The Market Financial » USO

Falling U.S. Dollar Inflates Markets

Nicholas Santiago — Wed, 25 Jan 2012 21:03:30 +0000

This afternoon, the Federal Reserve Bank announced that they will keep the fed funds rate at zero to a quarter percent until the end of 2014. This statement by the central bank has caused the U.S. Dollar Index to plummet intra-day. As we all know by now, when the dollar dips the markets flip. Everything in the market has rallied higher. Gold, silver, copper, oil, and just about every other commodity has soared since the announcement. The SPDR Gold Shares (NYSE:GLD) have jumped higher by $4.19 to $166.21 a share. Gold is the ultimate barometer of inflation and it will usually lead the stock market.

As long as the U.S. Dollar Index continues to decline these markets are likely to inflate. Should the U.S. Dollar Index eventually find a low and rebound that is when the stock and commodity markets will pullback and decline lower. Until that time the inflation rally is alive and well.

Nicholas Santiago
InTheMoneyStocks.com

Mixed Data As Markets Ready For Next Major Move

Nicholas Santiago — Thu, 12 Jan 2012 17:46:42 +0000

The stock markets are flat today after mixed data across the globe. Overnight, China gave the futures a push after reports showed inflation cooled slightly. The consumer price index rose 4.1% in December in China. Overnight, the Dow Futures had been higher by over 100 points. This morning the ECB disappointed the markets when they held interest rates at 1%. Traders had been hoping for a more dovish ECB. At 8:30am ET, Jobless Claims were reported at 399,000. This was a jump from last week and back to that scary 400,000 level. The futures dropped back to the flat line which is where the markets are trading now. The SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $129.01, -0.24 (-0.19%).

This is the second flat day in a row after the Tuesday rally. The SPY is still stuck below the resistance level of $129.50. While into resistance, this light volume action and consolidation still speaks of another push higher.

Natural gas continues to be pounded. The United States Natural Gas Fund, LP (NYSEARCA:UNG) is down another 3% on the day. This dramatic fall continues with no bottom in sight. Oil on the other hand continues to grind higher. The United States Oil Fund LP (ETF) (NYSEARCA:USO) is trading at $39.25, +0.35 (+0.90%). It is very rare to see this major divergence in energy commodities. At some point there will be a snap back in natural gas. It is most likely nearing. Watch for news out of the government on incentives to switch to natural gas. It has long been talked about and most likely near.

Gareth Soloway
InTheMoneyStocks.com

Forget Supply And Demand, Trade The Central Banks

Nicholas Santiago — Tue, 10 Jan 2012 15:59:52 +0000

Does supply and demand even matter any longer? Just think about it for a minute, it is really the central bank’s policy that really moves the market. Just look at Alcoa (NYSE:AA) today, the company missed its earnings estimate and the stock is still inflating higher after the Chinese government basically said that they will push investors to buy stocks. This stuff can’t be made up. This action by the Chinese government comes as the Shanghai Index was plummeting throughout most of 2011. Last night, the Shanghai Index rallied higher by nearly 3.0 percent, this important stock index has rallied higher by more than 5.0 percent in two trading days. The point is that the central banks can move the markets almost at will.

The central bank that controls the monetary policy of the United States is called The Federal Reserve. In late 2008 this central bank initiated a massive bond purchasing programs called quantitative easing. That has helped to inflate and revive stock and commodity prices over the past three years. It is important to note that the key overnight bank lending rate called the federal funds rate has been held at zero percent since December 2008. That means that the large financial institutions such as J.P. Morgan Chase & Co (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), Bank of America Corp (NYSE:BAC), and Citigroup Inc (NYSE:C) can borrow money at zero percent. Who would not like to have free money available to them? These banks can buy stocks, bonds, commodities, and even operate a high interest rate credit card business. This low rate is the reason why interest rates on a savings account are so low. Once again, the central banks move the markets and supply and demand is having less and less effect.

