Hurricane China Watch

22:40- Commodity Update

WTI CL- November ‘Crude oil rose, recouping part of the biggest loss in eight months, as China’s interest rate increase added to signs of economic growth and analysts forecast a decline in U.S. fuel stockpiles. Futures gained as much as 0.4 percent after dropping 4.3 percent yesterday, the biggest decline since Feb. 4.’

November Crude trades at $79.90/b up $0.30. December Crude trades at $80.50/b up .37%. Globex shows December contract volume of 4.8k. Due to impending expiration on Wednesday, November crude only traded 481 contracts as of writing.

‘The Energy Department report today may show U.S. gasoline inventories fell 1.5 million barrels, according to the median of 16 analyst estimates in the Bloomberg News survey.’ (Bloomberg.com)

Natural Gas- NG contracts expiring on October 27 continue to pick up traction from yesterday’s session in which prices rallied more than 2%. The front month contract is up by .51% to 3.538.

GC- Gold was crushed in yesterday’s session and traded down by $40 on December contracts. The precious metal is up by $3.50 to 1337.10/Toz.

Copper- After trading down to 3.7250 throughout the NYMEX session, HG gained some traction during Globex trading. The Red base metal December contract is up by .94% to 3.7655.

22:30- FX Commentary

EUR/USD- The Euro has weakened a bit since the blood bath, across all asset classes, at the close of NY trading. The pair traded as low as 1.3700 @ 20:00. The slight breach of 1.37 triggered heavy buying up to 1.3750. Since then the pair has bounced and now trades higher by 58 pips from the lows to 1.3758. The pair is up 34 pips on the session.

USD/CHF- The ‘Swissy’ traded down to .9680 at 21:50 from session highs of .97185 at 20:00.  The pair is weaker by 32.5 pips on the session and was last quoted at .9686.

AUD/USD- Watching this pair is almost as much fun if not more fun than the viewing the  EUR/USD trade.  The Aussie dropped to .9665 at 20:00 and paired all losses to touch a session high of.9742 at 21:45.  The pair now trades at .97375.

Trading Economics

Many Commodity traders who held Net long positions may have been caught off-guard when The People's Bank of China explicitly announced hawkish monetary policy in order to curb inflation:

"China's benchmark rates are not an overnight lending rate as is the case in the United States and other major western economies. Instead, it has a one-year interest rate on saving deposits, which increased to 2.5% and a one-year interest rate on loans, which rose to 5.56%." (CNNMoney.com)

GDP, CPI, PPI, Retail Sales, and Industrial Production data are to be released tomorrow evening.  Economists expect the Chinese economy grew by 9.5% yoy in the third quarter of 2010.  Any growth figures over 10% ought to unleash the commodity bulls from the proverbial cage they were placed in today.

-Patrick M. Ambrus

Sources: Bloomberg.com, Economy.com, listown.com, CNNMoney.com

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

Consumer Confidence- 02/23/10

Via Bloomberg:

The consumer's mood is definitely downbeat, a strong indication that the jobs market isn't improving. The Conference Board's consumer confidence index fell back in a surprising and sizable way, down nearly 10 points to 46.0 in February (January revised to 56.5). Expectations, the index's leading component, fell more than 13 points to 63.8 reflecting a sweeping sentiment downturn in income, employment, and business conditions. The expectations index never really got going last year, barely approaching the watershed 80 level, a level consistent in the past with economic expansion.

The trouble in expectations signaled trouble for the present-situation component which dipped into the teens and toward the record lows of the early 80s. The index fell nearly 6 points to 19.4, reflecting pessimism over current business conditions where only 6.2 percent of the 3,000-home initial sample describe them as good. Only a miniscule 3.6 percent describe jobs as currently plentiful with 47.7 percent, up 1.2 percentage points from January, describing them as hard to get. This latter reading, which gets a lot of attention, will raise talk of trouble for February's jobs report.

Note that consumer confidence may have weakened but momentum and recent indications on the retail sector suggest that consumers haven't pulled back their spending, at least yet. The Reuters/University of Michigan consumer sentiment index for February, which edged lower in an initial reading at mid-month, will be posted on Friday.

