasts. Also, I got short crude via USO. My position there is underwater but I have confidence in the fundamentals.

U.S. equity markets rallied hard right before the close after trading marginally lower for the majority of the session. Short covering? Algorithms running wild? EIther way I'm still a SPX bull for the next few weeks.

The Purple People Eaters will beat the Vitamin C's in tonight's showdown in Boston. I expect big things from Mr. Gasol, Odom, & The Black Mamba.

Related ETF's: United States Oil Fund LP (USO:US), United States Natural Gas Fund LP (UNG:US), United States 12 Month Natural Gas Fund LP (UNL:US)

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
AnalyzeCapital@gmail.com

Oil Inventories-06.03.2010

Via Bloomberg:

A decrease in imports made for a 0.9 million barrel draw in oil inventories, to 363.2 million barrels for the May 28 week. Gasoline inventories fell a steep 2.6 million barrels to 219.0 million, a dip that does not match up with soft demand readings including a three-month low for the year-on-year rate, at plus 0.5 percent though the Memorial weekend shift to Monday may be distorting this comparison. In contrast, distillate demand is increasing, up 17.1 percent year-on-year to indicate acceleration in the industrial sector. Oil firmed about 50 cents to $73.75 in reaction to the headline oil and gasoline draws.

Both Crude and Brent rallied after this report was dispersed. I am interested to see how long crude oil will trade between this $70-$75 range. If the dollar remains strong throughout Q3 I expect prices to trade between $65-72. However, if the Euro regains confidence then we could see prices as high as $85/barrel this summer. Time will tell. The OPEC basic traded @ 70.98 as of 6/1. I expect the financial police will continue keep prices in line.

Dinner in the city, then back to the Bronx to watch The Finals. The Black Mamba will dominate tonight. Lakers in 5.

Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
Twitter: AnalyzeCaital

Crude Oil Inventories/Commodities Update- 04.21.10

Crude oil inventories rebounded 1.9 million barrels for the April 16 week with refined stocks also up. Motor fuel jumped 3.6 million barrels; jet fuel edged up 0.4 million; distillate fuel oil; gained 2.1 million; and residual fuel oil rose 1.8 million barrels. Crude is up a little more than expected and spot crude dipped on the news, edging down about two bits to $83.19. Final demand is mixed as gasoline demand is up 2.7 percent from a year ago while jet fuel is down 0.3 percent and distillate demand is minus 0.1 percent. Refineries operated at 85.9 percent of capacity for the latest week.

•Crude is currently off by -$0.15 sitting @ $83.70/barrel

•Natural Gas is little changed on the session down 50 basis point @ $3.96/british thermal unit

•Gold is up $7.50 today, finishing at $1146.70/troy ounce.

Today and tomorrow I have a copious amount of school work. The mountain gets steeper the closer I get to graduation. However, I will try to update the blog with the usual economic/market data. Be sure to check out Alex's Forex post below.


Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
Follow us on Twitter: @ AnalyzeCapital

Weekly Forecast - Forex, Energy, & Chinese Equities - 03/01/2010

Forex

USD is the name of the game.

EUR post 2.26.10 <-- Click Here
EUR post2.25.10 <---
EUR post 2.24.10 <---

Last week we examined EUR/USD movements quite closely. As my consolidated post show I am bearish on the EUR going forward into next week. Most of my arguments come from technical analysis. Though there is plenty of fundamental news to support a weak EUR thesis. Uncertainty looms with the Greek Debt situation, inflation is rearing its ugly head to an extent, and jobs are not getting better in the short run.

Of course this is relative to the US, who have raised discount window rates, and has RELATIVE mild economic (reports, though bearish overall on any accounts). The key being the relative expectation.

I will be updating the blog periodically throughout the week to report on my performance and progress.

Technically:

1.35 is looking like a strong support/consolidation level, and she be a key indicator moving forward. In a weekly time frame I don't see levels going higher than 1.37 (by friday). I expect prices to trade within a high 1.34 to mid 1.36 range.