The European Central Bank (ECB) has now created a new lending facility for the struggling and European banks. The ECB is now lending the banks money at 1.00 percent for three years. This is another way to help keep these banks afloat. Once again, failure has been avoided by throwing more capital (money) at the problem.

On the surface it seems that the central banks could simply just keep artificially inflating the markets. The problem with this method is that it creates inflation. This morning, the price of light sweet crude is around $103.00 a barrel. Food prices soared sharply higher around the world in 2010 after the Federal Reserve implemented its $600 billion quantitative easing program. Simply put, inflation is created by all of this easy money creation. Perhaps this is the trade off that the central banks believe we all need in order to have a functioning economic system.

The one thing we must always remember is that for every action there is an equal but opposite reaction. For the time being, we shall enjoy the inflation rally. In my opinion, these days it seems that it is better to forget supply and demand and actually trade the action by the central banks around the world.

Nicholas Santiago
InTheMoneyStocks.com

Stock Market Action: Natural Gas On Radar

Nicholas Santiago — Wed, 04 Jan 2012 18:01:03 +0000

After some early selling, the markets have floated back to the positive side. This is not surprising as light volume plays a key role in an up market. In addition, the S&P 500 broke out of a triangular range yesterday. This means further upside in the next week is likely. The SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $127.58, +0.09 (+0.07%). The action today is known as consolidation. This is also a bullish signal for the next week with an upside SPY target of $129.50.

Commodities are mixed today. Oil is slightly lower while gold is still moving higher. The United States Oil Fund LP (ETF) (NYSEARCA:USO) is trading at $39.64, -0.05 (-0.13%) while the SPDR Gold Trust (ETF) (NYSEARCA:GLD) is trading at $156.99, +1.07 (+0.69%).

The standout commodity of the day is natural gas. After collapsing almost daily, it is inching higher. A bottom is close if not already at hand. The United States Natural Gas Fund, LP (NYSEARCA:UNG) is trading at $6.63, +0.16 (+2.47%). This may be the commodity of 2012 as it is likely the U.S. government will create many new incentives for its use in cars and trucks. With the energy source trading around $3.00, the risk reward is very solid to the upside.

Gareth Soloway
InTheMoneyStocks.com

Oil Breaks Out And Is Positive For Stock Market

Nicholas Santiago — Tue, 03 Jan 2012 19:16:59 +0000

The stock market continues to rejoice in the new year. The S&P 500, Dow Jones Industrial Average and NASDAQ are all sharply higher on the day. The upside is being fueled by optimism on the global economy. This is mainly stemming from Europe. As the Euro gains traction, the Dollar has fallen sharply. The weakness in the Dollar is helping commodities push higher. Oil is having a monster day with the United States Oil Fund LP (ETF) (NYSEARCA:USO) trading at $39.45, +1.34 (+3.52%). This big jump in oil is partly due to the weak Dollar and optimism on the global economy and also due to issues with Iran. Threats are continuing to be floated from the Iranian military over the Straights of Hormuz.

The higher oil price is actually helping stocks today. Dow Jones Industrial leaders like Exxon Mobil Corporation (NYSE:XOM) and Chevron Corporation (NYSE:CVX) are sharply higher. They are key components of the Dow, thus helping the markets gain.

Gareth Soloway
InTheMoneyStocks.com

Stock Market Rally Could Be Seen On Charts Last Week

Nicholas Santiago — Tue, 03 Jan 2012 17:02:46 +0000

The triangle pattern broke to the upside on the S&P 500 today. The SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $128.21, +2.71 (+2.16%). This breakout was expected based on the bullish pattern formation seen last week. In addition, new money flow was likely to enter the market on light volume. The combination of all these factors spelled rally.

