Posts Tagged: ‘markets’

Trading the US and UK Crude Oil Markets

May 16, 2012 Posted by admin

The increasing strength in world economic data does not seem to be translating, just yet, into more demand for crude. While ‘peak oil’ is a phrase on everyone’s lips it must be said that production from many parts of the globe is currently artificially constrained.

Producers seem willing to turn on the taps above $75, as a sort of profitable-commitment to world growth. While everyone blamed the financial institutions for the collapse in the global economy the impact of $147 per barrel of oil was not exactly a helpful factor.

Looking at the day-to-day trend more closely, oil looks to have found a ceiling as it struggles to get beyond the $80 level.

Whenever there is any strength in the US Dollar that has naturally led to weakness in oil prices as investors close positions, very much a flight from risk.

Strength in the equity markets and weakness in the Dollar normally translates into rising Oil prices. Although we are still seeing some good market rallies, it seems that dealers are less confident than in times past.

The failure to break permanently above $80 may be worrying the Crude Oil bulls a bit as all the normal impetus required seemed to be in place. If the Dollar starts to strengthen, unlikely as it might seem, we may find that dealers are pressuring the support levels again rather than the resistances.

Since the highs at $82 in the US WTI Oil contracts in October 2009 we have had a series of attempted rallies, all of them failing at lower and lower levels. Looking at the oil charts, we now have a very nice falling-trend-line-top to aim for.

Should we close above the trend line there may well be a reaction move to new highs. But, and there is always a ‘but’, the longer we remain below the trend easier it will be for the bears to drive prices lower.

So what should an investor look to do? I prefer to trade the oil markets through spread betting. Note though, there are downsides to all forms of investing and with spread trading you need to be careful because you can lose more than your initial investment.

On the plus side though, there is no capital gains tax, no stamp duty and no income tax on spread betting*.

Also, an interesting benefit is the number of markets that you can trade. Spread betting firms often offer thousands of markets from European and US shares to gold and Dollar/Sterling currency rates. Naturally you can trade both US and UK crude oil spreads.

With the volatile markets like oil, being able to short a market provides interesting opportunities. You do not have to speculate on markets to go up. If your research leads to you think the price of crude oil will go up, you can, of course, bet on it to go up. However, if you think that oil will go down you can bet on it to go down.

It is important to note though that spread bets carry a high level of risk to your capital so you should only speculate with money you can afford to lose. Like the adverts say, before trading, please ensure that spread betting matches your investment objectives. Make sure you familiarise yourself with the risks involved. If necessary seek independent advice.

* Based on current UK tax law, if you pay tax in another jurisdiction then tax law may vary.

Robert Thomas is a financial journalist and a commodities spread betting writer offering strategic views on a range of financial markets.

Article Source:http://www.articlesbase.com/investing-articles/trading-the-us-and-uk-crude-oil-markets-1584632.html

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Dubai Drops a Turkey on Global Markets! November 27, 2009

December 13, 2011 Posted by admin

Being Street Smart

Sy Harding

Dubai Drops a Turkey on Global Markets!  November 27, 2009.

This was shaping up to be such a calm and enjoyable Thanksgiving week.

A lot of important economic reports were crammed into the first three days of the week. Most of them provided positive surprises, supporting the scenario of a nicely improving economy. It wasn’t good that the economic recovery in the third quarter wasn’t as strong as previously reported, with 3rd quarter GDP being revised down to 2.8% from the previously reported 3.5%.

However, other economic reports included that new unemployment claims fell by 35,000 the previous week (to the lowest level in 13 months); existing home sales shot up 10.1% in October; new home sales rose a better than expected 6.2%; home prices rose again in October; and consumer confidence was up again. The stock market was following its tradition of usually providing a positive Thanksgiving week, closing up each of the first three days of the week.

What a nice backdrop for the beginning of a long and relaxing Thanksgiving holiday weekend in the U.S., with the market closed Thursday and open only half a day Friday, and a three-day Islamic holiday in much of the Middle-East,

However, Dubai World, Dubai’s government owned ‘sovereign investment company’ stuffed the Thanksgiving turkey with a bombshell announcement that gave many investors indigestion before the bird was even carved.

