How to predict the market’s next moves

MIAMI, Fla. (MarketWatch) — If you ask many traders which market indicator they’d use if they could only choose one, it would be moving averages.

Even if you don’t believe in technical analysis, take a look at moving averages, a powerful but simple indicator that gives important clues to market direction. The most popular are the 50-day, 100-day, and 200-day moving averages, although people use the 200-day measure as a guide to the long-term market trend.

But in a recent article, MarketWatch columnist Mark Hulbert found that a portfolio following the 200-day moving average hadn't produced such impressive results over the past 20 years. “Even on a risk-adjusted basis over the last two decades, the 200-day moving average has lagged a simple buy-and-hold approach"

If you’re a buy-and-hold investor, you’re probably not interested in timing strategies, and as Hulbert concludes, the 200-day moving average may not be the ideal vehicle for timing the market. If you’re a trader, however, you can use moving averages for timing. More important, moving averages can help provide clues to market direction.

Short-term traders tend not to use the 200-day MA for timing, but prefer the 13-day, 20 or 21-day, or 50-day. For example, long-term trader Laszlo Birinyi, president of Birinyi Associates, makes his trades based in part on a stock’s 50-day moving average.

Other traders use even shorter time frames such as the 8-day or 10-day moving average. They use it both for support and resistance, and also observe when one moving average crosses another. One popular crossover strategy: when the 8-day MA (the shorter moving average) crosses above the 13-day MA (the longer moving average), this is a signal to buy. Conversely, if the 8-day crosses below the 13-day MA, this could be a signal to sell.

Using moving averages for support and resistance

Traders, and investors, also use moving averages for support and resistance. For example, in June the S&P 500 sliced through the 50-day and 100-day moving averages. If the benchmark were to drop below its 200-day moving average, this would be a major sell signal.

Why? Because the 200-day moving average, and other moving averages, act as support (which is like a floor), or resistance (which is like a ceiling). It takes a lot of buying or selling pressure to move the market above or below a moving average.

Yet moving averages are not perfect. First, they are considered lagging indicators, which means they follow prices. In other words, they are often slow to react to market conditions. By the time the index drops below the moving average, you may already be out of luck. In addition, moving averages are not ideal during choppy trading environments. Like any indicator, you never want to make trades based solely on its results without confirming with other indicators.

Moving averages for rookie traders

If you are a rookie trader and want to know more about moving averages, here’s a brief tutorial.

Moving averages show the value of a security’s price over a period of time, such as the last 10, 20, 50, 100, or 200 days. Most people overlay the stock price over its moving average on a chart to get a good feel where the stock or market is headed.

Calculating a moving average is not difficult. For example, the 20-day simple moving average is found by taking an average of the last 20 days of the market’s closing price and dividing by 20. So as the 21st day is added, the first day is dropped off. It’s constantly moving, which is why it’s called a moving average. In addition to the simple moving average, many people use the exponential moving average, which gives more weight to the most recent time periods.

Many traders have designed strategies based on moving averages. With the help of a professional technician, last year I back-tested dozens of trading strategies. What did I find? The moving average crossover strategy (buy when the 50-day crosses over the 200-day, and sell when the 50-day crosses below the 200-day) consistently ranks high, especially when the market is trending.

The advantage of using moving averages is that it helps keep your emotions out of the trade.

Bottom line: If you are an investor or trader, you can gain valuable information by watching how stocks or indexes react when they rise above, or below, their moving averages.

Credit: Michael Sincere is the author of Start Day Trading Now (Adams Media, 2011), All About Market Indicators (McGraw-Hill, 2010), and Understanding Stocks (McGraw-Hill, 2003).

Galoc consortium strikes oil in new well off Palawan

MANILA - The consortium running Galoc in offshore Palawan has successfully flowed oil from one of the field's new wells.

In a regulatory filing, Otto Energy Limited said the recently drilled well in the petroleum block flowed oil to surface vessels at a rate of 6,300 barrels per day during production tests.

"Operations were conducted via the drilling rig 'Ocean Patriot' and oil was flared at the location," the Australian company said.

The Galoc consortium expects the new well to produce between 8,000 and 12,000 barrels per day under normal field operating conditions.

The well was successfully tested following the installation of underwater equipment used to monitor and control its production early today.

The Galoc consortium will install similar equipment in another new well drilled in the field where the group also expects to churn out oil.

The new wells will complement Galoc's two existing wells, which have been producing at an average of roughly 6,000 barrels per day.

Galoc's production is expected to increase to 12,000 barrels per day by November when its new wells begin commercial operations. It is the Philippines' only commercially producing oil field.

Otto Energy is the operator of the field. Its partners are Galoc Production Company 2 Pte, Nido Petroleum Limited, Oriental Petroleum and Minerals Corporation and Linapacan Oil Gas and Power Corporation, The Philodrill Corporation and Forum Energy Philippines Corporation.

Credit: Euan Paulo C. Añonuevo, InterAksyon.com

Philippines: The Deuterium Project

 Twenty years ago, a certain Dr. Nona Calo from Butuan City in Mindanao, hypothesized that a very large deposit of deuterium can be found in the Philippine Deep, located off the waters of Surigao.  First discovered and isolated in 1932 by an American chemist Harold Urey, deuterium or heavy water is composed of two isotopes of hydrogen and an oxygen atom, with a chemical formula of D20 or H30.  With more hydrogen molecules than ordinary water, it is much heavier than water and even saltwater, causing it to naturally sink farther into deep ocean trenches.

