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Strategies & Market Trends : The Epic American Credit and Bond Bubble Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: Wyätt Gwyön who wrote (59538)	4/25/2006 8:41:46 PM
From: patron_anejo_por_favor	Read Replies (1) \| Respond to of 110194

Cheaper than Evian by a long shot.....it's nuts, really...<NG>

To: Wyätt Gwyön who wrote (59538)	4/26/2006 9:14:10 PM
From: ild	Read Replies (1) \| Respond to of 110194

Random Meanderings on the Commodities Market 4/26/2006 10:09 AM ET By Bernie Schaeffer On Monday I offered my thoughts on the natural-gas market. Today I'd like to briefly touch on some developments regarding gold and oil that I've noticed from an Expectational Analysis ® standpoint. Whither Gold? Gold is certainly an intriguing subject these days. After more than two decades, the $600/oz level was finally overcome, but the fanfare that followed was muted, to say the least. While select analysts feel a run to the $800 mark is next on the horizon, a more popular view is that the gold market's rally has worn out its welcome. Earlier this month, The Financial Times published a piece entitled "As it loses its lustre, rising gold already looks old." Zacks data indicates that just 40 percent of all analysts' ratings on gold issues are of the "buy" variety, making this one of the lowest-ranked sectors we track. While there is evidence of optimism, including large inflows into the StreetTRACKS Gold Trust (GLD: sentiment, chart, options) exchange-traded fund (ETF), bullishness is anything but widespread. The put/call ratio has risen during the bull market in gold as compared to 2003, when gold was entrenched in sideways price action. If recollection serves me correctly, I believe this is being driven more by a liquidation of call sellers, who constantly wrote calls on the gold metal during its sideways period, perhaps inducing some of the directionless action during that period. The commodity's put/call ratio has been steadily advancing during the past several weeks, which I appreciate from a contrarian perspective. Currently, the ratio stands at 0.91, indicating that calls and puts are near parity. It's tough to precisely gauge the chart of the ratio compared to gold's price action, but in general, when the ratio has been rising, gold has headed northward as well. It looks like the market saw a huge expiration-related plunge in the ratio during late 2005 that distorted things a bit. Panning back further and incorporating a 50-day moving average offers a smoother picture of the metal along with its put/call reading. I also like the fact that this ratio is at a historical high, but with this peak comes a caveat. From a cautious standpoint, it looks like gold has sometimes hesitated when this ratio has peaked. The ensuing question is therefore whether we're experiencing a rise in the ratio that will continue forward to reach new-high territory (which would be bullish for gold) OR whether the ratio is going to peak in this area as it has in the past (a short-term bearish sign). Pumped-Up Expectations On Oil Like its shinier counterpart, black gold futures have sprinted to historical heights of late, but sentiment on oil-related issues is a different story. Zacks figures show a "buy" percentage of 68 percent on oil stocks and 74 percent on oil-service issues. Talk of $100 barrels is all the rage, and editorial cartoons suggesting $5/gallon fill-ups are littering the Internet. And all of this is just in time for the summer travel season. (Incidentally, I can't figure out why most analysts seem to think this won't be a strain on consumers' wallets). Last week, BusinessWeek published an online survey asking respondents where they thought oil prices would be on July 4. Around the office, we wondered why they failed to use $10 increments, but at any rate, here are the findings: $35 per barrel: 2.4 percent $50 per barrel: 7.4 percent $70 per barrel: 40.8 percent $100 per barrel: 41.4 percent $140 per barrel: 4.6 percent Not sure: 3.4 percent So the most popular response expects crude at $100 per barrel. Let's assume 30 percent annual volatility, which is at the very high end of recent historical volatility readings. This equates to about 15 percent volatility over a three-month period. So a 43-percent move from $70 to $100 by July 4 is almost a three standard deviation move, which would "normally" have a one-percent probability (actually, only half a percent, given we're talking about one direction). Of course, we're dealing with potential supply shocks here, which makes for a much fatter tail to the upside, but from a statistical standpoint, the poll expectations seem way over the top. -Bernie Schaeffer schaeffersresearch.com