Posts tagged ‘oil’

Waves.Oil - Chevron tops at 80

To access member’s area or Orpheus estore click here.

WAVES.OIL is a perspective product published once a week. The report covers BRENT, WTM, XLE (Energy SPDR), top energy stocks, Natural Gas and related FUTURES. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools and sentiment indicators. REUTERS RICS: BRT-, WTM-, .XLE , CVX.N, XOM.N, IPNG, NG-P-CAL

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS - USA


NATURAL GAS. PRICES ARE STARTING THE 3/C WAVE UP

ORPHEUS GLOBAL RESEARCH

WAVES.OIL is a perspective product published once a week. The report covers BRENT, WTM, XLE (Energy SPDR), top energy stocks, Natural Gas and related FUTURES. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools and sentiment indicators.

REUTERS RICS: BRT-, WTM-, .XLE , CVX.N, XOM.N, IPNG, NG-P-CAL

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS - USA


OIL. WTM. ANTICIPATED AND HAPPENED

Enjoy the latest WAVES.OIL

ORPHEUS GLOBAL RESEARCH

WAVES.OIL is a perspective product published once a week. The report covers BRENT, WTM, XLE (Energy SPDR), top energy stocks, Natural Gas and related FUTURES. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools and sentiment indicators.

REUTERS RICS: BRT-, WTM-, .XLE , CVX.N, XOM.N, IPNG, NG-P-CAL

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS - USA


LONG DOW, SHORT OIL UPDATED

Read more…

* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.

Login to the member’s area to read the report here.

DOWNLOAD THE REPORT HERE wavesoil130709
ORPHEUS GLOBAL RESEARCH

WAVES.OIL is a perspective product published once a week. The report covers BRENT, WTM, XLE (Energy SPDR), top energy stocks, Natural Gas and related FUTURES. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools and sentiment indicators.

REUTERS RICS: BRT-, WTM-, .XLE , CVX.N, XOM.N, IPNG, NG-P-CAL
ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM
ORPHEUS RESEARCH AT REUTERS - USA


LONG DOW, SHORT OIL UPDATED

The anticipated turn on OIL we talked about happened. Prices fell nearly 23% from JUN highs. Now conventionalists might call it another random forecast that just got lucky. But then this is not all we said. We also talked about the LONG DOW, SHORT OIL pair at the time we were negative on both DOW and OIL. To be able to understand that both DOW and OIL were going down and also anticipate that OIL will fall more than DOW. The pair made 8% over the last 41 days, we need to have extreme luck. For us here at Orpheus, the idea of fortunate recommendation calling lies in simplicity. Performance cycles were clearly skewed in favor of DOW in the DOW-OIL pair though both were negative. Now the news linked to macroeconomic factors like “lower Oil prices leading to lower trade deficits in the US leading to a stronger Dollar leading to lower Oil prices” should start appearing. Media will now ask “Does Dollar weakness cause high Oil prices?” or the opposite “Does Dollar strengthening cause low Oil prices?”, “Oil prices up, Dollar down – coincidence?” , “Oil prices down, Dollar up – coincidence?” etc. . If one looks at the performance cycles between BRT and the Dollar Index, the cycles suggest that the outperformance of Oil against USD has already topped and USD should be the outperformer now.

This means that our LONG DOW-SHORT OIL pair can be extended to LONG DOLLAR INDEX - SHORT OIL. Our overall view on Oil remains negative. Oil, gold and commodities have all been priced in US dollars since 1975 when OPEC officially agreed to sell its oil exclusively for US dollars. So oil producing countries receive the payment for their oil in Us Dollars. Economists say that an increasing oil price results in increasing inflation, negatively impacting the global economy, especialy oil importers. These dollars are used to purchase other goods in international markets. As the dollar lost its value, oil producers could afford to buy less in international markets with their dollars. The traditional belief is that betwen oil and dollar should exist a inverse relation (oil up, dollar down, and vice versa).