Wow, disappointing numbers. The Dow rallied about 33 points in early trading on strong earnings from Home Depot. However, when this report hit the market at 10 EST equities and commodities sold off. NYMEX Crude was off 1.84% midday from its highs of $80.31/barrel from yesterday's trading session. Natural Gas continues to sell-off as reports of warmer weather than usual in the Midwest began to circulate this week. Natural Gas is trading at $4.78 per British Thermal Unit down 2.35% at the close of NYMEX trading.


Patrick M. Ambrus
Managing Partner
Analyze Capital LLC
ambrus.anlzgroup.com

Where is Miss Cleo?- 12.18.2009

The Dark_Trader Took a bit of a hit yesterday. Currently, I am short Nat Gas and long Citi. I am encouraged by today's action, and the charts confirm my positions. It now becomes a waiting game. Though, my sentiment has yet to change. I am currently examining the fundamentals of S&D on the Nat Gas trade to see if I can find any underlying indicators.

C is undervalued at these levels. Regardless if the financial system tanks C will be bailed out. Also, the street sold off the stock after an under-priced equity offering. Hence, it may take more time to exit the Troubled Asset Relief Program. I will continue to exam Citi's financial statements as well as weekly charts with my colleague Alex. This is what he had to say on October 30th when evaluating his position:

"Overall 3rd quarter fundamentals will prove to shine better in 4th quarter. C will be a better hold on the longer term out."

My sentiments to a T.



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

Hunger For More- 12/11/09

"Well, ladies and gentlemen we're not here to indulge in fantasy but in political and economic reality. America, America has become a second-rate power. Its trade deficit and its fiscal deficit are at nightmare proportions."

--Gordon Gekko

IEA Oil Market Report Highlights:

• Forecast global oil demand is virtually unchanged for 2009 at 84.9 mb/d but is revised up by 130 kb/d to 86.3 mb/d in 2010. Yearly growth (‐1.4 mb/d and +1.5 mb/d, respectively) remains driven by non‐ OECD countries, but OECD prospects have slightly improved.

• OECD industry stocks fell by 36 mb in October to 2,735 mb, 2.5% above 2008’s level. Middle distillates accounted for over 40% of the draw, yet global products in floating storage continued to rise in October and November. End‐October forward demand cover fell to 59.4 days, 2.5 days higher than a year ago.

• Global oil supply rose by 200 kb/d in November. OPEC crude production increased by 135 kb/d to 29.1 mb/d, its highest level in a year. Largely as a result of lower non‐OPEC supply prospects for 2010, next year’s call on OPEC is raised by 0.5 mb/d to 29.0 mb/d, compared with 28.7 mb/d in 2009.

• Forecast 2009 non‐OPEC supply is raised by 125 kb/d to 51.3 mb/d as Russian gas liquids output is revised up. In addition, the end of the quietest US hurricane season since 1997 has contributed to lift this year’s outlook. By contrast, 2010 supply is revised down by 265 kb/d to 51.6 mb/d, with North American supply now lower.

• Projected global 4Q09 refinery crude throughput is revised down by 0.6 mb/d to 72.3 mb/d, due to weaker US preliminary data and higher maintenance in Asia and the Middle East. Global 1Q10 crude throughput is seen rising by 1.0 mb/d year‐on‐year to 72.7 mb/d, but OECD crude runs are expected to fall given weak refining margins.

• Crude oil futures prices traded in a higher $75‐80/bbl range in November before weakening in early December on fears that the recovery in the global economy could be shallower and slower than expected, especially in the key US market. Prices were trading at eight-week lows of around a $70‐74/bbl range at the time of writing.

• A medium‐term market update sees upward revisions for demand (largely non‐OECD Asia) outstripping those for supply (Russia, OPEC NGLs and Nigerian and Iraqi capacity). Yet higher OPEC capacity ensures similar market outlooks – tightening under the higher GDP case, but remaining comfortable under lower GDP growth or faster efficiency gains.

