Parameter name: request
Error in deserializing body of reply message for operation 'Translate'. The maximum string content length quota (8192) has been exceeded while reading XML data. This quota may be increased by changing the MaxStringContentLength property on the XmlDictionaryReaderQuotas object used when creating the XML reader. Line 1, position 9028.
Read below the end of this column for the disclaimer. (I hate cluttering up the front end of this post by splattering that mess across the “above the fold” part of this post).?
With all the revolutionary and violent human activity happening across North Africa and the Middle East, I finally saw the scary article published on Tuesday regarding crude oil. The article, published by Bloomberg quoting Nomura Securities, stated that it was possible that $220/barrel oil was possible if Libya and Algeria left the oil markets because of civil war or violent protests against the ruling authorities in those countries.?
What I want to do today is to show how simple Fibonacci extensions can be used to measure the rationality of such claims using fairly simple A-B-C-D extensions that assume that price symmetry can hold (that is, the length of A-B would in essence equal to C-D, with C-D extended into the future. Take a look at the monthly chart for CL #F (which is of NYMEX crude oil futures continuous contract prices). I decided to use this as the bench mark so that I could do an easy historical expansion of price action. As one can see, the perfect alignment of price symmetry would put crude oil somewhere near $180-185 a barrel. If, however, the price were to break above the typical 1.272 extension of the A to B segment (measured from the lows in 1999 and taken to the highs of 2008), that target would indeed be $232/barrel. From the standpoint of how I calculate my price projections for crude oil, Nomura Securities estimates are indeed rational in my mind. That is, it is NOT impossible, and is in fact to some extent probable that oil prices could reach $232 dollars in the future (and probably not to extremely distant future) particularly if world events got really crazy.? Instead of getting my tin foil hat out and dialing into the fear factor radio and TV programs by highly compensated nighttime radio hosts or syndicated multimedia ‘ghost-written book’ sellers, I am placing a bounded range upon what the worst case scenarios might be.?
Is $232 per barrel crude oil LIKELY? I cannot say for certain. In early 2008 I had calculated that we would see $187 per barrel oil, but, as the mortgage and banking crisis killed demand, oil only made it to $147 per barrel. But again, was it not right to have that outbound target as a possibility?. I think so. It was at that time that I decided to purchase a Prius (not because I am a huge environmentalist, but because I wanted to protect the green in my wallet).? Because the longer term pattern has held up, I think my ability to forecast pricing allowed me to make a very good decision. The forecast did not have to be perfect to put me in the right ball park. As traders, investors, and consumers, that is about all we can hope for. The rest is handled by risk management.
Let?s extend this exercise to the XRB (which is the NYMEX futures contract price for unfinished gasoline. I could get into a huge discussion of what it is, but basically it is unleaded gas without any enhancement of MTBE or ethanol). If you want to study it further for pricing action, knock yourself out, starting right here. I invested about an hour looking though the spreadsheets provided by the United States Energy Information Administration (EIA). Their website is a data goldmine that individuals who are interested in tracking energy information can begin good research.?
What about these wholesale prices? Take a look at the monthly XRB continuous contract futures chart. Well, using price symmetry, one can realistically see that the wholesale price of unfinished gasoline could hit roughly $4.10. Add 40 cents or more for processing, transportation, and retail margin, and you would get around $4.50 at the pump. A standard 1.272 extension from the previous (and all time high) of 3.63 would put you at $4.53. Add your minimum 40 cents to that figure for the price at the pump and there you are just under $5 a gallon ($4.93 roughly). At the extreme, we could see 5.67 a gallon on the unfinished gasoline (at the 1.618 extension). Add the 40 cents minimum to that, and you have your six bucks a gallon gasoline ($6.07).?
Because I have done my homework to bound the possible extremes, now I can laugh at any Senator, Congressperson, or other political sack of sushi (PSOS)? (you thought I was going to use profanity, didn’t you?) tells me about fear mongering about prices, I now know what the reality could be. Now, whether or not the PSOS knows what he or she is talking about is another thing, but at least I have a ballpark idea of near-term worst case scenarios.?
The future for cheap gasoline prices does indeed look bleak, but knowing this information should allow adult supervision in industry, politics, and on Main Street to begin to hone non-political rational solutions to these problems. We can solve them (and in fact we have ALL the resources we need to combat and fix these problems). What we need is leadership to get us there. That, my friends, will have to come through us. If we have to flush every standing politician in this Senate, Congress, and Executive Branch again and again at the ballot box to do it, that is what we have to do.? If we do not do this and get real representation, then we are going to suffer much over the coming months and years. The same old blind and bland rhetoric, whether it comes from entrenched politicos or the so-called “Tea Party Movement” (which to my mind looks pretty weak presently, though the term is young, in the midst of its leadership), will not get us where we need to go.?
Enough of the politics though, you can see that the problems with energy are real, and that, in the case of the news story presented by Bloomberg, the data presented is indeed rational though at the extreme end of estimates. That kind of rational technical analysis can help traders and investors see where the bounds of reality are, and how to use that information for profit.?
Ok, let?s drag out the lawyer crap again…?
