Nymex Crude Recap 3/26/12
Futures Activity:
The big market mover today was Ben Bernanke's statements this morning that the current job environment needed a lot of work. He indicated further accommodation would be forthcoming if necessary. Commodities and stocks rallied while the Dollar sold off. The metals especially appreciated the comments as Gold, Silver, Copper and Platinum all reacted strongly to his comments. The Aussie Dollar also spiked.
However, the market that didn't get the news was Energy. Natural Gas was lower, but that market is dealing with its own oversupply issues. Crude was the big surprise today, doing almost nothing on the news. It spent the day in the middle of a $1.13 range. Last print as of this report is $106.92.
This could easily be interpreted as bearish. Bullish QE3 type news comes out, Oil doesn't care, Oil sells off tomorrow. This could happen, but we don't think so. We choose to put more weight on the technicals at least for the next 24 hours.
Technicals
The daily chart shows an extremely long bull flag now, which gives some concern for the bull case. But if you focus on the weekly chart you will see the last 3 weeks have long wicks underneath their candles. This is bullish as the market is "running way" from buying. The weekly stochastics are far from over-bought as well. conclusion: Moderately Bullish
Our focus is more on volatility as the best indicator as to when we get involved. Today our triggers to Buy/ Sell are $108.27/ $105.73. We are friendly to the market, but will not commit either way until one of those numbers is breached on a settlement basis.
Options
Twenty day realized volatility as stated last night is on its lows going back to the life of the contract at 8.0%. Twenty day implied vol is trading approximately 24.0%. This spread is untenable. It exists in part due to the Iranian fears and the ability to limit risk using long options for strategies instead of futures. There are no natural sellers to step into the void. We do not count ourselves among them either. That said, we will be option buyers on our breakout system expecting convergence to happen with realized vol coming up to meet implied. If it doesn't happen, we are staying away.
Crude Oil
Month Strike Bid Offer Mid Vol. Change
K12 10700 510 530 24.29% -0.10%
M12 10750 835 855 25.93% -0.49%
N12 10800 1060 1085 26.38% -0.32%
Q12 10850 1260 1285 26.47% -0.46%
U12 10850 1445 1470 27.03% -0.19%
V12 10850 1595 1625 27.06% -0.28%
X12 10850 1750 1780 27.46% -0.19%
Z12 10900 1865 1895 27.42% -0.17%
Brent (OS)
Month Strike Bid Offer Mid Vol. Change
K12 12550 500 530 24.58% 0.39%
M12 12500 920 950 26.20% -0.23%
N12 12450 1200 1235 26.63% -0.10%
Q12 12350 1425 1460 27.08% -0.21%
U12 12300 1625 1665 27.38% -0.48%
V12 12250 1800 1850 27.63% 0.01%
X12 12200 1940 2000 27.66% -0.24%
Z12 12100 2075 2155 27.85% -0.26%
Good Luck