For us at Orpheus it is not about positive or negative correlation, it is about the cycle of correlation. According to performance cycles, an asset will always outperform or underperform the other asset. This means that there will always be an inverse correlation between any pair of assets if you are comparing performances. So what matters is really not correlation, but which of the assets is outperforming the other and WHEN. Our preffered view on dollar mentioned in our perspective product WAVES.FOREX (below 1,41 dollar heads up to 1,30) is in sync with our view on OIL as the top commodity heads lower.

Enjoy the latest WAVES.OIL

Download free report wavesoil1307093

* This is a perspective product and not a strategy product. Long Short strategies are not riskless strategies. Please mail us for a detailed working or consult a local financial risk manager.

Login to the member’s area to read the report here.

DOWNLOAD THE REPORT HERE wavesoil1307092
ORPHEUS GLOBAL RESEARCH

WAVES.OIL is a perspective product published once a week. The report covers BRENT, WTM, XLE (Energy SPDR), top energy stocks, Natural Gas and related FUTURES. The product highlights Primary (Multi Month) and Intermediate (Multi Week) price trends. The report illustrates key price levels, price targets, price projections and time turn windows. The product uses Elliott waves, traditional technical analysis tools and sentiment indicators.

REUTERS RICS: BRT-, WTM-, .XLE , CVX.N, XOM.N, IPNG, NG-P-CAL
ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM
ORPHEUS RESEARCH AT REUTERS - USA


THE TIME INDEX

Can we trade time as an asset class?

On one side we have comments like will the equilateral triangle lose symmetry as time triads move and on the other side is a clear idea of time triads being an empty philosophy. A controversy is a start, at least there is a debate, a thought. Volatility has been around since markets started trading, but it was not until 1993 that the idea started trading as a VIX index. Now we have hedge funds trading volatility, as an asset class. Will the market evolve to trade new asset classes? Can the market trade time as an asset class? Can we have something called time indexing?

As a start it looks counterintuitive. We are already trading time indirectly, but how can you trade time directly? And even if you could, how will you commoditize time as an asset class? Before we understand how time triads can itself become an asset class, one should realize that indexing techniques over the last centuries have moved from price weighting to free float to fundamental indexing. The idea of a benchmark is simple and investible.

So what’s time indexing?

 

more…


The TIME Index

Can we trade time as an asset class?

On one side we have comments like will the equilateral triangle lose symmetry as time triads move and on the other side is a clear idea of time triads being an empty philosophy. A controversy is a start, at least there is a debate, a thought. Volatility has been around since markets started trading, but it was not until 1993 that the idea started trading as a VIX index. Now we have hedge funds trading volatility, as an asset class. Will the market evolve to trade new asset classes? Can the market trade time as an asset class? Can we have something called time indexing?

As a start it looks counterintuitive. We are already trading time indirectly, but how can you trade time directly? And even if you could, how will you commoditize time as an asset class? Before we understand how time triads can itself become an asset class, one should realize that indexing techniques over the last centuries have moved from price weighting to free float to fundamental indexing. The idea of a benchmark is simple and investible.

So what’s time indexing? The time index tracks the performance of a pair of assets, a quantifiable study of pair performance. Pairs can be between Nikkei- Bovespa, Dow Industrials - Dow Transports, Gold - Oil, Sensex - Dow, Sensex - Gold or between any two economic time series. Pairs can tell us a lot about markets and where we are headed tomorrow. But what do pairs have to do with time? When you are long on an asset class and short on the other, you are taking out the price and just trading on time. This is why long Dow Industrials and short Dow Transports (or vice versa) is a pair idea, which lets us trade time as an asset class. Now conventionalists may argue, what fun is it to trade two indices, which move up and down together?

This is where we come in. Performance cyclicality was highlighted first time in the Kyoto University journal, Nistor, Pal. The paper illustrated performance cycles between Nikkei and the other BRIC countries. The research proved that performance between two economic zones illustrated through the countries composite equity index was not just cyclical, but even quantifiable. One of the conclusions of the paper was demonstrated through our feature here ‘Long India - Short China’. The pair delivered 50% over a quarter. Markets are quantifiable and they allow even regional indices to be pegged against each other profitably. What the paper demonstrated was that irrespective of the tight or lose correlation of an asset, performance cyclicality can be demonstrated at all time frames. The paper was indirectly demonstrating time fractals, triads.