THE RISK OF LOSS IN TRADING COMMODITIES, FUTURES, STOCKS AND FOREX CAN BE SUBSTANTIAL. YOU SHOULD THEREFORE CAREFULLY CONSIDER WHETHER SUCH TRADING IS SUITABLE FOR YOU IN LIGHT OF YOUR FINANCIAL CONDITION. IN CONSIDERING WHETHER TO TRADE OR TO AUTHORIZE SOMEONE ELSE TO TRADE FOR YOU, YOU SHOULD BE AWARE OF THE FOLLOWING:?
(1) IF YOU PURCHASE A COMMODITY, STOCK OR FUTURES OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE PREMIUM AND OF ALL TRANSACTION COSTS.?
(2) IF YOU PURCHASE OR SELL A COMMODITY OR STOCK FUTURE OR SELL A COMMODITY OR STOCK OPTION, YOU MAY SUSTAIN A TOTAL LOSS OF THE INITIAL MARGIN FUNDS AND ANY ADDITIONAL FUNDS THAT YOU DEPOSIT WITH YOUR BROKER TO ESTABLISH OR MAINTAIN YOUR POSITION. IF THE MARKET MOVES AGAINST YOUR POSITION, YOU MAY BE CALLED UPON BY YOUR BROKER TO DEPOSIT A SUBSTANTIAL AMOUNT OF ADDITIONAL MARGIN FUNDS, ON SHORT NOTICE, IN ORDER TO MAINTAIN YOUR POSITION. IF YOU DO NOT PROVIDE THE REQUIRED FUNDS WITHIN THE PRESCRIBED TIME, YOUR POSITION MAY BE LIQUIDATED AT A LOSS, AND YOU WILL BE LIABLE FOR ANY RESULTING DEFICIT IN YOUR ACCOUNT.?
(3) UNDER CERTAIN MARKET CONDITIONS, YOU MAY FIND IT DIFFICULT OR IMPOSSIBLE TO LIQUIDATE A POSITION. THIS CAN OCCUR, FOR EXAMPLE, WHEN THE MARKET MAKES A ?LIMIT MOVE.??
(4) THE PLACEMENT OF CONTINGENT ORDERS BY YOU OR YOUR TRADING ADVISOR, SUCH AS A ?STOP-LOSS? OR ?STOP-LIMIT? ORDER, WILL NOT NECESSARILY LIMIT YOUR LOSSES TO THE INTENDED AMOUNTS, SINCE MARKET CONDITIONS MAY MAKE IT IMPOSSIBLE TO EXECUTE SUCH ORDERS.?
(5) A ?SPREAD? POSITION MAY NOT BE LESS RISKY THAN A SIMPLE ?LONG? OR ?SHORT? POSITION.?
(6) THE HIGH DEGREE OF LEVERAGE THAT IS OFTEN OBTAINABLE IN COMMODITY OR STOCK OR FUTURES TRADING CAN WORK AGAINST YOU AS WELL AS FOR YOU. THE USE OF LEVERAGE CAN LEAD TO LARGE LOSSES AS WELL AS GAINS. IN SOME CASES, MANAGED COMMODITY, STOCK OR FUTURES ACCOUNTS ARE SUBJECT TO SUBSTANTIAL CHARGES FOR MANAGEMENT AND ADVISORY FEES. IT MAY BE NECESSARY FOR THOSE ACCOUNTS THAT ARE SUBJECT TO THESE CHARGES TO MAKE SUBSTANTIAL TRADING PROFITS TO AVOID DEPLETION OR EXHAUSTION OF THEIR ASSETS.?
THIS BRIEF STATEMENT CANNOT DISCLOSE ALL THE RISKS AND OTHER SIGNIFICANT ASPECTS OF THE COMMODITY, EQUITY, OPTIONS OR FOREX MARKETS. YOU SHOULD THEREFORE CAREFULLY STUDY COMMODITY TRADING BEFORE YOU TRADE.?
TRANSACTIONS ON MARKETS LOCATED OUTSIDE THE UNITED STATES, INCLUDING MARKETS FORMALLY LINKED TO A UNITED STATES MARKET MAY BE SUBJECT TO REGULATIONS WHICH OFFER DIFFERENT OR DIMINISHED PROTECTION. FURTHER, UNITED STATES REGULATORY AUTHORITIES MAY BE UNABLE TO COMPEL THE ENFORCEMENT OF THE RULES OF REGULATORY AUTHORITIES OR MARKETS IN NON-UNITED STATES JURISDICTIONS WHERE YOUR TRANSACTIONS MAY BE EFFECTED. BEFORE YOU TRADE YOU SHOULD INQUIRE ABOUT ANY RULES RELEVANT TO YOUR CONTEMPLATED TRANSACTIONS AND ASK THE FIRM WITH WHICH YOU INTEND TO TRADE FOR DETAILS ABOUT THE TYPES OF REDRESS AVAILABLE IN BOTH YOUR LOCAL AND OTHER RELEVANT JURISDICTIONS.?
It is also quite possible that Buffalo-Carolina, Inc. or its partners may take positions IN DIRECT OPPOSITION to the opinions stated in this blog post based on its own risk analysis and based on the timeframe in which the trade is being made. THIS BLOG POST IS PROVIDED FOR INFORMATIONAL AND EDUCATIONAL PURPOSES AND IS NOT A SOLICITATION TO TRADE OR A DIRECT TRADING RECCOMENDATION.
No comments:
Post a Comment