It looks like my colleague Alex is correct to be an oil Bull. One must also exam U.S. EIA numbers as well as OPEC numbers to get a better understanding of the numbers above. Though, this report does give a pretty good picture on the demand story. China's beak is wet I presume. If China continues to grow, they will continue to consume oil. I will look to see how domestic oil refiners are operating in order to gauge future consumption. If I like what I see I will look to enter my USO position around $70/barrel after incorporating technicals as well.

When the Money Goes, Will the Honey Stay?- 12/10/09

"Money itself isn't lost or made, it's simply transferred from one perception to another. "
-Gordan Gecko

Via Bloomberg:

Trade Report
The latest international trade report shows exports continuing an uptrend, boosting U.S. manufacturing. Imports also rose, likely reflecting inventory rebuilding for autos and cautious hope about the consumer and business investment. The overall U.S. trade deficit narrowed to $32.9 billion from a revised $35.7 billion gap in September. The deficit was smaller than the market forecast for a $36.4 billion differential. Exports advanced 2.6 percent while imports gained 0.4 percent. The improvement in the trade deficit was primarily due to a narrowing in the petroleum deficit, which came in at $17.8 billion compared to a gap of $20.5 billion the previous month. The nonpetroleum gap shrank to $25.2 billion from $25.7 billion in September.

Looks like the decline in oil prices coupled with depressed demand played a major role in the narrowing of the gap.

But apparently, U.S. businesses are a little optimistic about domestic demand for both capital equipment and consumer goods. Import gains were led by a $1.1 billion boost in capital goods ex autos, followed by a $1.0 billion rise in consumer goods imports and $0.4 billion for autos. Industrial supplies imported fell $1.8 billion, with the crude oil component falling even more-by $2.4 billion. However, some of the auto imports may be lagged effects from the surge in auto sales under the cash-for clunkers program as import auto dealers restocked.

If the consumer continues to spend we should see robust GDP growth in the 4th quarter. Though, I would be cautious to predict anything over the 3-3.5% forecast by Mr. Bernanke and Mr. Dudley of the Federal Reserve.

Initial Jobless Claims
Initial jobless claims ended five weeks of improvement, rising 17,000 in the Dec. 5 week to 474,000 for the highest level since mid-November. But the four-week average continues to improve and is right at the current level, down 7,750 to 473,750. Market News International also notes that seasonal contraction in construction, tied to heavy weather, is another offsetting factor in the latest week's rise. Continuing claims in data for the Nov. 28 week fell very sharply, down 303,000 to 5.157 million. The drop in continuing claims reflects an uncertain mix of new hirings and the expiration of benefits. The unemployment rate for insured workers continues to come down, 2 tenths lower to 3.9 percent. This rate peaked in July at 5.2 percent in a major contrast with the overall unemployment rate which, at 10.0 percent in November, hit a 10.2 percent peak in October. Today's report is a bit of a disappointment and will lend modest support to those who question whether the November jobs report, with its big improvement, will prove to be a fluke.

Claims missed analyst Consensus estimates of 460,000 for the week. This will be a very important trend to watch over the month of December leading into the Employment Situation on January 8th. Additionally, these numbers will have the potential to avalanche the Santa Clause Rally. Specifically, I will look for action from Washington as Obama looks to subsidize jobs with left over Tarp money. If this action is taken it will probably be viewed as bearish on the economy.

Natural Gas Inventories
Natural gas in storage fell 64 billion cubic feet in the Dec. 4

Nat Gas continued its volatility today and is up a whopping 7.7% at $5.28/btu on the session due to bullish supply numbers. I was able to lock in a favorable long position at the close of the trading day yesterday through the UNG. I have already taken profits today, and I will look to re-enter around $9.10.

Other News & Notes

• CIT exits Bankruptcy
• Citi looks to raise $20B through common offering to help repay $45B Tarp loan
  
• London bankers set for exile as Darling approves Bonus Tax in excess of £25,000
• U.S. Treasury will extend the Tarp until October 2010

On a a personal note, Tiger Woods is a great golfer and not a role model. Stop expecting him to live a flawless life. Everyone makes mistakes. I am sure Disney is loving ESPN's rating right about now. There is no news like Bad news...