There are some clear advantages of trading on time triads, time indexing, or say performance as an asset class. Being long and short two high correlated assets can reduce market risk i.e. offer market neutrality. This makes the strategy attractive. What is the investment world looking for? The first and foremost is a reduction in risk. For example shorting Nsebank and going long on Nifty reduces portfolio volatility and captures performance between the two sector indices creating relative alpha. Now this strategy may not perform better in a trended market, but it will surely outperform stagnation or declining market. The pace of wealth destruction and changing risk appetites also makes time indexing a viable option.

So what’s at the soul of the investment strategy? It is the ability to isolate the performance cycle. How do you do it? First, you accept that cyclicality of time exists and Kitchin, Juglar, Berry and Strauss were thinkers and not just illusionary pattern watchers. Second, one should understand that cycle regularity is not just about equality but power law proportionality. Third, one should start connecting or overlaying larger time fractals with smaller fractals. This again brings us to time triads, triangle in a triangle essence.

What kind of pairs? Large capitalization against Small capitalization indices, value vs. growth indices, mid economic vs. late economic etc. what if we go wrong? Well! If you can invest in a naked asset with a risk return history, you can invest in a market neutralizing, capital conserving simulated spot time index too. Above all if speculative volume can trade anything that moves, this is still an open source model. What about risk management? A diversified time index with many components could take care of emerging risk from the strategy.

We have been carrying pairs in this feature starting 2004. Frankly speaking it took us a lot of time to comprehend that what we were really trading, pairs or time. It took us more time to understand the fractal aspect in the subject. Long India, short China was one such pair we featured profitably. We have illustrated Oil - Sensex, CNXIT - Sensex, BSE500 -Sensex and many such pairs to highlight not only performance cyclicality but also market, economic perspectives and direction. We are not very far from the first Indian TIME index.

Another example of performance cyclicality can be built around the three pillars of global economy, Gold, Dow and Oil. So what does the Gold - Dow pair (ratio line) tell us? It says that Gold has hit an intermediate underperformance low against not only Dow, but also Sensex. This means that long Gold, Short Dow (Sensex) should be profitable pair for more than a few weeks. Even the larger primary performance cycle is also up in favor of Gold and against Dow. The respective performance cycle has been working from 1976 with an average 5 year cyclicality. The last cycle turned up in 2008 and should complete sometime in 2012. This means there is more for Gold ahead against American equity. This could mean that Dow should underperform and fall against Gold, Gold should rise or outperform Dow or Gold should fall but less compared to Dow. The very fact that Gold did not collapse against anything also suggests that the underlying larger cycle of Gold (2008-2012) outperformance against Dow continued to work.

If we need more confirming evidence we can look at Dow - Oil pair (ratio line). It might seem like a counterintuitive pair, but though Gold and Oil belong to the same commodity class, they can behave differently. Unlike Gold, Oil has pushed up to cycle highs against Dow. This could be owing to extreme oversold levels, reprieve in recession worries, or simply putting volatility cycles ruling OIL. There could be a thousand more reasons to explain why Oil shot up against both Gold and Dow. What really matters is where is the performance cycle (time oscillators) between Oil and Dow headed now? The respective pair has reached an extreme against Oil and is non confirming suggesting topping Oil performance against Dow. This means that the OIL intermediate topping could be near. Even if Dow pushes up above 8,800-9,000 levels in the ongoing leg, Oil needs magic to sustain and push to further highs against Dow. So if Oil is turning down against Dow, and Gold is turning up against Dow, what equity strength are we speaking about for the next few weeks? We have a history of contrarian calls from Oil at 100, when we said the oil rocket was not sustainable. The MAR low call on markets and Bsemetals compelling valuations where made at a time when $5 was thrown as another achievable figure for Oil. We are at $70 now.

