Oil Falls 5.4% in Biggest Drop Since 2004
August 23rd, 2008WARNING: This is not a recommendation to buy, sell or hold any financial instrument.
A couple of days ago, during the crank rally in oil and gold, and the sell off of the dollar, I wrote:
These moves look like very technical plays. I’d be extremely careful chasing gold or oil long here. These look like textbook DCBs (Dead Cat Bounces) so far. A better gamble might be to look for good entries on long dollar plays as USDX consolidates and daily oscillators pull back from extremes.
Gold has a VERY hard resistance overhead at $850. As I said, I haven’t sold one gram of my gold through any of this recent nonsense, but when it comes to taking on new positions, I wouldn’t want to try to fight that $850 resistance here.
It didn’t take long for the whipsaw move to set in.
Via: Reuters:
Crude oil prices fell more than 5.4 percent on Friday in the biggest one-day slide since 2004 as dealers turned their focus to rising supply levels and weakening global demand.
A rebound in the U.S. dollar encouraged the sell-off, applying downward pressure across the commodities markets by weakening the purchasing power of buyers using other currencies, dealers said.
The slide adds to a more than 20 percent fall in the price of crude since mid-July and could increase the chance oil cartel OPEC will cut official production limits when the group meets in Vienna on September 9.
U.S. crude fell $6.59, or 5.4 percent, to settle at $114.59 a barrel — the biggest fall in percentage terms since December 27, 2004. London Brent crude fell $6.24 to $113.92 a barrel.
“People who were buying yesterday are taking profits today,” said Peter Beutel, analyst at consultancy Cameron Hanover. “There is also renewed technical selling and talk again of demand destruction. The dollar is strong again too.”
The declines Friday were encouraged by two reports — one showing an uptick in OPEC crude oil output and another showing an expected decline in U.S. travel over the September 1 Labor Day holiday weekend as high fuel prices hit consumers.
Industry consultant Petrologistics said on Friday OPEC oil output was expected to rise in August by 450,000 barrels per day, to 32.95 million bpd, a factor that could further beef up inventory levels in consumer nations.
Meanwhile, the U.S. auto and travel group AAA said that Labor Day holiday travel was expected to fall this year by the largest amount in at least eight years as consumers struggle with higher gasoline prices and airfares.
Concerns high energy costs are taking a toll on global fuel demand have played a big role in oil’s sharp descent from peaks above $147 a barrel in mid-July. But oil prices remain up about 15 percent so far this year.
Kevin, have you ever heard of fellow-New Zealander John Needham’s Daniel Code?
http://www.thedanielcode.com/public/Search_for_the_Danielcode.pdf
I haven’t heard of him, but I clicked the link above and I’ve been reading information related to this for a couple of hours now… (In fact, I think that’s the most time I’ve spent reading about anything submitted in comments before.)
Do you trade these levels with any success?
If you subscribe, does he teach you how to calculate the levels?
Neeham writes a regular column here:
http://www.financialsense.com/asia/danielcode/archive.html
Hi Kevin, I was thinking of taking one of his 2 days training classes (a few grand) at Lake Taupo, which sound incredible, but have not been able to find the time over the last year.
Also, I am not sure if I have the disposition for trading (it took me 3 months of waiting in the knife-battle shorting LEH to squeeze out 4 grand).
If you are serious about trying this after emailing him on the availability/timing of his classes, I can send him the money if you will post your experience with it here.
If it works, I bet readers will be happy to arm you with donations to go into battle.
@GK,
That’s VERY generous of you to offer to pay for the tuition. I’d like to take you up on it, but I wonder just how necessary it would be for me to actually go down there??? It would cost a lot for me to get there and find accommodation for a total of about ten hours of instruction. (NOTE: Becky did give me the green light to go, if necessary! It’s important to check with the boss before hand.)
Clearly, John Needham’s experience is vast and the charts that he’s generating definitely have my attention.
I might try a subscription to his charts to see if I can fathom anything out. It’s $68, but I was about to spend more than that on Amazon books just now!
The main thing is the sequence and the levels, which he generates. I’ve spent about ten years fiddling around with all of the other indicators and multi interval charts, etc. So… If I have his numbers to start with, something could just “click” pretty fast.
Re: the disposition for trading.
The beauty of all of this is that it can remain an intellectual exercise until we build confidence in the tools. When it comes to pulling the trigger for real, simply use small amounts of money and low leverage vehicles at first. There’s absolutely no need to go in too heavy.
You know who should look at this… Dagobaz. I’ll send her an email.
@ pookie
There are a pile of editorials archived here as well:
http://financialsense.com/fsu/editorials/danielcode/archive.html
Kevin, it seems like an excellent idea to trade on paper first. I have no doubt that you can pick this up on your own, obviously. My curiosity is killing me wondering how it well it works.
As the family is the bedrock of civilization, I also agree that it is essential to have Becky agree.
Let me know if you need any logistical support. Let’s rumble!
Kevin, et al — I spent several hours reading/researching DC, as well.
” Your theory is crazy, but it’s not crazy enough to be true. ” — Neils Bohr
Personally, I trade a method that is based on musical notes so who am I to be offering an opinion on anything 😉
My take:
The man is obviously an expert, and also quite literate. His professional reputation is excellent. I have travelled an almost identical path as he has, with the same frustration and have tried everything he has, too, with the same results. 😉
Analyzing his risk/reward ratios and timing entries, I think that his methods would be extremely useful to swing/position traders, not so much for intraday traders. Although he offers a 4 hour chart, as he says, “charts will get out of date rapidly in fast moving markets” … as most of my trades last under 1 hour, I am of the opinion that DC would be of less use for me, in my own trading. However, I do perform analysis of other people’s portfolios, and I think that this might be superb for that.
I have signed up for the 1 month, as well. I would be delighted to post my experiences with it, if you believe it would be helpful.
– cybele
@ dagobaz
Personally, I trade a method that is based on musical notes so who am I to be offering an opinion on anything
Musical notes. That’s definitely one I’ve never heard about before…
Re: DC, that’s great to hear that you’re trying it out. I thought the same thing re: the longer intervals. The drawdown on swing trades in forex are… not tolerable for me. Indeed, I was thinking swing on things like the currency ETFs (very low leverage compared to regular forex) and maybe index etf options.
I was going to say that maybe you can add the DC levels to your intraday charts for your system, but then I thought… Musical notes??? Do you even use charts?
Very curious to hear any additional info about these topics.