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

Money Never Sleeps, but People Do - 12.09.09

Via Bloomberg:

Oil whipsawed in reaction to weekly petroleum inventory data. On the negative side for prices are a large 2.5 million barrel build in crude stocks at the WTI delivery point at Cushing, Oklahoma together with a 2.2 million barrel build in total gasoline stocks and a 1.6 million build in distillates. On the plus side is a sizable 3.8 million draw in total crude inventories to 336.1 million barrels. Oil and gasoline imports were down in the week while domestic output of gasoline and distillates were both up. Refineries operated at 81.1 percent of capacity, up from the prior week but still very low. On the demand side, demand for gasoline was steady in the week while demand for distillates dipped. Oil first fell $1 then rebounded $1 to trade at $73 following today's data. Supply in the petroleum market, despite the week's draw in crude, is still very heavy and is a threat to the oil industry should the global economic recovery stall.

If crude continues to stay in a lower range short term ($70-72) I will look to jump in via USO. Tomorrow we will get Natural Gas Inventories at 10:30.

Tommorow's Action:

The U.S. international trade gap in September widened to $36.5 billion from $30.7 billion worth of red ink in August. Exports rose 2.9 percent while imports jumped 5.8 percent. The worsening of the trade deficit was led by a wider petroleum shortfall which came in at $20.5 billion compared to $16.6 billion the previous month. The nonpetroleum gap increased to $25.9 billion from $24.3 billion in August. Looking ahead, the sneak peak indicators are mixed. First, there could be a drop in auto imports from Canada as not as many are needed with cash for clunkers having concluded. But a drop in shipments of nondefense capital goods in October could show up in lower capital goods exports. Also, higher oil prices will cut into any potential improvement in the trade gap.

Consensus is -34.6B. I don't expect this to be much of a market mover unless the gap increases significantly. Data should be flat or slightly improve. If data is week I expect a dollar sell off.

Also,Watch out for initial Jobless claims at 10:30. The combination of initial claims and trade deficit data have potential to move markets in either direction.

It will be interesting to see how dollar strength or weakness influences equity investors for the rest of the trading week.

On Friday we will get a real feel for how well the U.S. consumer is doing with retail sales and consumer sentiment reports.

The ASX 200 and Nikkei 225 are sitting on slight gains to start the trading session in Asia, up .25% and .06% respectively. Futures are negative in the Eurozone and U.S. equity markets are poised to open slightly to the upside.





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

Early Market Action Thoughts: Oil- 10.26.2009

I spent much of the morning on the Blooomberg looking at charts. CL1 is definitely overbought at the moment and I expect a pull back to $78 as I said in my last post. This morning Nymex Crude was trading around $80.50/barrel. Momentum on the upside is topping out. Additionally, the upper Bollinger band(30, 2.0) has been pierced for too long. However, one must keep in mind that crude will not follow technicals or fundamentals in the long run. Much will depend on the Greenback.

-Pat

Patrick M. Ambrus
Analyze Capital LLC
ambrus.anlzgroup@gmail.com

Where's Oil Headed? 10.23.09

Crude oil reached a new high of $82/barrel earlier today. I expect the rally today was related to the Chinese growth story as well as continuous dollar weakness. However, a weak dollar is a reality the U.S. government will have to live with for the time being. China reported GDP growth of 8.9% for the 3rd quarter 2009. This may be a farce but numbers can't be fudged more than +/- 200-250 basis points. Hence, the economy continues to grow rapidly, and thus commodity consumption will continue if not grow. Additionally, stocks of Crude oil failed to meet analyst expectations rising only 1.3M barrels last week. My short-term outlook is a price range of $75-85 barrel if the RSI can sustain its momentum. Currently the RSI is overbought at 74.16 with the previous high at 77.81. Also, CL1 pierced the upper Bollinger band at 20 days, 2 standard deviations. I expect a bounce off to about $78 or so before we see more upside movement. Long-term I am extremely bullish. Prices of crude will rocket to $100 by late January early/February. Next week I will look to enter into long position into the USO when prices retreat.