          According to Anthony B. Halog (PhD, MBA), working at the Sustainable Technology Office of the Institute for Chemical Process and Environmental Technology, National Research Council of Canada in Ottawa, Canada, "the Philippine Trench, the largest in the world, is 868 miles long, 52 miles at the widest point and 2 miles at the deepest point which is 10.057 kilometers below sea level.  Deuterium can be obtained from this depth of more than 7 kilometers below sea level under 10,000 psi of ocean pressure, replenished by nature 24 hours a day from the Central America across the vast Pacific Ocean.  The amazing thing about deuterium is that at room temperatures or normal atmospheric pressure, deuterium atoms are electrolyzed naturally out of water dispelling hydrogen gas.  This natural phenomenal process needs no expensive electric power-consuming electrolysis to artificially separate hydrogen from oxygen in ordinary water.  At present, deuterium is used in the production of hydrogen (Li-Hy) fuel now used in Canada, America, Germany and some parts of Sweden to provide fuel for cars, trucks, jet planes, including solid hydrogen for spacecrafts Challenger and Columbia".
         
          Though deuterium mining has never been done before, even in highly developed first world countries and the possible costs might be staggering, research on this opportunity is still worth investing in, considering the high stakes involved.  This program could propel the Philippines as the biggest hydrogen fuel (Li-Hy) producer in the world, and become the only fuel producer 40 to 50 years from now in an oil-depleted world economy.  Utilizing the expertise of the Philippine National Oil Corporation (PNOC) through one of its departments which focuses on indigenous and non-traditional fuel sources, the government can embark on a deuterium research program and hydrogen (Li-Hy) production project with ease as far as project organization and administration is concerned.
         
          What hasn't been done before does not mean that it cannot be done.  Deuterium mining is practically just pumping water from the ocean bottom.  The present technology in offshore oil production is up to depths of 6.4 kilometers from the sea level, and they still have to drill through the ocean bottom to get to the oil, hundreds of meters below the sea floor.  Deuterium, the target element, is located just between 7 to 10 kilometers from the sea surface and needs no further drilling.  And since deuterium naturally electrolyzes when the 10,000 psi ocean pressure is gradually removed through the pumping process and replaced by lower atmospheric pressure, two upper pipes will then collect  segregated by-products of deuterium which are pure liquid water and gaseous hydrogen.  The dispelled hydrogen gas, can then be collected, compressed and stored as liquid hydrogen.  The pipeline itself shall serve as the refinery of deuterium to produce hydrogen.  Oil mining may actually be more laborious, costly and dangerous in comparison to deuterium mining, and oil refining more expensive than the processes involved in deuterium and LiHy production.  With regards to expertise, Filipino engineers and technicians at PNOC have proven and even exported their skills to Japan in constructing geothermal plants, installation of which is comparatively more complicated and hazardous.
         
           The tidal conditions along the Philippine Trench have to be included in the research and studied all year round.  Petroleum production in the North Sea, located between the Isles of Britain and Norway, goes uninterrupted despite the perennial turbulences in its waters and harsh climatic condition in the area ranging from icy cold to ordinary cold temperatures.  Pacific climate and condition is temperate by comparison.  Scores of oil rigs in the North Sea are 170 to 200 miles from the nearest port, compared to a possible site on the Philippine Trench which is only 100 miles from Surigao City and 120 miles from Tacloban City.  If workers in the North Sea oil rigs need to work only half the time (two weeks work; two weeks rest) all year round due to the extreme and dangerous working conditions in the area, working in deuterium rigs in the Pacific is just like taking a vacation in some Hawaiian islands.
         
           Oil rig platform manufacturers in Singapore can fabricate specially designed platforms for US$100-150M or approximately P5-7.5 Billion.  For a total cost of P 10 Billion for research and construction of a single floating deuterium rig with an average production capacity of 50,000 barrels a day, the government can expect a conservative daily income of  US$4M or US$1.2B per year, which is equivalent to P54.0 Billion annually.  If the government constructs  one deuterium rig every year generating an annual income of US$1.2B, our World Bank loan can be totally wiped out in less than 15 years.  The budget for this venture is well within the means of our government.  If the government can afford the President's P40 Billion pork barrel in 2006 for assorted poverty alleviation programs, our government can afford one deuterium rig every year which has a hundred fold cost benefit ratio.

          Estimates show that there are only 1,000 billion barrels of reserve petroleum left in the world today.  With the world's annual consumption of 28.6 billion barrels, all reserve oil will be fully used up 35 years from now.  World energy requirements will have to be shifted then to natural gas which still has 5,457 trillion cubic feet in reserve.  But this particular source is still subject to depletion.  Hydrogen, which has an abundant and unlimited source in deuterium, will be the future energy reserve.  If the Philippines can tap this energy source, we can have a much better future and economic position than the rest of the world including the United States of America. Should we, as a nation, will have reached this point in our history, Philippines can then be described as the fabled promised land ..., a land flowing with milk and honey.

          The United States of America once dreamed of sending a man to the moon.  Now it is history. What she did to pursue that dream made her the world's most technologically advanced and economically prosperous nation. This could happen to the Philippines.

Credit: deuteriumproject.blogspot.com