------

Alexander Lê
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

------

Crude Outlook



Overview

Since January 4th WTI Crude oil has traded between a range of $83.12/barrel reached on January 6th and $71.15 reached on February 5th. That equates to 14% range from peak to trough prices. Today Crude rallied 1.3% to $79.68 a barrel in New York. WTI Crude needs to rally only 4.14% or more in order to reach a new high for 2010. I predict Crude will trade in a range of $74.50-$82.5 until it breaks resistance at $83.12.


Fundamental Analysis

•Crude Oil prices rallied over the past month in large part due to colder temperatures in the Northern Hemisphere.

•A strong United States Dollar has hurt prices in February

•The Chinese central Bank has asked its lenders to boost bank reserve requirements , leading to fears of the Chinese economy overheating

•Global demand for Oil is projected to grow by 800,00 barrels/day for 2010

•Bullishness in the tanker market continued in January and spot freight rates have increased on all routes.

•U.S. commercial oil inventories fell by 3.0 million barrels/day in January to 1.05 million/day

•U.S. commercial oil inventories are 32.0 million barrels/day above a year ago and 61 million barrels/day above the five year average.

•In OECD countries, the recovery has been sluggish and remains largely dependent on fiscal stimulus and Quantitative Easing

•United States CPI Inflation remains low and economists project an increase of only 2% in 2010


Technical Analysis

•As you can see from the USO 3 year daily chart, the 50 and 200 day Simple Moving Averages crossed briefly in July but look to converge once more.

•The tape continues to move inside and outside of the 50 and 200 day SMAs as they may act as near term resistance and/or support.

•RSI might have formed a double top with the first at the end of 2009 and the second top in January 2010.

•Volume has stayed at consistently low levels since the beginning of global asset rally in March of 2009.


Conclusion: The fundamentals for $100 oil are not present, not even 90$ oil. Global Demand is not great as The United States and Euro area continue to slowly drag themselves out of recession. A stronger dollar going forward will not help Crude sustain this high a price range. However, if the Chinese economy continues to grow at 10% annually, expect to see prices stay around $85/barrel.

Prediction: If the USO fails to test $40 (coinciding with a test of $83 for Crude; see above) on this next leg up I would be bearish.


----

Patrick Ambrus
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com

----


The Chinese word:

Chinese Stock Index Trend, before & after Spring Festival


2009-10-28 ~ 2010-03-03 - Graph 1



2010-02-01 ~ 2010-03-03 - Graph 2



The first graph above is the candlestick chart of Shanghai Stock Index from Oct 28th, 2009 to Mar 3rd, 2010, whereas the second one shows the trend from Feb 1st to Mar 3rd this year. The Graph 1 shows that the market started recovering at the beginning of February this year, and maintained a growing trend. Due to the traditional holiday: Spring Festival in China, the stock market was closed during Feb 13th ~ Feb 21st. Although the graph shows two slight pullbacks during the first two days after the holiday, the index went back up again quickly and kept a trend as the start of this year in lunar calendar.


2009-10-28 ~ 2010-03-03


2010-02-01 ~ 2010-03-03




MACD graph of the index illustrates the same idea that candlestick chart are telling. The increase in trading volume indicates that investors are much more activate than last year. A buy-in signal appeared right before the market close for Spring Festival, and after moving averages cross, the trading volume and price will become a pretty positive correlated relationship.

Furthermore, most stocks in the market have been following the index closely this year, especially in February. Since the index is having a pretty good trend, it is likely that most stocks will go to a higher price level in March as well. For instance, alternative energy stocks, such as LNRY or HTY for solar energy, have been moving along with the index most of the time. Therefore, if the index sticks to an up trend in the next few weeks, then there is a great possibility that the market will do much better than previous months, because of heavy weighted stocks will move up the index.
Lastly, plenty of positive reactions from investors before and after the holiday have made a great impact on investor sentiment in a good way throughout the year. Nevertheless, March will determine whether the market will become stable with growth or go back down to about 3000pts, where has been trapping investors for quite a long time.

-----

Clark Chu
Managing Partner
Analyze Capital LLC
email: analyzecapital@gmail.com