Crude oil inventory reports came out Wednesday from the Energy Information Administration (EIA). Is the trend towards higher prices supported by the numbers?

Crude oil inventories were down four million barrels but still 7.7% above last year’s level. This was a larger drop in inventory than the market was expecting. Imports dropped 764 thousand barrels, 486 thousand barrels below the four-week average. Imports for the week were 1.846 million barrels less than one year ago.

Oil is getting a boost this morning following the weekly EIA inventory report which showed that crude oil stockpiles decreased by 3,963K barrels (expectations called for a build of 1,500K). At a time of year when stockpiles are typically rising, today's inventory decline came as a big surprise.

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This week's report on Energy Inventories from the EIA showed a smaller than expected build in crude oil stocks (778K vs. 1910K forecast). Gasoline and distillate stocks, however, posted larger than expected builds. In addition, even though the build in crude oil stocks was less than expected, current levels are well above their historical averages. While oil prices were down heading into the report, prices have dipped further following the release.

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By Brad Zigler

Halloween's approaching, and with it comes the prospect of tricks and treats for oil market traders. For traders plying the "crack spread," one of the market's tricks actually turns out to be more of a treat.

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there and give investors some new investing/diversification ideas. Last week, emerging markets and commodities continued to show strength while some of the other usual suspects took a breather and the S&P500 ended with week with a small loss of 1%. I've made sure to include both some leveraged ETFs with their outsized gains (but take note of leveraged ETF risk of value destruction over time due to daily rebalancing) as well as non-leveraged traditional sector ETFs. There are some ETNs in the mix as well, since not every individual commodity is covered by an ETF. ETNs often carry additional counterparty risk, so ensure you've investigated a particular ETN and parent company solvency before considering.

Top Leveraged ETFs/ETNs

Each week, I like to publish the past week's hottest ETFs to share some new trends and niche ETFs out there and give investors some new investing/diversification ideas. Last week, emerging markets and commodities had quite a showing. I've made sure to include both some leveraged ETFs with their outsized gains as well as non-leveraged traditional sector ETFs. There are some ETNs in the mix as well, since not every individual commodity is covered by an ETF. ETNs often carry additional counterparty risk, so ensure you've investigated a particular ETN and parent company solvency before considering.

Top Leveraged ETFs

Risky assets remained in favor during the past week, generally helped along by fairly robust economic data and better-than-expected corporate earnings reports. A number of bourses, crude oil, inflation-linked bonds and high-yielding corporate bonds and currencies recorded fresh highs for the year, whereas gold hit an all-time high of $1,070.20 per ounce.

Assets such as government bonds and the U.S. dollar saw fading demand as safe havens, now that the global economy is on the mend. Similarly, credit default spreads tightened markedly and the CBOE Volatility Index (VIX) declined to its lowest level since early September 2008.

As supply and demand pressures start to influence gasoline, what lies ahead for the commodity and its ETFs?

The summer months are officially over, unemployment rates continue to creep up and consumers are holding onto their wallets. As a result, demand for gasoline has declined and continues to weaken. Nearly a year ago, gas prices were north of $4/gallon in certain parts of the nation, but today it’s a far cry from that. AAA recently announced that the national average for a gallon of gasoline is $2.46 and expected to keep declining.

After hitting its best levels of the year on Wednesday ahead of the Federal Open Market Committee’s (FOMC) communiqué, the S&P 500 Index ran into heavy weather on the realization that the Fed could start scaling back on emergency support of the economy. U.S. equities dropped further later in the week on renewed concerns about the state of the troubled housing market and weaker-than-expected durable goods orders.

In addition to global stock markets declining, risky assets such as commodities, oil, gold and other precious metals all sold off as pundits worried about the winding down of quantitative easing puncturing the “liquidity rally”. Government and corporate bonds, as well as the Japanese yen, emerged as winners.

Denver-based United States Commodity Funds has launched another exchange-traded commodity product, its first to offer inverse exposure to commodity prices. The United States Short Oil Fund (DNO) began trading this week on the NYSE Arca Exchange. DNO is the sixth product from United States Commodity funds, joining products offering exposure to crude oil (USO), natural gas (UNG), 12-month oil (USL), gasoline (UGA), and heating oil (UHN).

DNO will seek to track the inverse of the spot price of light, sweet crude oil delivered to Cushing, Oklahoma, as measured by the price of futures contracts on the commoidty. The fund will invest in near month futures contracts, except when the near month contract is within two weeks of expiration, in which case it will invest in the next month’s contract.

The Energy Information Administration (EIA) recently released its short-term energy outlook for a variety of energy sources. Their forecasts could impact a wide range of energy-focused ETFs.

Remember, though, that while forecasts are informative, unforeseen events could cause the reality to play out differently. While you keep these predictions in mind, have an entry and exit strategy if you’re thinking of investing in energy ETFs.

The October West Texas Intermediate Crude oil price was up $1.50 to $73.98 a barrel last Friday. We have not seen the price of crude oil hit that mark since last October. This current uptick was the result of the bearish Energy Information Administration - Department of Energy (DOE) and American Petroleum Institute (API) inventory reports published earlier in the week. Both reports reflected huge unanticipated draws for all products including crude oil for the week ending August 14, 2009.

ETF Trend Monitor (08-11-2009)

Disclosures: Hillbent.com, Inc. or its affiliates may own positions in the equities mentioned in our reports. We do not receive any compensation from any of the companies covered in our reports.

By Brad Zigler

Real-time Monetary Inflation (per annum): 4.3%*

A year or two ago, oil companies were easy targets for consumer opprobrium. Record profits were scored by the majors while drivers were left steaming at the pump over ever-rising prices.

With all that is going on in the world of ETFs, it might be easy to overlook certain areas of the marketplace. If you’ve missed anything, here are some areas that have delivered some impressive numbers over the last couple of weeks.

There have been a number of stellar performers in recent weeks – these are just a few that caught our notice. Bear in mind that wherever you choose to place your money, always have a strategy for both entry and exit, since no trend lasts forever.

Bullish Events: June-2009 Pending Home Sales Index report showed its 5th consecutively monthly gain with a reading of 94.7 for a 3.6% monthly increase.

Positive Earnings Surprises: Aerospace (TDG); Basic Materials (TG, MWA, WLK, IPHS); Business Services (III, EXBD, IUSA, HEW); Computer & Tech (CRAY, CUTR, FNDT, IIVI, STEC, CTSH, SMSI, TDSC, CBB]], HPY]], PER]]); Construction (DHI, GLDD, PHM); Consumer Staples (JBT, CHD); Consumer Discretionary (MVL); Industrial Products (SNHY, NPO, POWL, RBC, AIN); Medical (IDRA, SNTS, PRX, ACOR, WST, MD, HSIC, FMS, RIGL); Energy (HNR, GMXR, NRGP, UDRL, CAM, SE, RDC); Financials (PPS, NYM, UTR, EXR, PRA, PNX, FSR, PKY, BMTC, GLAD, HCP, CIB, VNO, MXGL, SPG); Retail Wholesale (PMC; HLF; CVS); Transportation (PHH); Utilities (NI, DUK, UNS, ED)

Bullish Events:

1. July-2009 ISM manufacturing data posted 48.9 vs. consensus estimates of 46.5;
2. June-2009 Construction Spending improved to 0.3% vs. consensus estimates of -0.5%;
3. July-2009 motor vehicle sales rose 15% to 8.3mm annualized units vs. previous month’s 7.1mm; and
4. economists in the private sector, e.g. Alan Greenspan and notorious Dr. Doom aka Nouriel Roubini, are also seeing plausible light at the end of an economic tunnel of darkness.

Bearish Events: N/A