The weekly chart still has a bullish bias. Notice the MACD and RSI is rising and prices have broken out of a triangle consolidation pattern. While prices are still below the 50 week SMA, the 10 week SMA is moving higher and has crossed over the 20 week SMA. Also note the 20 week SMA is leveling off. Finnally, prices are above the 10 and 20 week SMAs which will pull these SMAs higher.
Prices broke out of a triangle consolidation pattern in early March. However, prices peaked from that rally in late March. Since then prices have been consolidating in a sideways move. Notice that the MACD is now drifting lower and gave a sell signal at the beginning of April. Also note that the RSI printed a lower high on the second price top in mid-April. Prices and the SMAs are jumbled together giving no clear reading of direction.
The reason for the difference between the weekly and daily charts' bias could be the difference between the technical and fundamental picture. The technical picture on the weekly chart says bull market. The daily picture was strong but is now cloudy. Consider the following fundamental issues:
Crude stocks are incredibly high
And gas stocks are above average, yet
Gas prices are still increasing slightly.
Simply put, supplies are high which should lead to lower prices, not higher. The reason is prices are rising in anticipation of recovery:
The timing and pace of the global economic recovery will determine whether the higher crude oil prices seen during March are sustainable. The prospects of limited growth in non-OPEC production and the expected start of economic recovery later this year, that should increase oil consumption and the demand for OPEC oil, are the main factors supporting the upward price path. If economic recovery begins earlier and is stronger than assumed in this Outlook, there is an upside risk of higher oil prices than currently projected. The downside risk to oil prices is a scenario of a prolonged economic downturn followed by a weak recovery, which could produce a greater decline in consumption than currently expected. This latter scenario would challenge the willingness of OPEC's members to sustain lower output levels for a longer period.
And then there is this:
Consumption. World oil consumption is expected to drop by 1.35 million barrels per day (bbl/d) in 2009 compared with year-earlier levels, due to the global economic recession. EIA assumes that the global gross domestic product (GDP), weighted by oil consumption, will fall by 0.8 percent this year. Consumption is expected to fall by 1.6 million bbl/d in the OECD countries and rise by 270,000 bbl/d in non-OECD nations. The bulk of the decline is expected to be concentrated in the first half of the year (World Liquid Fuels Consumption). World oil consumption is expected to grow by 1.1 million bbl/d in 2010, driven by a recovery of global GDP growth to 2.6 percent.
In other words, there are mixed signals in the oil market. Current prices are the result of expectations, not underlying facts. Traders are hoping that fundamentals will catch up with prices. Further complicating the mix are the continued OPEC production cuts.
Right now the daily chart says prices are going to move sideways for awhile and wait. Prices have already rallied; now traders want to see if fundamentals catch-up.
