XAO Technical Analysis

wayneL · 8 July 2008

Re: XAO Analysis

Whiskers said:
With a 70% speculator factor and 100:1 leverage, that's a $12.6t industry controlled by an investment of $88billion.

There is no 100:1 leverage in the oil market, it is closer to 10:1

Also any lunatic, whether individual or institution, that is fully leveraged up on the available margin, WILL blow up.

Your sums are just not how it works at all.

nizar · 8 July 2008

Re: XAO Analysis

wayneL said:
There is no 100:1 leverage in the oil market, it is closer to 10:1

Hi Wayne,

Is this the maximum available leverage in every futures contract?
Or is it different for every market?

Just curious.

Thanks.

caribean · 8 July 2008

Re: XAO Analysis

Whiskers said:
On the current economic facts with oil at current levels capitulation of many economies seems inevitable... unless the US acts quickly... which I suspect they will.

Ummm, just a question...which part of the "US" is going to be the part that's
going to save us, by bringing the cost of oil down????
Multi choice:
1, the US oil lobby
2,the US govinmint
3,the US people
4,all of the above

wayneL · 8 July 2008

Re: XAO Analysis

nizar said:
Hi Wayne,

Is this the maximum available leverage in every futures contract?
Or is it different for every market?

Just curious.

Thanks.

It is different for each market and can be different for the same market at different times.

It's calculated on volatility by a formula known as SPAN.

prana · 8 July 2008

Re: XAO Analysis

Whiskers said:
On the current economic facts with oil at current levels capitulation of many economies seems inevitable... unless the US acts quickly... which I suspect they will.

What? You mean Helicopter Ben to print more money and ignore inflation further? I think Bernanke and his printing convoy has created enough inflationary pressures for everyone else, please Ben. Let Ron Paul take the drivers seat.

dhukka · 8 July 2008

Re: XAO Analysis

Whiskers said:
I think we are more severely impacted by the oil price this time than the sub prime credit crunch. This time the ball is firmly in the US hands and I reckon they will be compelled to take more extraudinary steps before our market can turn around.

Extract from the Immement and severe market correction post:

World production @ 90m bpd x $140 = a $12.6trillion industry.

With a 70% speculator factor and 100:1 leverage, that's a $12.6t industry controlled by an investment of $88billion.

That's an industry about the size of the US GDP controlled by speculative interests.

On the current economic facts with oil at current levels capitulation of many economies seems inevitable... unless the US acts quickly... which I suspect they will.

This just keeps getting better. Not only does he not have a clue how the oil futures market works, he is now tyring to explain away all his wrong calls by blaming it on oil. The market would not have put in new lows if it wasn't for oil. The US recession that has already arrived will be the fault of oil, not the effect of the biggest credit bubble in 75 years or possibly ever. Carry on Whiskers, this is amusing.

Whiskers · 8 July 2008

Re: XAO Analysis

wayneL said:
There is no 100:1 leverage in the oil market, it is closer to 10:1

Do you want a bet on that?

I've seen leverage up to 100:1 offered. How much do ya wanna put on the table?

Also any lunatic, whether individual or institution, that is fully leveraged up on the available margin, WILL blow up.

Again to paraphrase from another post:

The first point is that most of the anti speculator arguments are based on the assumption, I think incorrectly, that the surplus oil is being stored somewhere.

A specific point I made in an earlier post is what if some of the oil producers are double dipping, buying contracts to deliver their own oil and then not have to deliver it (to themselves), but help drive up the price for the next round.

Given the sophistication of some past scams and the lack of transparency in the market, can anyone categorically say something like this isn't or can't happen.

https://www.aussiestockforums.com/forums/showthread.php?p=312318#post312318

prana said:
What? You mean Helicopter Ben to print more money and ignore inflation further? I think Bernanke and his printing convoy has created enough inflationary pressures for everyone else, please Ben. Let Ron Paul take the drivers seat.

Nooo... by passing tighter regulations so that it can at least be seen who is trading the contracts and cut out any artifical market manipulation.

