Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
The Death of the US Real Estate Dream - 22nd Jul 18
China is Now Officially at War With the US and Japan - 22nd Jul 18
You Buy the Fear in Gold - 22nd Jul 18
Trumponomics Stock Market 2018 - The Manchurian President (1/2) - 21st Jul 18
The Death of Japan's Real Estate Dream - 21st Jul 18
SMIGGLE Amazing Mega Shopping Haul, Pencil Cases, Smigglets and Giant Back Packs! - 21st Jul 18
Cayton Bay Beach Caravan Park Holiday - What's it Like? - 21st Jul 18
Gold Stocks Investment Wanes - 20th Jul 18
Diversifying Your Stock Investing Strategies is Smart Investing - 20th Jul 18
Custom Global Stock Market Indexes May Be Sounding Alarms - 20th Jul 18
S&P 500 Just 2% Below Record High, But There's More Stock Market Uncertainty - 19th Jul 18
Stock Market Technical Picture - 19th Jul 18
Gold Market Signal vs. Noise - 19th Jul 18
Don’t Get Too Bullish on Gold - 19th Jul 18
Bitcoin Price Rallies to Upper Channel – What Next? - 19th Jul 18
Trump Manchurian President Embarrasses Putin By Farcically Blowing his Russian Agent Cover - 19th Jul 18
The Fonzie–Ponzi Theory of Government Debt: An Update - 19th Jul 18
Will the Fed’s Interest Rate Tightening Trigger Another Financial Crisis? - 18th Jul 18
Stock Market Investor “Buy the Dip” Mentality is Still Strong, Which is Bullish for Stocks - 18th Jul 18
Stock Market Longer-Term Charts Show Incredible Potential - 18th Jul 18
A Better Yield Curve for Predicting the Stock Market is Bullish - 18th Jul 18
U.S. Stock Market Cycles Update - 18th Jul 18
Cayton Bay Hoseasons Caravan Park Holiday Summer 2018 Review - 18th Jul 18
What Did Crude Oil - Platinum Link Tell Us Last Week? - 17th Jul 18
Gold And The Elusive Chase For Profits - 17th Jul 18
Crude Oil May Not Find Support Above $60 This Time - 17th Jul 18
How Crazy It Is to Short Gold with RSI Close to 30 - 16th Jul 18
Markets Pay Attention Moment - China’s Bubble Economy Ripe for Bursting - 16th Jul 18
Stock Market Uptrend Continues, But... - 16th Jul 18
Emerging Markets Could Be Starting A Relief Rally - 16th Jul 18
(Only) a Near-term Stock Market Top? - 16th Jul 18
Trump Fee-Fi-Foe-Fum Declares European Union America's Enemy! - 16th Jul 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

Crude Oil Looks Vulnerable

Commodities / Crude Oil Jun 25, 2010 - 04:52 AM GMT

By: Seven_Days_Ahead

Commodities

Best Financial Markets Analysis ArticleWe have remained sidelined in Oil for quite some time now as we judged the market lacked long-term direction. Although a recovery began after the steep sell-off in May, we decided the subsequent rally was probably a correction rather than a resumption of the previous bull trend.


The Technical Trader’s view:


MONTHLY CONT. CHART

The market is caught between the 50% Fibonacci retracement resistance at $90.28 of the pull back to the $40 level in 2008.

And the support from the 38.2% Fibonacci retracement support at $66.71….

BUT note the monthly Key Reversal of last month.

There has been no reaction to that so far, but we think it may yet….

Smashing down through the $66.71 support

 

DAILY SEP 10 CHART

This suggests the monthly bear possibilities may be close to fruition.

Note the rally from the lows at the end of May failed at the Prior Low resistance $80.36.

Note too, that the prior Lows 77.56/86 offered no support to the bulls yesterday.

And looking wider, see that a bear Rising Wedge is close to the point of completion.

Watch the lower diagonal tomorrow at $73.83 or so which is coincident with the Fibonacci support, adding to its importance if broken.

The Macro Trader’s view:

The May 2010 sell off was driven primarily by a spike in risk aversion caused by what became the Euro zone Sovereign debt crisis. As traders began to fear a sovereign default all risky assets were dumped in favour of safe haven trades such as government bonds, the Dollar and Yen.

They reasoned that if a government of a developed economy defaulted the repercussions would be far and wide with growth a likely casualty. But even when the Euro zone finally launched its safety fund worth US$1.0T traders were not re-assured. Only when the budget austerity measures were adopted by virtually all Euro zone economies, including Germany and more recently France, did markets breathe a sigh of relief. The resultant rally in equity markets marked a drop in risk aversion and traders began to buy back into oil too.

But a collateral risk of the rush to fiscal consolidation is a growth pause or worse, a dip back into recession. Equity markets have begun to take this risk seriously and are once again looking vulnerable. The Oil market too is struggling for direction.

The oil price already looked extended to us before the sell off when confidence in the recovery was reasonably high. We thought the recovery was initially unlikely to be as robust as in previous recovery cycles and the overhang of oil supply that had built up during the economic downturn would take time to work off, meaning supply was likely to outstrip demand.

But now with traders worrying about the outlook for the Euro zone economic recovery, where will the extra demand needed to push the oil price higher come from?

Moreover, a big question mark has once again arisen over the US economic recovery. Traders were already nervous after recently weak non-farm payroll and retail sales. But housing market data released over the last two weeks has solidified those worries.

This week has seen the release of much weaker than expected Existing and New home Sales. It is now perfectly clear that the housing market was only being propped up by tax breaks which have now expired. If the strength of the US economic recovery is now in doubt, what then of the oil price?

For the oil market to test the highs, we judge fresh new evidence is required, showing the global economy is expanding faster than is currently the case, and we don’t think it will be forthcoming, at least in the short/medium term, so our attention has turned to downside trading opportunities in oil.

Mark Sturdy
John Lewis

Seven Days Ahead
Be sure to sign up for and receive these articles automatically at Market Updates

Mark Sturdy, John Lewis & Philip Allwright, write exclusively for Seven Days Ahead a regulated financial advisor selling professional-level technical and macro analysis and high-performing trade recommendations with detailed risk control for banks, hedge funds, and expert private investors around the world. Check out our subscriptions.

© 2010 Copyright Seven Days Ahead - All Rights Reserved
Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Seven Days Ahead Archive

© 2005-2018 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules