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ssSome time back we looked at ACC as a probable breakout candidate but no, the breakout has failed and the "bull run" has been stopped in its tracks! The volume pattern on this weekly chart has been erratic at best. Ok baby, if you don't wanna breakout, then I can't complain, can I

(Stock Talk)

Singapore - Expectations of tightening supply is lifting sentiment in Asia's physical fuel oil market this week, but it remains to be seen whether this strength can be sustained against the weight of a suspect demand outlook.

The global economic slowdown slashed demand for residual fuel in the core marine and power sectors in the first quarter, causing stocks to build up to 21 million barrels as of Wednesday in Singapore, Asia's oil hub.

Supply may tighten in May, however, as the Europe-to-Asia arbitrage window has closed and refineries are expected to produce less fuel oil during the second quarter maintenance season.

"May crude runs are likely to be lower," due to poor margins, an Indian refiner said.

Refineries in several Asian countries, especially those in Japan, plan to reduce crude runs in the April-June quarter by at least 10% on year, as refining margins have been cut by weak distillates demand.

Supply cuts by the Organization of Petroleum Exporting Countries have also made heavy sour crude more expensive, causing some refiners to switch to lighter grades with lower fuel oil yield, traders said.

Asia, which gets the bulk of its residual fuel supply from the West, is unlikely to get more supply from Europe in May as the arbitrage window is "closed by a few dollars," a Singapore trader said.

While there is still some time left to fix May arrivals, there isn't much oil in Europe "to be pointed this way", he said.

Some of the Middle Eastern supply has recently been diverted to Europe, and exports from the region could fall as domestic demand starts to build up in June with the start of the Middle Eastern summer, traders said.

Weak Demand Weighs

On the demand side, lower fuel oil prices earlier this week have drawn inquiries from the key China market, and buying from Japan, South Korea, Vietnam, Taiwan and Indonesia has rebounded slightly.

Wholesale gasoline and diesel prices in China are rising and could prompt independent refiners to raise operating rates. These refiners use straight-run fuel oil as feedstock, as they aren't allowed to import crude oil.

"It's easy to raise prices (of oil products) but hard for them to fall. So the government is likely to maintain prices at current levels to ensure healthy refining margins," a Chinese trader said.

In Japan, low-sulfur fuel oil demand revived after Tokyo Electric Power Co. failed to restart its Kashiwazaki-Kariwa nuclear power station.

Pakistan State Oil's large fuel oil requirements for May-July could also help to tighten supply in the Middle East.

But some traders doubt that the demand is sustainable.

China's demand could wither if crude continues to recover and push fuel oil prices higher, they say.

High stocks and large inflows due in April also continue to weigh on sentiment.

"There's still an awful lot of oil on its way," the Singapore trader said.

"It's far more than what we need in Singapore and bunker demand is still subdued," he said.

Average monthly bunker sales at Asian ports this year have fallen about 10%-20% on year, according to traders estimates.

Tepco is still keen to restart its nuclear plant by summer, and if liquefied natural gas prices drop as expected it could pull some operators away from fuel oil.

Meanwhile, exports from the U.S. and Carribean Sea to Asia could rise in May to "well over 2 million tons", a second Singapore trader said, adding that some of these cargoes had originated from Europe.

"I am not convinced we're going to be tight. Demand is still falling and we don't need that much oil," he said, pointing out that the market is still in contango.

"The key is whether the Middle East will slow down (fuel oil) exports, but their (domestic) demand is falling as well. We're already seeing May barrels from Saudi Arabia," he said.

The fall in Gold has started around end of February 2009. The during the fall in gold prices globally, the interest rate cuts by central bankers across the global economies was seen. Also it is interesting to note that as soon as overall business conditions and economy seems to be perceived as being steady or not so bad, the weakness in precious metal was more evident & pronounced.

Another observation is that around middle of march 2009, almost all the equity markets across the globe started their rally, thus suggesting a co-relation that now smarter money had moved to equity and left the precious metal commodities. So now to a extent it will be fair to conclude that when again precious metals start rising, the overall perception of the economy is perceived to be weak in the financial markets.Every asset class do have an independent up-down cycle, yet it is interesting when one or two asset class start co-relating. As in now being perceived in equity market and precious metals.