As everyone is well aware by now, Dubai World announced a plan to delay payments on its global debts for six months. Dubai acknowledged that it realized how global markets would react, but will not provide more details until next week, for which it is being accused of irresponsibility and ineptitude.

Stock markets in Europe, open at the time, plunged an average of 3.2%. When Asian markets opened Thursday night they plunged between 3% and 4.8%. Dow futures were down more than 300 points overnight Thursday before improving some by Friday morning. But even so, when the U.S. market re-opened Friday morning the Dow was down 230 points in less than five minutes.

Meanwhile, the U.S. dollar and Treasury bonds soared as safe havens, while gold, oil, and most commodities plunged along with stock markets.

The Dubai announcement is generating enough ghosts, goblins and things that go bump in the night to remind me of Halloween rather than Thanksgiving.

Investors are worried that a default on its debts by a government-owned ‘sovereign investment company’ will create a ripple effect through global financial markets. Most of Dubai World’s debts are related to its massive commercial real estate developments in Dubai, as well as mortgage-debt on its large global real estate investments.  Most readers will remember the considerable publicity and political debate a few years ago when Dubai World bought the seaport operations of major cities on both coasts of the U.S. It has much more quietly acquired other large holdings around the world. Freezing its debt payments cannot help but cast a pall over global banks already experiencing rising defaults on commercial loans and mortgages, perhaps leading to even less willingness to make loans.

However, the initial reactions may have been overdone.

Dubai’s total debt is estimated as between $60 and $80 billion, large in relation to the country’s GDP of $75 billion. But, since any losses would only be some percentage of that, defaults spread globally could be quite easily absorbed, not likely on their own to create a new global credit crunch.

The danger of course is that fear could cause a ripple effect in financial markets similar to the aftermath of the failure of Lehman Brothers last September, a panic by investors to get out of all investments without discrimination.

We will have to wait and see. It was encouraging that after plunging more than 3% in kneejerk reaction on Thursday, European markets closed up on average of more than 1% on Friday. Meanwhile, the U.S. market, which was closed on Thursday, had a less panicked reaction than the rest of the world when it opened on Friday, closing down ‘only’ 1.7% on the day. It also almost salvaged a traditional positive Thanksgiving week, the Dow down only 9 points, or 0.1% for the week, and the S&P 500 exactly unchanged for the week.

However, the Dubai announcement did ruin what had promised to be an unworried weekend for investors, and adds considerable importance to next week. Retailers reports of Black Friday sales, and anticipation of the important employment reports due out next week, may take a backseat to renewed debate over the financial foundation of the fledgling economic recovery.

Sy Harding is president of Asset Management Research Corp, publishers of the financial website www.StreetSmartReport.com, and the free daily market blog, www.syhardingblog.com.

Sy Harding is CEO of Asset Management Research Corp., author of 1999′s Riding the Bear and 2007′s Beat the Market the Easy Way, editor of www.StreetSmartReport.com, and www.SyHardingblog.com.

Article Source:http://www.articlesbase.com/investing-articles/dubai-drops-a-turkey-on-global-markets-november-27-2009-1513774.html

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The U.S. Government provides inside information in the commodity markets

January 2, 2010 Posted by admin

By Floyd Upperman, Commodities Trading Expert

The U.S. Government provides inside information in the commodity markets

The U.S. government publishes a weekly report called “Commitments of traders” or “COT” which provides a very unique view of the futures and options market from the inside looking out. 

The Commodity Futures Trading Commission (“CFTC”) is the U.S. government agency responsible with policing and regulating trading on U.S. futures and options markets. The agency keeps track of all trading activity that takes place in these markets. The CFTC’s power and authority to oversee all trading activity gives it unique access to inside information in regards to the identities of market participants and their positions.  This information in the hands of futures and options traders can be extremely powerful.  Many people believe this information is heavily guarded and kept out of reach to individual traders, and in most countries that is indeed the case, but not in the U.S. 

