Morning Petrospective – October 5, 2011

il prices continued flowing south on Tuesday as traders continued to worry about global economic slowing, a dent in Chinese growth, a stronger dollar as euro-zone investors parked capital in the greenback as a safe haven. Oil prices reached their lowest levels in nearly a year, and that was a trend seen in equities, metals, energy futures and currencies. The DJIA was down 111 points at 3:30 PM, and it was under pressure throughout the trading day. Federal Reserve Chairman Ben Bernanke spoke at length about the economy on Tuesday, acknowledging that the Fed could do more to help the economy … without announcing anything fresh. But, wait, there’s more …

Of course, that was not it. In the final half-hour of trading, equities roared back on bargain-hunting, technical buying, short-covering and value-searching. From 111 points lower at 3:30 PM, the DJIA finished up 153.41 to 10,808.71. Oil prices rallied in after-hours trading late on Tuesday afternoon. The late rally came despite assertions by Bernanke that there will be no QE3. The rally could just be pushing stock quotes back where they belong in terms of quarterly profit results. At least short-term, the late rally seems to have changed the conversation. It prevented equities from closing at a critical technical breakdown point. And, it pushed crude oil back above $77.11, the low seen on September 26^th.

The dollar also dropped steeply against the euro later on Tuesday afternoon. Despite that, the US dollar has built a spectacular longer-term foundation as a major bottom. The dollar could drop for the next several days without even putting a dent in the long-term bottom picture.

But, Tuesday’s equities rally prevented the completion of a long-term flag pattern that would have pointed to a fresh leg lower had the indices finished at their lows for the day, rather than having rallied instead.

Of course, the rally in the euro, the rally in equities, the rally in oil prices – all of these came from bargain-hunting, oversold pressures and short-covering. There was no fresh news that rang a magical bell telling the world the asset sale had ended. Maybe, there was some ‘relief’ that the Fed had decided QE3 is stillborn, dead before arrival. That might have been the bullish chicken on the roof, waiting to fly down to roost for the night. Once the Fed said there would be no QE3, the bears figured they had gotten everything they could on this latest run. Once they started taking profits, the bargain-hunting was open range, free for anyone to scratch and peck among the remains of several days of selling. And, we had just started to see fresh short-selling taking over for long liquidation, meaning that the most urgent selling was over and the source of potentially urgent buying was ripe for stampeding.

FMX Newswire

FMX Newswire is an overnight news summary designed to meet the needs of professional energy traders. The content is to-the point, professional grade and not widely reported in the mainstream media. All sources are professional respected firms and newspapers.

Bentek Energy

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Platts

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Bloomberg

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