Dkukka oh dhukka, if you jumped across the road into traffic as quickly as you jump to conclusions and onto anyone that you detest, then it's no wonder you can't see anything but gloom and doom.

The point I'm making is that I think the US congress at least is seeing another spectatular catostrophe in the making because of a severe lack of oversight, accountability and transparency in another sector of markets under it's control... ie the oil market, and are desirious to get it fixed (better regulated) before it blows up in their faces like the property and financial sectors.

prana · 8 July 2008

Re: XAO Analysis

Whiskers said:
another spectatular catostrophe in the making because of a severe lack of oversight, accountability and transparency in another sector of markets under it's control... ie the oil market, and are desirious to get it fixed (better regulated) before it blows up in their faces like the property and financial sectors.

Ummm the President Ben Mugambe, oops I mean, The US Federal Reserve IS the oversight, the one who left the printing machine on overnight without parental guidance, the same one who allowed excessive consumption, also the same ones that left rates at 1% for way too long, might I add, the same one who ignored inflation until some 2 months ago before sounding hawkish about rates. ...

I think I quit from this discussion, this doesn't appear to be a productive direction.

wayneL · 8 July 2008

Re: XAO Analysis

Whiskers said:
Do you want a bet on that?

I've seen leverage up to 100:1 offered. How much do ya wanna put on the table?

Not in the major, market moving exchanges you won't. Maybe some pissant CFD provider might. But I don't think hedge funds would be using CMC or whoever LOL.

In any case, any muppet actually using that much leverage deserves to blow up, and they will. The daily range in Oil is more than that these days.

Temjin · 8 July 2008

Re: XAO Analysis

Whiskers said:
Do you want a bet on that?

I've seen leverage up to 100:1 offered. How much do ya wanna put on the table?

So you are willing to bet that EVERY SINGLE traded contracts out there are leveraged to 100:1? That's a big bet there. Anyone who does real hedging through the oil market would immediately debunk your theory because they don't play on leverage at all. Every positions they put in are backed up by real physical oils.

Like WayneL was saying, you only seem to think every players out there are using 100:1 CFD contracts. But they only account for an insignificant portion of the volume traded out there.

Whiskers said:
The point I'm making is that I think the US congress at least is seeing another spectatular catostrophe in the making because of a severe lack of oversight, accountability and transparency in another sector of markets under it's control... ie the oil market, and are desirious to get it fixed (better regulated) before it blows up in their faces like the property and financial sectors.

You are definitely quick to blame the US regulators on world oil speculations. They do not have the ability to control every single future markets out there, beside their own anyway. This is why I am astonished at their stupid attempts to "regulate" the future markets by limiting "long positions" and making them to report/identify themselves if they have placed over a certain number of long positions. Sure they can do that in their own future exchanges, but the business will simply goes elsewhere in other country's exchanges where they have no legislation power over it. Stupid I tell you.

The rise in oil prices are driven by both speculations and real fundamental factors anyway.

dhukka · 8 July 2008

Re: XAO Analysis

Whiskers said:
Dkukka oh dhukka, if you jumped across the road into traffic as quickly as you jump to conclusions and onto anyone that you detest, then it's no wonder you can't see anything but gloom and doom.

Again overestimating your importance. Detest is such a strong word, the most I can muster is mild contempt with a tinge of pity (the pity usually last about half a second and then vanishes).

The straw man arguments continue. I see plenty to be optimistic about with each passing day that the stockmarket (that you continually incorrectly called higher) continues to make new lows. Gloom is building and with it opportunity.

It is you that cannot see past your **** tastes like sugar outlook of the world and that is why you continue to be wrong.

Whiskers · 8 July 2008

Re: XAO Analysis

prana said:
Ummm the President Ben Mugambe, oops I mean, The US Federal Reserve IS the oversight, the one who left the printing machine on overnight without parental guidance, the same one who allowed excessive consumption, also the same ones that left rates at 1% for way too long, might I add, the same one who ignored inflation until some 2 months ago before sounding hawkish about rates. ...

I think I quit from this discussion, this doesn't appear to be a productive direction.

The Commodity Futures Trading Commission CFTC is the authority in the US.