January Effect plays are starting to run. What is a January play? These plays are beaten down stocks that are trading near or at their 52 week lows. In December, tax loss selling keeps pressure on them. Once that pressure subsides, the January Effect takes place. They bounce back. A good example of these types of plays are Renren Inc (NYSE:RENN) which started its run last Friday. E Commerce China Dangdang Inc (ADR) (NYSE:DANG) is another dead bottom China play that has seen a major rebound as tax loss selling has come to a close. Two other plays to watch are Smith Micro Software, Inc. (NASDAQ:SMSI) and THQ Inc. (NASDAQ:THQI). January Effect plays are great ways to start the year off right. The upside potential is huge on these.

Oil is having a big move today on continued concerns with Iran. In addition, global optimism is back in full force. The United States Oil Fund LP (ETF) (NYSEARCA:USO) $39.39, +1.28 (+3.36%).

Gareth Soloway
InTheMoneyStocks.com

$100 Oil Will Eventually Hurt The U.S. Economy Again

Nicholas Santiago — Tue, 03 Jan 2012 15:25:25 +0000

WTI oil has now traded above $90.00 a barrel since late October 2011. While high energy prices used to signal global economic demand and strength; it is still a direct tax on consumers. These days high oil is affected by geopolitical events, weather, and the obvious action in the U.S. Dollar Index. At this time, oil has a war premium built in due to the Iranian threats and sanctions in the Middle East. Since 2008, whenever oil has traded around the $100.00 level for any considerable amount of time it has caused problems for the economy and this time around should not be any different.

Many traders are now starting to watch the United States Gasoline Fund (NYSEARCA:UGA) very closely. This morning the UGA is trading higher $1.37 to $49.69 a share. The UGA has now rallied higher by nearly $5.00 a share since December 16, 2011. Most consumers that do not follow the stock and commodity markets do follow the price of gasoline. When gasoline surges at the pump the U.S. consumer will cut back their spending. It is important to understand that U.S. consumer spending accounts for roughly 70.0 percent of the gross domestic product (GDP) in the United States.

The winter season has just begun and many people will need to start to use more heating oil in order to keep warm. Traders may have noticed that the United States Heating Oil Fund (NYSEARCA:UHN) has begun to trade higher since December 19, 2011 when it traded as low as $31.40 a share. This morning, the UHN is trading lower by 0.08 cents to $32.87 a share. The daily chart on the UHN is forming a sloppy sideways base which could lead to higher prices in the near term for the UHN. Traders should watch the $35.00 level as important daily chart resistance.

High energy prices are a direct tax on all consumers and businesses. This morning, all of the leading energy stocks are rallying sharply higher with oil. While the stock markets are in jubilee mode at the start of the new year it has been high energy prices that ultimately cause the U.S. consumer to pull back on their spending. This economy has been dependent on the U.S. consumer continuing to spend and borrow over the past ten years. Traders and investors must beware that $100.00 oil is problematic for the economy. This morning, WTI oil is trading higher by $3.46 to $102.27 a barrel.

Nicholas Santiago
InTheMoneyStocks.com

Commodities Crash: Buy Levels Revealed

Nicholas Santiago — Wed, 14 Dec 2011 17:37:53 +0000

The markets are down again today. The selling is not massive but it is the third drop in a row. The SPDR S&P 500 ETF (NYSEARCA:SPY) is trading at $121.79, -1.32 (-1.07%). The big driver to the downside today is clearly commodities. Almost every single commodity is dumping sharply. Everything from oil to gold and silver. While these drops are massive, smart investors and traders are starting to look for the buy level.

Oil is coming off a massive run-up recently. The United States Oil Fund LP (ETF) (NYSEARCA:USO) is trading at $36.93, -1.68 (-4.35%). This is a massive drop as spot crude is down well over $4.00 per barrel. Support levels on the USO are tricky because the commodity is still overbought. The first level that looks attractive on the USO is the 50 moving average at $36.35. This level will be a short term oil bounce level but is not a long term buy. The term used to trade this level would be swing trade. The following major support on the USO is $34.50. This would be the longer term hold level.

