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Notice the following on the weekly chart
-- Prices fell hard after July, but appear to be consolidating
-- All the SMAs are moving lower
-- The shorter SMAs are below the longer SMAs
-- Prices are below all the SMAs
-- The RSI is oversold
-- The MACD appears to be turning
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Notice the following on the daily chart
-- Prices are above the 10 and 20 day SMA
-- The 10 day SMA has crossed above the 20 day SMA
-- From the end of December to early January, prices rallied to just below the 50 day SMA, but backed off
-- The MACD has been rising for the last two and a half months
-- The RSI is neutral
Bottom line: The weekly chart says this market is done selling and maybe wants to rally. The daily chart says maybe.
But consider these two charts from the latest This Week in Petroleum:
Oil and gas stocks are increasing -- and oil stocks are at the top of a historical range. This indicates there is less demand for oil from the market right now.
3 comments:
Dear Hale,
I am a big fan and have been following your blog for the past 1.5 years. Your common sense and gift for analyzing the complex financial data are refreshing. Would you be able to give advice on managing personal finances during this downturn? The average suburban investor has few places to turn for unbiased and intelligent advice. Last August 2008, I liquidated about 75% of my investments and put 1/2 in a CD at an employee owned credit union and have 1/2 as cash. The other 25% is still invested, although I, like many others, have lost about 50% of that. I dn't know if I can trust the credit union, but I am not ready to buy foreign currency or gold and I'm not going to bury money in the back yard....I can be reached at hpkoeppen1@gmail.com (I'm sure you won't post this comment, but if you do , could you delete my email?
Thank you! and keep on keeping us informed...
Since (1) Oil isn't going to $0, and (2) Oil tends to be seasonal (rising in the first half of the year, falling in the second half - relatively speaking), we probably are at or near a near-term bottom in Oil. Take that with a couple of grains of salt: (1) allegedly there are speculators with Oil tankers at sea, waiting for the price to rise. If it doesn't, they will panic and depress prices further; (2) further price decreases through spring mean a drastic falloff in demand with all the Armageddon-ish implications therof.
One of the most interesting things I have seen is the sheer numbers of articles about folks storing oil and committing to a future contract. They lock in about $10 a barrel by storing through the summer. I would think this artificially booses the stocks, while in actuality there will be no oil available until they can roll into a nearer contract at that same price they have committed to in December 09.
What does this mean in my book?
I think oil will have to go to $60 to bring that oil forward on the curve, otherwise it *really* doesn't exist for use in the market. Low prices will be the cure for low prices through removal of supply, combined with playing the curve through steep contango.
Backwardation is the only thing that will cure the storage issue, once it becomes apparent.
Right now crashing demand has hidden this market mechanism from view, but as soon as supply and demand roughly balance.
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