R.N. Elliott masterfully combined security price movements with human sentiments to come up with a technical charting technique now known as the Elliott Wave Principle. His thesis is simple. Prices react not only to supply and demand fundamentals, but also to greed and fear psyche.
There must be more than a few high volume crude traders following the Elliott Wave patterns this year, as text book waves are clearly marking crude's price direction.
Elliott Wave theory likens price movements to ocean tidal patterns. Price movement flows are charted in 5 low and high tide ebbing patterns. Pretty cool. The problem is that in the short term this writer has not been accurately able to see the beginning and end of each wave. However, longer term the picture evolves more slowly and clearly. And thus more useful for trading setups.
This week crude peaked at high tide wave B at $88.8 (78.6% retracement) and consistently withdrew or ebbed off high tide wave B. This sets up a larger out going tide C move lower. $85 is a key congestion support area going back to May 2010. A break below support brings crude down to lower $80's.
House traders will be carefully monitoring this out going C wave tide to try and hop on the low tide and ride it up shore on wave D. Told you this was cool stuff.
Last week the news was full of stories on higher crude prices. These stories are likely to be true in the longer run, but for now crude appears to be obeying R.N. Elliott's Wave thesis for a bit of a pullback.
Saturday, November 13, 2010
Saturday, November 6, 2010
Ethanol and the Divided US Congress
Ethanol as an energy source has always needed government subsidies to exist in the marketplace. Now that Republicans control the House of Representatives, some major ethanol tax breaks for producers and blenders may go away for good in 2011.
In the long run doing away with the ethanol tax benefits will be a good thing. Using our food supply to run our vehicles was never a wise use of limited resources. And hopefully more research will be devoted to more productive and cost efficient alternative energy sources.
Will the recent increase in allowable ethanol blending formula to 15% have any affect on helping the ethanol production industry stave off imminent layoffs? Not anytime soon. Vehicle warranties are voided if gasoline is used with more than a 10% ethanol blend. So until vehicles adapt to the higher blends, gasoline marketers will not take the chance on selling 15% ethanol blended gas until they are comfortable law suits will not follow this new product.
With an expected decrease in US corn harvest, falling US dollar, and slowly rising US fuel demand, ethanol is likely to hold spot price support and according to Morgan Stanley, will average $2.59 per gallon next year. Ethanol like all other commodities will likely continue on the bid supported by the $600 billion Fed bond purchasing.
In the long run doing away with the ethanol tax benefits will be a good thing. Using our food supply to run our vehicles was never a wise use of limited resources. And hopefully more research will be devoted to more productive and cost efficient alternative energy sources.
Will the recent increase in allowable ethanol blending formula to 15% have any affect on helping the ethanol production industry stave off imminent layoffs? Not anytime soon. Vehicle warranties are voided if gasoline is used with more than a 10% ethanol blend. So until vehicles adapt to the higher blends, gasoline marketers will not take the chance on selling 15% ethanol blended gas until they are comfortable law suits will not follow this new product.
With an expected decrease in US corn harvest, falling US dollar, and slowly rising US fuel demand, ethanol is likely to hold spot price support and according to Morgan Stanley, will average $2.59 per gallon next year. Ethanol like all other commodities will likely continue on the bid supported by the $600 billion Fed bond purchasing.
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