They have been given instructions to monitor trading on a daily basis as opposed to weekly previously and require the London-based ICE Futures Europe exchange to adopt position limits used in the U.S. They have also been told to gather more data on unregulated trading, including over-the-counter swaps.

And more regulation is currently in the congress.

It seems pretty obvious to me that the more regulated an industry becomes the less volatile it is and the less likely to attract speculative investors and consequently prices become more stable.

wayneL · 8 July 2008

Re: XAO Analysis

wayneL said:
Not in the major, market moving exchanges you won't. Maybe some pissant CFD provider might. But I don't think hedge funds would be using CMC or whoever LOL.

In any case, any muppet actually using that much leverage deserves to blow up, and they will. The daily range in Oil is more than that these days.

Whiskers,

Let me give you an idea.

The high so far today on the NYMEX Q contract is $142.44 with the low so far being $138.68.

That is a range $3.76 - Nothing out of the ordinary
= 2.7%

Just to cover that range so far today, without any pad, would need a leverage ratio of 37:1, and would entail an immediate margin call.

100:1 on oil is just plain ****ing stupid... absolutely idiotic... suicide.

As I type this, oil is breaking below the above-mentioned low, making the figures even bigger.

No institution is using leverage of 100:1 on oil!!!

wayneL · 8 July 2008

Re: XAO Analysis

FYI

Nymex oil margins:

Trembling Hand · 8 July 2008

Re: XAO Analysis

Whiskers said:
Do you want a bet on that?

I've seen leverage up to 100:1 offered. How much do ya wanna put on the table?

As I pointed out to you a week ago and Wayne has again shown margin has nothing to do with the equation. Not for anyone who trades for a living. Not the the funds, not to the big swinging dicks that move the volume.

That 1% margin you are quoting is rubbish. That is for retail Market Maker model Not FUTURES. Where the Market maker takes the other side of **** traders and then waits till they blow up. And no the orders never make it to the real market as hedges either. They don't last long enough to bother hedging. Why hedge against someone playing Russian Roulette

Whiskers · 9 July 2008

Re: XAO Analysis

Temjin said:
So you are willing to bet that EVERY SINGLE traded contracts out there are leveraged to 100:1? That's a big bet there.

Why are people focusing on the wrong things.

It's pretty clear that none of you are of a 'legalistic' mind.

No, no , noooo Temjin, Wayne and TH. I said I've seen up to 100:1 leverage offered.

The MAIN point is firstly that the speculative part of the oil market is huge about equal to the US GDP and secondly that there is POTENTIAL there for small amounts of money to control and manipulate a big chunk of a (rising) market.

Struth, for the sake of some maths 100:1 was a nominal number as part of the worst case scenerio.

You are definitely quick to blame the US regulators on world oil speculations.

Well I suppose you could call it blame, they seem to be the culprit of the moment, but as I've often pointed out I take an observational position looking for the sentiment and action that is driving the market.

Repeat, the main point... who would feel comfortable with speculative interests controlling 70% of a 12 to 13 TRILLION DOLLAR industry, a vital industry at that?

Stupid or otherwise I'm not judging because I can't change it... just trying to pre-empt the mob and the market.

Wayne the main question being asked is can you or anyone categorically, I mean categorically say there is no market manipulation happening?

For example if an oil producer or related entity was buying back their own contracts to force up the price for refiners.

Trembling Hand said:
As I pointed out to you a week ago and Wayne has again shown margin has nothing to do with the equation.

Nothing at all!

Well if higher margins were required in the largest commodity market in the world it would take more money to get the same size position for a start.

And isn't it a fact as I mentioned last post?

It seems pretty obvious to me that the more regulated an industry becomes the less volatile it is and the less likely to attract speculative investors and consequently prices become more stable.

Isn't leverage and the 'speculatice' portion of the market the core issue of what all this oil speculation business and legislation is about?

Again repeating myself, but rightly or wrongly, it doesn't affect me, but given the world wide outrage about the price of oil and the political will to minimise the adverse effects on the economy and that tighter regulation and accountability is happening as well as higher margins and limits on the number of contracts held... are you seriously trying to tell me that oil won't become less attractive to speculators and fall in price as they leave the market?

