Follow the Big Money on Oil

Looking for an explanation for the oil move in the latest weeks - look no further than the big money leaving the station. Barchart (www.barchart.com) publishes a Commitment of Trader chart updated on a weekly basis. The latest one is below.

The middle chart is the traditional Commitment of Trader (COT) chart. The green line is what is called Large Spec. These are large banks and money managers. The blue chart in the lower chart  (Disaggregated COT) represent Managed Money (commodity traders or advisers). The charts plot the difference between long and short positions of the various groups. The higher the line, the "longer" one group is. Look what has been happening since early May - big money is getting out of oil. They have been driving the price up since last September and now, they are cashing in. And look at the price since then... Surprise!

The Value of Support and Resistance Lines

The move in oil today is the perfect illustration of why it is valuable to have an idea of where the price will "stick" in the coming hours. Drawing support and resistance line based on previous day prices is the easiest way. The formula for calculating the Pivot Point and the Support and Resistance line is available on the Internet. I have programmed Amibroker to display them automatically in my charts at the beginning of the day. Below is today's price action on the oil future market.

The Pivot Point for the day is in gray, the support lines in red. Resistance lines do not appear as they are above 100. The red circles point out congestion areas and support where you can tell that there was some hesitation on the direction. It is not always that clear cut, but these lines usually offer some guidance!

Dollar Fibonacci Retracement - 5-13-2011

And to match the euro Fibonacci retracement, here is the opposite chart with the dollar using the lows of October and the highs of January as anchors. The red dotted line is a regression channel for 2011 and we are against the top line now!

Euro charts 5-13-2011

Some euro charts to put the latest moves in perspective.


First a regression channel for 2011. We are now at the bottom of the channel which should provide some support.

And now for some Fibonacci lines - using the 2001 low and highs as anchors. As with the regression channel, 1.41 seems to be a good support level. At least temporarily.

And finally, a Fibonacci regression using the previous highs of last October and the lows of January as anchors. Once again, the 1.41 line is significant.

Dollar reaches 50 dma!

The dollar is not at its 50 dma which has been breached last in January! Might be a good resistance point...

Copper - Regression Channel 4/29/2011

Copper is getting close to the lower limit of the regression channel it has been in since last June!

Silver - Resistance Line?

Here is an updated chart with the Fibonacci retracement. This is the same chart I posted yesterday and as predicted, silver is hedging closer to $40. The $39.60 Fibonacci line is holding for the moment, but weakness in the dollar should propel silver over that bar eventually.