Performance cycles (time oscillators) are easy to understand, but they become tougher to grasp when you start to explain them fundamentally. The real counterintuitive thinking is not how we can have long Dow and Short Oil and still call Gold as a performer, but how time indexing can revolutionize how we understand and trade time as an asset class.

timetriads060609 DOWNLOAD THE REPORT

ORPHEUS RESEARCH AT REUTERS - UNITED KINGDOM

ORPHEUS RESEARCH AT REUTERS - USA

Share


Oil Triangle

A triangle is one of the 13 patterns illustrated by Elliott. Triangle is one of the five patterns which work against the trend also called as corrective or counter trend patterns. A countertrend pattern typically does not cause a reversal and is generally seen as a pause in the ongoing trend.

The Triangle leads to a more sideways and contained price action representing a balance of buying and selling forces. The formation witnesses a decreasing volume and volatility as sideways action is tougher to trade and is a test of patience.

There are five overlapping waves, which are further subdivided into 3-3-3-3-3 formations, labeled A-B-C-D-E. Position of a Triangle generally occurs in a position prior to the final exhausting up move.

Just like other patterns, identifying triangles is an art. Triangles should be given time to develop rather than counting the five legs too early or forcing the formation.

The true signal of the continuation of the underlying trend down comes when the triangle pattern breaks. Triangles are usually measured by projecting the base of the triangle to the point where the triangle breaks. This way we obtain the first price target.

Here we have illustrated a triangle pattern on OIL (WTM). As you can see on the chart, the A-B-C-D-E structure suggests a corrective countertrend movement which suggests a sideways action before the final leg down on Oil. Current Oil prices are near 45 levels on WTM. As we said in our latest WAVES.OIL, we are expecting a final leg down before anything. Prices should turn down anytime now. The quality of the dip will tell us whether we are making a new low on Oil or the asset has already bottomed.


Oil Triangle

A triangle is one of the 13 patterns illustrated by Elliott. Triangle is one of the five patterns which work against the trend also called as corrective or counter trend patterns. A countertrend pattern typically does not cause a reversal and is generally seen as a pause in the ongoing trend.

The Triangle leads to a more sideways and contained price action representing a balance of buying and selling forces. The formation witnesses a decreasing volume and volatility as sideways action is tougher to trade and is a test of patience.

There are five overlapping waves, which are further subdivided into 3-3-3-3-3 formations, labeled A-B-C-D-E. Position of a Triangle generally occurs in a position prior to the final exhausting up move.

Just like other patterns, identifying triangles is an art. Triangles should be given time to develop rather than counting the five legs too early or forcing the formation.

The true signal of the continuation of the underlying trend down comes when the triangle pattern breaks. Triangles are usually measured by projecting the base of the triangle to the point where the triangle breaks. This way we obtain the first price target.

Here we have illustrated a triangle pattern on OIL (WTM). As you can see on the chart, the A-B-C-D-E structure suggests a corrective countertrend movement which suggests a sideways action before the final leg down on Oil. Current Oil prices are near 45 levels on WTM. As we said in our latest WAVES.OIL, we are expecting a final leg down before anything. Prices should turn down anytime now. The quality of the dip will tell us whether we are making a new low on Oil or the asset has already bottomed.


THE METALS MAZE

Intermarket relationships between metals can not only give cues about the economic cycle but also lead the start of a global equity bear market.


The last time we discussed Gold in Dec 07, it was at dollar 800. Starting 2008 it completed it’s leg up to 1000 and is now ruling at 930. While Gold (Fig 1.) and Silver (Fig 10.) might be hanging in there tight, metals as a group are scattered on the price performance scale.

For example few would like to talk about Zinc, which has crashed 50% since the time we wrote about negativity on Zinc (Jan 2007 – India Outlook). It was then we saw that the metal had turned and Hindustan Zinc (Fig 3.) could fall despite a positive Sensex. The love has turned into hate. And all the merger talks between Zinifex and Umicore could not prevent Zinifex from crashing 61% from merger highs. Euphoria about mergers, despite a 33% success rate (since 1985) is unsustainable.

