In association with

Market Bulletin 6th August 2010

The pressures on Oil

The Technical Trader’s view:
Crude Oil Light Sweet Continuous
155
150
145 MONTHLY CHART
140
135
130
125 The very long term
120
115 support around the $40
110

61.8% 105 level provided the

100
95 bounce from the lows
50.0% 90
85 in early 2009.
80
75
70
65
60
55
50
Support long term from Prior Highs
45
40
35
30
25
20
15
10
5
0
9000000
8000000
7000000
6000000
5000000
4000000
3000000
2000000
1000000

1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

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Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
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This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
Crude Oil Light Sweet Sep 10

110
WEEKLY CHART
105

100
That bounce can be
95 seen as a Bear Rising
90 Wedge that completed
85
in May 2010.
80

But far from the bears

75
taking control, the
70
market has paused
65 beneath the lower
60 diagonal of the wedge.
55

50
And while doing so,
working itself better.
45

1500000

1000000 Look closer.

500000

2008 M A M J J A S O N D 2009 M A M J J A S O N D 2010 M A M J J A S O

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
Crude Oil Light Sweet Sep 10 94.0
93.5
93.0
92.5
92.0
91.5
DAILY CHART
91.0
90.5
90.0
The Sept 10 chart shows the
89.5
89.0
88.5 strength of the market in the
88.0
87.5
87.0
86.5
way it has overcome the
86.0
85.5
85.0
resistance from the Fibonacci
84.5

$80.82
84.0
83.5
83.0
resistance coincident with the
82.5
82.0
81.5
Prior Lows at $80.82.
50.0% 81.0
80.5
80.0
79.5
79.0
78.5
78.0
Note though, the coincident
77.5
77.0
76.5
resistance of the parallel
76.0
75.5
75.0
74.5
diagonals and the lower
74.0
73.5
73.0
diagonal of the wedge above
72.5
72.0
71.5
71.0
the market.
70.5
$69.62 Low 70.0
69.5
69.0
68.5
68.0 That suggests important
350000
300000
resistance at that level.
250000
200000
150000
100000
50000 So, for the moment, the
23 2 9 16 23 29 5 12 19 26 3 10 17 24 1 7 14 21 28 6 12 19 26 2 9 16
March April May June July August market is caught between the
support from the Prior High at
$80.82 and the resistance
from the co-incident diagonals
at $83.

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Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
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This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
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 In association with
The Macro Trader’s view:
Since the sharp sell-off back in May at the height of the Euro zone sovereign debt crisis, oil has
experienced a long slow recovery, which for most of that time looked like no more than a
prolonged period of sideways trading.

For most of that period we were square of the market, but anticipated a fresh break down
through May’s lows. And although the hysteria around the Euro zone crisis began to subside,
fears of a US economic slowdown began to intensify, which led us to maintain an underlying
bearish view of the market.

But oil has proved surprisingly resilient. Although the US recovery is still causing concern
among policy makers, as data continues to slow led by weak housing and Labour markets, the
Euro zone economy has began to strengthen, led by a resurgent German economy. While
some of this new strength may be due to the earlier sharp sell-off experienced by the Euro,
which it has since substantially retraced, something more durable seems underway in the
German economy.

Add in the continued vigour of the Chinese and Indian economies and an argument for solid
support underpinning this market can be found. But what has driven the market back through
the $80 level? And why are even further gains now looking possible?

Clearly, strong demand for energy resulting from a strong recovery would be an important
driver in a bull market, but with the US economy struggling for traction, that cannot currently be
the reason. Look instead at the weak Dollar.

At times of Dollar weakness, oil has historically rallied. This might sound paradoxical since a
weak Dollar is ultimately a reflection of a weak US economy, but nonetheless, periods of
extreme or extended Dollar weakness have helped oil rally because oil is priced in Dollars, and
the value of revenue flowing to producers is effectively cut as the Dollar weakens. And as the
period of Dollar weakness extends, producers begin to production cuts to force the price
higher, and traders anticipate this by buying in the futures market.

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Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.
 In association with
Of course Dollar revenues from the US are unaffected, but from the rest of the global economy
they are and since Oil producers are consumers with most of what they buy being imported,
especially luxury goods like Mercedes Benz cars etc, a weak Dollar is like a pay cut.

So we believe Oil can rally further from here.

The engine for that rally will be either a return to stronger growth in the US or failing that,
further Dollar weakness. Currently, the later looks most likely as data from the US continues to
disappoint.

You might then conclude that oil looks a bull market no matter what happens, so why did it sell
off during the financial crisis? Clearly a global recession, like the one recently experienced is a
big negative for oil, regardless of the Dollar’s direction as energy demand slumps, but with two
thirds of the global economy expanding smartly and the other third, the US bit, expanding
slowly, Oil is a market that can be squeezed higher, as geopolitical concerns also have a
significant role in this market.

Mark Sturdy
John Lewis
Seven Days Ahead

SEVEN DAYS AHEAD Professional trading guides and recommendations for the World's markets

Authorised and Regulated by the FSA 124 REGENTS PARK ROADLONDON NW18XL TEL +44 (0) 7849 933573
E-MAIL MSTURDY@SEVENDAYSAHEAD.COM WWW.SEVENDAYSAHEAD.COM
This information memorandum has been prepared solely for informational purposes for customers of Seven Days Ahead and is based on publicly available information from sources
believed to be reliable. It is not an offer, recommendation or solicitation to buy or sell, nor is it an official confirmation of terms. No representation is made as to the completeness or
accuracy of any statements or forecasts contained herein and no responsibility or liability is accepted for losses arising from transactions undertaken or investments purchased, sold or
held on its recommendation. Consequently, any persons acting on information contained herein do so entirely at their own risk. Although the opinions contained herein were
considered valid at the time of release, financial markets are subject to rapid and unexpected movements. Seven Days Ahead, its associated companies, their directors, employees,
other customers or connected persons may from time to time undertake transactions or deal in investments mentioned in this information memorandum or have a material interest,
relationship or arrangement in relation to them.