PS: Getting a little off topic, but just clarifiny the original point about the potentional impact of oil market regulations on the economy and stock market.

Trembling Hand · 9 July 2008

Re: XAO Analysis

Whiskers said:
Nothing at all!

Well if higher margins were required in the largest commodity market in the world it would take more money to get the same size position for a start.

And isn't it a fact as I mentioned last post?

Isn't leverage and the 'speculatice' portion of the market the core issue of what all this oil speculation business and legislation is about?

Again repeating myself, but rightly or wrongly, it doesn't affect me, but given the world wide outrage about the price of oil and the political will to minimise the adverse effects on the economy and that tighter regulation and accountability is happening as well as higher margins and limits on the number of contracts held... are you seriously trying to tell me that oil won't become less attractive to speculators and fall in price as they leave the market?

Whiskers god help you if you ever decide to trade leverage. Let me spell it out very clearly. Traders do not trade on minimum margin. Read it again PLEASE. Traders do not trade on minimum margin. and AGAIN Traders do not trade on minimum margin.

The only ones that look at minimum margin as to how many contracts they can buy are IDIOTS. For god sake think about it.

But that aside you still are obviously lacking a fundamental understanding of how futures function. And why they are the BEST tool capitalism has at pricing a commodity. But this is way off topic.

davo8 · 9 July 2008

Re: XAO Analysis

prana said:
Now my question, Australia as I know it (and correct me if I am wrong here) consists mainly of 2 massive industries, Commodities (metals and energy) & Financials. Now the financials have retreated to levels close to early 05's (its unfortunate that the XFJ doesnt go quite back far enough).
So, let me see, if the financials index has retraced that far back, if the XJO is to retrace back to support lines set by long term charts, then, either the financials have to suffer further (very very) serious losses , or the miners are going to get into serious retracement - ie the BHP, RIO, WPLs. Any chartists want to comment on this?

The ASX is more than that: you have to include property, manufacturing and all the consumer stuff at least. So far the miners pull us up and the financials slap us down. Now that mortgages are hard to come by (or afford), construction has tanked and that takes with it lots of consumer stuff.

You can expect to see widespread losses in all sectors, especially property and consumer discretionary with possibly near recession conditions. If China gets sick after the Olympics, things could get quite sticky.

I've been predicting 4800 for months, but it could go even lower. Forget the charts -- they'll only tell you after it's all over.

davo8 · 9 July 2008

Re: XAO Analysis

Whiskers said:
PS: Getting a little off topic, but just clarifiny the original point about the potentional impact of oil market regulations on the economy and stock market.

My view after extensive reading is that speculation is not the dominant influence on the price of oil, and that the proposed regulations will have little or no impact.

Regardless, this is wrong place to look. The main driver for the current down leg in the USA (and here) is still the credit crunch, phase 2. There is massive wealth destruction going on and so far oil is just a nasty added problem.

I said months ago and I say again now: the US economy is looking over a cliff. Do not expect bottom this year -- first we need a few more bank failures. IndyMac, WaMu, Wachovia, Lehrman, etc.

The ASX is in a bear market and the really bad news is only just starting. The construction industry is currently falling apart, property values are dropping and banks are struggling. Consumer discretionary is weak and resources are vulnerable to post-Olympics China. 4800? 4500? Who knows?

I know you're a permabull, but this really isn't the right time yet.

wayneL · 9 July 2008

Re: XAO Analysis

Whiskers,

The point you are missing is that for speculators to be able to actually "control" the market, requires them to take physical delivery. Otherwise the arbitrageurs will simply pull it back into line with the price of physical.

The spot futures price only tracks the physical price, plus cost of carry, plus or less other minor factors. It wouldn't matter if speculators are 90% of the futures markets, unless they take physical delivery, they cannot manipulate price, beyond minor swings.

The western muppet, brainless clueless pollies screaming for lower oil prices may as well piss into the wind.

If prices come down, it will be due to other factors, not related to speculation.

XAO Technical Analysis

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