Even Uranium (Fig 4.) fell 50% from its peak. There are of course many reasons why metals or markets fall or why things happen. But most reasons, like news always are late and cannot time a market. The reasons which worked for Zinc were linked to fractals of mass psychology and intermarket analysis.

We made the case between equity (example Hindustan Zinc) and its underlying metal (Zinc - Fig 2.) and how one could tell us about the other. Today we go a step further and look at the relationships between metals itself. We extend the inter market  dynamics to  various metals like Gold, Silver, Zinc, Copper and Uranium.

Silver has never outperformed Gold since 1985. And Gold-Silver (Fig 6.) sentiment indicator, which we have mentioned on prior occasions continues to be leading market indicator for equity bear markets.

The last two periods when Gold outperformed Silver was in 1987-1991 and 1999 -2003 (Fig 6.) . Both these periods were the only time we witnessed the last two global bear markets. Gold has not started outperforming silver yet and is still at parity of about 25 years.

So there is no negative signal here. This means that all references to great depression and pictures of pensive Ben Bernanke on the Newsweek cover alluding to a global crisis and failure of American Leadership might all be premature. According to metals, this was no big collapse. We need another few months to see what works, the news and emotional chaos or the Gold - Silver ratio.

Then comes Copper-Silver (Fig 5.) ratio. Copper is outperforming Silver from Jan 2002. Why should Copper outperform Silver? Copper is more about discretionary consumption and Silver is precious and limited in its industrial usage.

This is probably the reason why Copper leads Silver consumption at the start of a business cycle. The ratio made a low few months ahead of the equity bear market low worldwide in 2002.

The ratio has stagnated over the last two years but is still above parity. Copper prices also are in a large consolidation and seem to have a primary (more than 9 months) upside left. This means more outperformance for copper compared to Silver. This too does not give us bearish cue for equity markets now.

Coming to Uranium, this strategic metal has also outperformed Gold. Compared to the geopolitical crisis and the dollar crisis that is crippling the world economy, it’s the energy crisis which Uranium suggests is more serious.

This metal leadership starting Feb 2005 happened exactly at the time when Oil (Fig. 7) broke above the dollar 40 barrier broke. We have also illustrated the Uranium – Oil (Fig 9.) intermarket ratio. The outperformance of Uranium compared to Oil also suggested that Oil was set to rise much above dollar 40. Strange reason some might say, a metal telling us more about global economy than the best economists in the world.

This list of intermarket dynamics between metals can be stretched to Uranium vs. Copper. Copper is linked to mid economic expansion cycle, while Uranium owing to its energy connection comes in the late expansion economic cycle. Uranium started outperforming Copper in (late) 2005 and is still above parity suggesting that we are nearing towards the turn in the economic cycle. Here also we have no signal which tells us, that we have indeed turned.

Zinc has come a full circle compared to Gold (Zinc vs. Gold – Fig 8.) . It outperformed Gold from Sep 2005 and now starting this year started underperforming Gold. Why?

Zinc is linked with auto and auto is in a rut. The commodity drop might be owing to this auto connection. Zinc is also ancillary to the metal industry. A drawdown in metal prices might also have some added influence.

From a fractal perspective, both Gold and Silver are completing their primary fifth circle legs with a final pending leg up. Final leg ups are tricky and can be truncated. So we will not be micro timing it. After these respective final legs, both precious metals should see a sizeable retracement.

Locally (India)INR 12,000 levels are decisive for MCX Gold Jun. A push down here confirms further negativity here. MCX Silver Jun key levels lie at INR 24,000. And we have not much positive confirmation here too.
In conclusion, we are indeed at key junctures for Gold and Silver and global markets. But in any case, it’s not the metals that are insane, but we the humans.

In his book, The power of Gold, Peter Bernstein starts with a story of a man on a voyage with his entire wealth in a large bag of gold coins. A terrible storm and a call to abandon the ship prompted the man to jump overboard strapped to his bag of gold. He promptly sank to the bottom of the sea. And so the narrator asks, “Now, as he was sinking, had he the gold? Or had the gold him?“