-Pat

Patrick M. Ambrus
Analyze Capital LLC
ambrus.anlzgroup@gmail.com

Excerpt From Pat's Trading Journal - 9.16.09

Today I liquidated my position in Natural Gas. I sold all of my shares in The United
States Natural Gas fund @ $11.69/share. Up $1.98 since I took my position or a gain of
20.39%. My reasons are instinctual. I actually did not look at any charts before I exited.
However, I felt the charts may have clouded my vision and told me ton hold on a bit
longer. Yet, My view on the overall direction of the markets is what drove my decision.

I thoroughly believe in a market correction of 5-10% in equities as well as commodities.
THE USD weakness cannot last forever and is a bit exaggerated. I also track the S&P 500
regularly which is overbought as well. The upper bollinger band (2, 20) has been severely
pierced and the RSI is over 70 indicating a correction is coming. IN addition I did some
research on the call options of the SPX for the next month. It was interesting to see heavy
activity about 6000 calls for 1070, but significantly fewer calls for 1080, 1090, and the big
one 1100. I may be wrong bu the market is ahead of itself.

Hence, I am absolutely sure I will be able to enter into Nat Gas, Crude, and the S&P at
much lower valuations during the next 2 weeks. In the mean time I will explore shorting
some financial stocks. My next play may be to short the XLF. More on that in my next
post. As the Great Warren Buffet says, "You can never loose money taking a profit."

Author: Pat Ambrus

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I would like to make a side note that his entry timing was nearly flawless, and his exit was clean. We are currently waiting on a more significant pull back of around 10.5 to assess re-entry points. Overall NGU09 futures have been very volatile which as indeed been reflected in UNG to an extent.

-Alex

Daily Energy Market Commentary - 9/14/09

$75 eh? – The Fundamentals

Not so fast. Unfortunately for oil we have not seen this price feat accomplished since October 14th 2008 when CL1 closed at $78.69/barrel. I am surprised at oils recent price behavior considering the potential for a commodities rally; especially when Gold and Natural gas are starting to take off. WTI Crude’s highest closing price since October 20th 2008 ($74.08) was $73.68 on August 24th 2009. Over this 10-month span oil was practically flat. That is not to say money wasn’t made on the violent swings over the span, but as an asset class, crude has been unreliable.

Looking at a fundamental driver of Crude prices there has been plenty of dollar
weakness. As I am writing this, the USD is trading at nearly a 12month low vs. the Euro €1= $1.4604. The yearly movement in exchange rate is virtually flat. (September 29, 2008 closing €1= $1.46170). What does this tell us about crude? Over the past 12 months it has been paired with the euro/dollar price movement. However, I am starting to see a divergence. Over the last trading week the USD has weakened considerably vs. the EUR yet WTI crude has not strengthened, and instead sold off. Only time will validate this recent move.

If we look at some of the news affecting crude, one could argue oversupply as a
reason for the lack of movement towards the upside. For instance, Petrobras along with Exxon Mobile, Chevron, and RDS have discovered a huge oil well off the coast of Sao Paulo/Rio. This well is predicted to have the capacity of 2 billion barriers of light sweet. It should be fully functional by 2013 if Brazil’s government can find more ways to subsidize Petrobras. Additionally, the Chinese government granted a $30 billion loan through Construction Bank of China (last week) to PetroChina. This loan was primarily for sand-oil exploration in Canada or “to secure natural resources,” according to a spokesperson from PetroChina. Lastly, OPEC has decided oil prices are fine at the current supply. I believe OPEC is hoping to see $80 to $85 a barrel. However, this is wishful thinking in the short-term.

Price Targets and Technical Plays

Where is oil headed? Well for the time being I see it trading as low as $63 and as high as $72. It is a broad range, but it has been notoriously volatile. Also, CL1 seems to be trading within 1.4-1.6 standard deviations from the sample mean (Keep in mind for timing on entries and exits). In addition, do not forget about the possibility of the economy reverting back into recession either. With these considerations, my long-term outlook six months from now, we will see $80/barrel…

“Inflation is coming in 2010”

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Authored By: Pat Ambrus
Edited By: Alexander Lê

All Comments and concerns can be forwarded to ambrus.anlzgroup@gmail.com