For more an independent trend analysis or view of this age old precious metal -MCX Gold.

I articulate the short term-to longer term trend by observing Daily,Weekly & Monthly chart of MCX Gold.

MCX Gold Daily Chart Till 07/05/2009

If weakness persist then MCX Gold may take support on the uptrend line 1 and thus test 14928,14772,14650. (Target achieved on 06/04/2009)
Currently the gold prices in daily MCX Chart as on 07/05/2009 is Rs.14534. On the upside the MCX Gold may find the uptrend line 2 a good resistance. Unless this resistance is crossed on upside, bulls may find it difficult to come back.

In MCX Gold a top was made on high of Rs.16065 on 20/02/2009. From then on a downtrend in MCX Gold has been observed and it broke down the uptrend line 2 seen in MCX Gold Daily Chart.This break-out on down side has given a bearish tone to MCX Gold in Daily chart.

Momentum KST Indicator/Oscillator For Daily Chart
But currently KST Indicator has gone down towards median or zero line, indicating rise in downward momentum.Shorts may get a fast down move, but shorts may be careful with trailing stop loss to guard their profits.(Target achieved)
The KST indicator in MCX Gold currently is in the over sold zone and has given bullish breakout. Unless KST Indicator breaks out of median line/zero line on the upside, bears may celebrate.
In technical analysis the trade is done till the evidence is in supporting in the direction of trend.With of course stop loss & trailing stop loss.

MCX Gold Weekly Chart Till 07/05/2009

Currently the MCX Gold Weekly Candle is bearish hammer like formation. But such formation are considered important only either at the top or bottom. So based on this current candle nothing more can be articulated.Weekly MCX Gold prices have taken support on 13ema. The 13ema in a crucial weekly support.

In the Weekly MCX Gold Chart, it is clearly evident that the MCX Gold prices have been uptrend since August 2005. In August 2005 MCX Gold Price were at 6300, from low of August 2005 an uptrend line1 has been constructed in the weekly chart.

Though MCX Gold is in uptrend , new high in gold retreats the validity of bull market in MCX Gold. In May 2006 gold touched the high of 11000, and till June 2007 gold prices went sideways -down to 8600. In July 2007 MCX Gold prices took support on the weekly uptrend line 1 at 8450 & again resumed its upward journey to make a new high of 15975 in February 2009.

Momentum KST Indicator/ Oscillator For Weekly Chart
The momentum indicator KST MCX Weekly Gold is in the over bought zone, but Negative divergence is observed in the Weekly MCX Gold Prices and Weekly momentum KST Indicator.This hints at bearish tone for intermediate trend in MCX Gold.

Often during a strong bull trend Momentum Oscillators like KST remain in over bought zone and keep giving negative divergences and prices keep forming new tops. But negative divergences also hint at loss of upward momentum & correction in price is considered to be on card.

MCX Gold Monthly Chart Till 07/05/2009

In the Monthly MCX Gold Chart the uptrend in gold is seen. As long as the uptrend line1 in monthly MCX Gold is not broken. MCX Gold can said to be in bull market.
Both January 2009, February 2009 are bullish candle, but March 2009 candle has ended on the bearish note. April 2009 Candle is small bullish doji star. May 2009 may prove a turning point for MCX Gold. Wait n watch.

Momentum Indicator For Monthly Chart

It is worth noting that since the uptrend in MCX Gold in August 2005, the Momentum indicator KST has been in over-bought zone. This itself validates the claim that MCX Gold is in uptrend. Also the peaks & trough,s in the Monthly Momentum Indicator -KST are in tandem with the MCX Gold monthly prices.

(No Negative Divergence has been seen in momentum indicator of monthly MCX Gold chart.)

Interesting Note
It is often noticed that when a long term strong bull market or bull trend develop in any asset class then prices and indicator go to overbought zone & often remains in that zone, sometimes giving a series of Negative divergences for a long period of time thus hinting at the maturity of long term trend.

At times bearish crossover and Negative Divergence in such asset class give indication of maturing trend. It all depends on the strength of that asset class. In such asset class, end of long term trend, bull market is said to have happened when indicator goes to oversold zone. In technical analysis we deal with possibilities and probabilities, never certainty...

As we are dealing with force of that asset class.