Gold is plummeting. The SPDR Gold Trust (ETF) (NYSEARCA:GLD) is trading at $153.32, -5.13 (-3.24%). As central banks dump gold and raise cash, pressure on the commodity is strong. In addition, the Dollar of late has surged dramatically higher. This also puts major pressure on the precious metal. The first support level on the GLD is $149.50. After a small bounce, expect the GLD to head to $144.00. This should be a longer term bottom.

Silver, like gold is under major pressure. iShares Silver Trust (ETF) (NYSEARCA:SLV) is trading at $28.09, -1.73 (-5.80%). SLV hit some minor support today at $27.40. This may give it a day or two bounce. However, more downside is likely before all the selling concludes in mid 2012. The next major support on the SLV is $26.10 with the longer term buy level at $24.25.

Gareth Soloway
InTheMoneyStocks.com

Analysis: Solar Stocks Have Reached A Bottom

Nicholas Santiago — Wed, 30 Nov 2011 17:39:09 +0000

The solar sector is finally participating in a rally. Throughout 2011, the solar stocks have fallen, even during great market moves to the upside. The obvious issue has been margin pressure and the problems in Europe. Europe has long been one of the biggest buyers of solar energy. Austerity measures have meant major cutbacks in solar installations. In addition, overproduction of solar cells from China have caused major price cuts. Prices of solar panels have fallen off a cliff in 2011 and amazing earnings growth has turned into major losses for many players. While the fundamentals look gloomy, it appears a bottom is in.

Solar stocks are running higher today headed by First Solar, Inc. (NASDAQ:FSLR) . First Solar is trading at $46.98, +3.17 ($7.24%). Other smaller solar companies have seen major moves in the last few days. One of the highlights would be Canadian Solar Inc. (NASDAQ:CSIQ). Just last week the stock traded as low as $2.07. Today it hit a high of $2.93

Another factor that should help solar stocks rebound is oil. Crude oil is trading above $100 per barrel. The United States Oil Fund LP (ETF) (NYSEARCA:USO) is trading at $38.86, +0.31 (+0.80%). As oil holds over $100, at current prices, solar is an amazing alternative energy. Demand will increase. The increase in demand should shoot solar prices slightly higher which in turn will bring profits back to the sector. Other solar stocks to watch are SUNPOWER CORP CL A (NASDAQ:SPWR) and Trina Solar Limited (ADR) (NYSE:TSL).

Gareth Soloway
InTheMoneyStocks.com

Expect The Wild Swings To Continue

Nicholas Santiago — Wed, 02 Nov 2011 14:42:51 +0000

This morning, the major stock indexes are trading sharply higher. The 150.0 point rebound in the Dow Jones Industrial Average comes after yesterday’s bloodbath decline in all of the major stock market indexes. The daily moves in the stock market have been very dramatic with wide range swings. One day risk is on and the next day risk is off. The trend since August 2011 has been very choppy and sideways. Is there so much uncertainty that traders and investors are not willing to commit capital to this market for more than just a few days, or is there something else moving this market in such erratic fashion?

If traders have not noticed yet the major stock indexes seem to trade inverse to the U.S. Dollar Index. When the U.S. Dollar Index declines everything from Amazon.com Inc (NASDAQ:AMZN) to Rio Tinto plc (NASDAQ:RIO) will inflate and trade higher. Most traders expect the commodity and energy sectors to inflate higher when the dollar declines, however, these days we see the financial, tech, agriculture, transports and consumer staple stocks all rally on the back of any dollar decline. Essentially, every trade is a trade on the U.S. Dollar Index.

Over the past two trading session the U.S. Dollar Index futures (DX Z1) have bounced sharply higher by $2.50 to over $77.50 per contract. During that bounce in the U.S. Dollar Index the highly followed Dow Jones Industrial Average declined lower by 600.00 points in just two trading days. These moves are dramatic by anyone’s standards. This is not your parent’s buy and hold market anymore. Traders should expect these wild swings to continue as long as central banks and countless governments are constantly dabbling in the market place.

Nicholas Santiago
InTheMoneyStocks.com