An Ignoble Experiment: Gas Up

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Gas Up

Mucky, slimy, slippery and dirty, no I’m not describing the politicians and the banksters, but crude oil, since I’m taking a break today from lamenting the nonsensical behavior of the US equities markets.

With the onset of summer driving season, it’s not just traders following the crude oil markets. Prices are spiking in several parts of the country, and a lot of drivers are wondering why they are suddenly shelling out more to fill up.

Take Chicago for instance. Here we have the highest prices in the whole country!!! Why? If you live here, or another state that pays out the wazoo to fill up like Connecticut or California, you probably want to know why you’re getting hosed.

For starters, the sky high price of crude oil on the global market isn’t helping things. Yes, futures prices fell Monday below $96 a barrel, but that’s still at a historically high level thank to demand in Asia, turmoil in the Middle East and good ol’ Mother Nature — like the flooding we experienced earlier this month.

But the regional effect has lot to do with the available refining capacity, along with the transportation costs in getting fuel to the drivers that need it. In the Midwest, a series of refineries shut downs, two for scheduled maintenance and one from a fire, have really hurt.

But of course, the big factor is the tax man and about 70-90 cents on the gallon is what people pay in Chicago for gas taxes. For example, if gas costs $4.67 a gallon that means 18 cents goes to the federal government; 43 cents for the state. And if you live in Chicago, tack on another 33 cents for Cook County and the city.

Oh yes, taxes. I am sure every penny is well accounted for and spent properly by the mucky, slimy, slippery and dirty politicians.

Trade well and follow the trend, not the perma-bull OR perma-bear “experts.”

---Larry Levin

In conjunction with TheStreet.com and Bar Chart, Trading Advantage Chief Market Strategist Alan Knuckman provides a daily morning update on the global action in stock futures, gold, oil and interest rates.

Congratulations to Peter Prince

Congratulations to Peter Prince for his successuf learning in the FX/ Currency Futures classroom. Peter had a solid week trading last week and he continues to apply Ed Moya's methodology to the FX markets. Ed had a terrific month of May. Congratulations Peter.

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OPTIONS: Volatility Commentary

---Steven Lee / Michael Shorr

The Nikkei took the U.S. employment data and an improved GDP revision right in stride and rallied 4.9%. The dollar firmed against the yen which further helped bolster stocks in Japan. Also, a very welcome addition was introduced to PM Shinzo's economic plan. He intends to introduce tax cuts for capital expenditure in the fall. He also wants to pare back regulations that impede research and development. If you recall, China reported monster export numbers last month. It was subsequently uncovered that much of the "exports" were really just excessive inventory. May's export growth slowed to just +1% from +14.7% in April. Adding to a decreasing market sentiment was inflation dipping to 2.1% from 2.4% and producer prices fell 2.9%. Standard & Poors affirmed its AA+ long-term and A-1 short-term credit rating on U.S. debt and revised its outlook on the long term to stable from negative.

Gold (ETF GLD) has been on a wild ride certainly since mid-April trading from a high of 151.71 all the way down to 130.51 (a 14% move) and then up to 143.43, down to its lows again before consolidating this month. The straight move down in the Nikkei seems to have subsided for a while and in the absence a any major releases here in the U.S., things are in a holding pattern until the FOMC releases its statement a week from this Wednesday. We are looking to take advantage of this. We constructed a trade that will simply take advantage of collecting the time decay during this hopefully uneventful week in a commodity that is suggesting a consolidating pattern. The trade signal was to buy the June (monthly) 132/136 strangle and sell the June 14 (weekly) 131/135 strangle paying a maximum of $1.50.

FOREX: Currency Spotlight	---Ed Moya

Price action on USD/CAD respected the 100-day simple moving average for a second consecutive trading despite the impressive housing news from Canada. Home construction accelerated to the fastest pace in over a year. The news followed Friday’s blockbuster Canadian jobs number. An increase in 95,000 jobs and an increase in the participation rate to 66.7% from 66.5% underline an impressive rebound in the Canadian economy. This type of jobs number would be the equivalent of a US NFP reading of over 800,000 since Canada’s population is roughly 11% to the US. The strength in the loonie may be greater against other major trading partners, but undeniably someone is defending these levels. If USD/CAD finally breaks down below 1.0150, key support may target the parity level which is currently very close to the 200-day simple moving average. If the dollar rout resumes today, key resistance remains at the 1.03 and 1.0420 levels.

STOCKS: Watch List

---Charles Moon

We had a pretty flat day of trading overall in the markets, with the Dow finishing down 9.5 points for the day. This is the prevailing trend of 2013 on Monday's to finish in the red. We initially had an implied open of 80-100 in the Dow pre-market, but had a chance to reach that level. This was on a upgrade to the US markets by Moody's which was essentially laughed off. It seems the streets has very little respect towards Moody's credit ratings since it was discovered they take payments to make adjustments, very similar to how the Better Business Bureau issues ratings. While the ratings boost seems legit, it still holds very little credence at the moment. The overhanging fear of the Fed pulling back on easing is still lingering.

Apple(AAPL) disappoints the streets once again with a weak announcement of iTunes Radio. While the initial announcement shot the stock up 4 points with Pandora Media(P) dropping 2.5%, We saw conflicting moves as Apple closed down nearly 3 points, while Pandora rallied to close up nearly 2.5%. I truly believe that AAPL refuses to innovate purely from an arrogance stand point, while the consumer laughs at them and their nose being held so high. The consumer wants to be wowed and not spend hundreds of dollars for the same product over and over. Yet Tim Cook refuses to budge, and he can be the sole reason as to the possible death of this company. Now Apple will never go away, but they are leaving the door wide open to end up 3rd in the race for smartphone and tablets. The recovery of the stock price will never come into play without a reason for consumers to overspend. I highly doubt we will see AAPL trade at 600.00 ever again. It might be quite sometime if they ever get to 500.00, they might not even reach that price level also with they way they are going.

I do anticipate a bit more action to come in, but we can see flat conditions once again. We may start another streak on finishing in positive territory on Tuesday's, but if conditions remain choppy, then the markets can slide in either direction with no conviction. Watch for the rebound early on, as this can be an early indicator to a higher push in the market. Open Position: INTC, ADBE Stocks to Watch: INTC AAPL GOOG IBM AMZN ADBE FB TSLA GRPN CTXS CSCO NTAP JBL BAC C PRU WFC GS JPM MS CMI CAT NFLX WDC GE AIG LULU LNKD DIS KORS COH FOSL CROX STZ NKE UA CHKP JNPR POT GMCR HOG YUM LOW HD LEN TOL V MA AXP DFS LVS MGM TSL FSLR JASO

FUTURES: Technical Data

ES 1645.50 / 1640.50

POC… 1642.00

YM 15262 / 15220

NQ 2999.25 / 2987.75

NOTES FROM THE PIT
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COMMODITIES: Play of the Day

---Patrick Assalone

Old crop soybeans remain in tight supply, and the market is still
trying to buy acres in the face of uncertain yield potential. The move above the Revenue Protection base price is an opportunity to protect bushels that will be produced above the crop insurance guarantee. Based on our educational methodology, we are looking to trade the concentrated areas of volume using the HVAs to enter and exit.

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