What We're Reading

Had to share this monthly chart of crude oil because I am one that has viewed it bearishly since it broke it's 200 month sma; prior support during the financial crisis. (click chart to enlarge)

Blame it on fracking.  Blame it on OPEC.  Blame it in fuel efficient cars.  Blame it on whatever you wish but just because it was bullish for years, does not mean it will always be the same.

Natural gas has been embraced by the U.S. and continues to grow.  Coal is all but dead; being dropped by one country after the next.  There obviously is no U.S. oil shortage (thank you Bakkens) and our dependency on overseas oil becomes less with each passing day.

Yes they have shut down rigs to cut back on the oversupply but (imo) barring any disruption in production, I see this years move in crude oil as nothing more than back-n-fill.  The 200 month is an interesting overhead obstacle.  And that strong U.S. Dollar?  No, that not going to help it either (again barring a disruption).

It's not a bear mark

Seasonal demand is just what it sounds like.  What seasons certain things see higher demand such as natural gas for A/C and heating or gold for jewelry manufacturing and sales.  With that in mind I thought I'd flip through our Seasonal Charts for hints of possible trades here and in the months approaching.  My unscientific belief has been that larger players begin to buy long futures contracts before the season hits so I begin to watch for divergences and support in charts.  Click on the charts below for a better view.  Let's take a look:

Consumer Staples Which can be traded via $XLP or one of it's components are items which consumers feel they cannot do without.  They're considered non-cyclical, meaning that they are always in demand, no matter how well the economy is performing (or not performing).  Think diapers $KMB, personal hygiene $PG, discounters like $WMT, beverages such as $KO, cigarettes $MO and $PM, pharmacies such as $WAG and $CVS.  There are many other names, b

Crude oil today with a draw instead of a build and Summer driving season soon to begin.  It is what it is, bullish $USO.

[Edited October 15, 2012 to add Reuters link and Citicorp PDF ]

Natty outperform black gold?  Texas tea?  Yes it's happening and the intriguing part is it could continue.  It's unimaginable, unheard of, pure heresy but it at the same time, appears to be the Captain Obvious trade to these novice aging eyes.  While I'm no guru and don't begin to know it's intricacies, allow me to explain from a technical analysis and common sense point of view.  [CLICK ON ANY CHART TO ENLARGE]

#1  Falling crude oil demand in developed countries continues and this decline is expected to continue going forward......while increasing demand is expected in developing countries however I doubt quite a rapid increase given the status of global economies at this point in time.  Main point however, is that the U.S. itself is not expecting to increase its demand any time soon.

On a side note, the EIA expects more U.S. homes to use more heating fuels this Winter. [See report] BP, Shell and others are pushin

"I've just completed a new research paper that surveys the history of the oil industry with a particular focus on the events associated with significant changes in the price of oil. Here I report the paper's summary of oil market disruptions and economic downturns since the Second World War. Every recession (with one exception) was preceded by an increase in oil prices, and every oil market disruption (with one exception) was followed by an economic recession."

The table above itemizes the particular postwar events that are reviewed in detail in my paper. The paper also provides the following summary discussion:

The first column indicates months in which there were contemporary accounts of consumer rationing of gasoline. Ramey and Vine have emphasized that non-price rationing can significantly amplify the economic dislocations associated with oil shocks. There were at least some such accounts for 5 of the 7 episodes prior to 1980, but none since then.

The third column indicate