The CFTC is mandated to keep the marketplace fair for all participants, big and small, and to prevent price manipulation from taking place. To achieve this, the CFTC releases certain information to the public on a weekly basis. This information is contained in the Commitments of traders (“COT”) report. The COT contains a summary of all positions held by the largest market participants. Making this data public helps to provide market transparency and gives the public a certain ability to police the markets as well. In addition to that however, it also gives traders access to a powerful tool. It helps to level the playing field between large and small speculators, though that may not be the intended effect. Having access to weekly changes in positions held by large commercial producers, processors, and users of the world’s commodities provides the little traders with a wealth of information that can never be obtained through any price indicators!

The weekly COT data provides individual traders with inside information regarding changes in hedging activities by commercial producers as well as speculative activity by the world’s largest money managers and swap dealers. The CFTC releases all of this information to the public weekly via the Commitments of Traders (“COT”) report. 

It still amazes me how few people actually know about this report. And of those who know about it, few really understand the information and know how to put it to use. I’ve spent the last fifteen years studying this data and building entire trading strategies around this information. Recently (2009) the CFTC has begun to improve the report and is now even breaking down positions further in an effort to provide greater clarity into the individual market participants.

I am thrilled that that the U.S. government provides this wonderful service (no other government in the free world provides such a service) and yet I am also still puzzled how few people know the report exists. If you are trading futures, an examination of this report is like turning on the lights in a dark room! The positions are all revealed. The report provides a detailed breakdown of all positions and discloses which market participants (by category) are holding the positions. Amazing!

In 2006 the CFTC began a pilot to provide greater clarity of the commercial category, which had begun to change due to new trading practices (pension funds and swap dealer activity). To address these changes the CFTC began releasing a supplemental report called “CIT” or commodity index trader report in twelve agricultural markets. The CIT report discloses the positions of commercial producers and commercial consumers on a weekly basis. These large commercial institutions utilize the futures market to hedge their cash exposure in the underlying physical markets. For example, an energy consumer (e.g. airliner) may use the futures markets as a form of insurance; to lock in the price they pay for their energy consumption in the future. This is called “hedging” and it reduces a business’s risk to future market fluctuations.

An airline which consumes jet fuel can use the futures market to lock in the price they pay for their fuel over the next five years. This hedges their exposure to the risk of sharply higher prices in the next five years. If an unforeseen event were to occur which causes fuel prices to sky-rocket, the company would not have to worry as they would have their price secured for a predetermined period (in this example five years). These commercial consumers and producers are widely considered to be the most knowledgeable group of traders in the futures markets.

The Trading Groups in the COT Report

 The commercial entities typically know more about the true supply and demand than any other trading group. There are two other categories of traders in the markets and their positions are also disclosed in the COT report. These are Large trader (managed money) positions and small speculators. The large traders are usually funds, such as a hedge fund, which typically use price indicators such as trend following techniques combined with fundamental information. What is interesting here is that most of the fundamental information that gets reported to the government (such as crop reports) all comes from the commercial traders. Thus, that’s why the commercials are widely considered to be the most “knowledgeable” group in the markets.

The COT report is the kind of information you’d be happy to receive once in a lifetime, yet few people are aware that the U.S. government actually publishes this information on a weekly basis. 

This information has provided the public with a ‘heads up’ to massive movement in and out of various futures markets, including the U.S. stock market. Consider the Nasdaq stock index at the height of the internet bubble at the turn of the last century. When the Nasdaq was trading around 5000 (its all-time high at the time) the COT report showed the commercial traders were actually selling off all of their long positions in the futures market and in a little over a weeks’ time had accumulated a record size short position in Nasdaq futures!

This article is an excerpt from the free e-book Slipstream Wealth. Read the full chapter in the free e-book Slipstream Wealth downloadable at http://www.slipstreamwealth.com

Floyd Upperman is recognized as the leading expert and analyst of Commitments of Traders (COT) data. He is the author of the highly recognized commodity trading book “Commitments of Traders” and is one of the world’s foremost authority on this long neglected subject. Read his full article at http://www.slipstreamwealth.com

Article Source:http://www.articlesbase.com/investing-articles/the-us-government-provides-inside-information-in-the-commodity-markets-1642387.html

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