Is this bounce in oil the start of something?
We chat with Doc today about the continued bounce in oil. Over the past 3 trading days oil has made a significant move up. Listen to find out why Doc does not think it will continue.
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Does anyone know anything about this claim in a Zerohedge article today that a hedge fund needed a higher oil price prior to close of end of the month today otherwise, implied, it might go bust?
This is from the ZH article:
‘Finally, let’s not forget that today is month end for the person many expect will be oil’s second casualty in one year – Andy Hall, who late in 2014 blew up once already, and should oil have continued its gravitational descent, would have been in line for a second hedge fund closure in under 12 months.
So is it just month end window dressing by all those underwater commodity managers? Why, of course.’
http://www.zerohedge.com/news/2015-08-31/oils-biggest-3-day-rally-25-years
Left this bit of the article out:
‘Put another way: If Hall does not get all the help he needs to save his month, he will have to liquidate and send oil under $30. And then there is the ongoing issue that USO remains hard to borrow as always…’
DOC, what say your technicals on OIL and GOLD on weekly charts?
Peter, for oil on the weekly charts (if we closed the week around this level) we would move up yet next week—-ask me by the end of this week for next week. All I have to say is the path currently of least resistance is still higher. The weekly chart for gold is less sanquine—-it’s neutral right now—-tomorrow will be important for gold on the daily chart. I believe the odds are we move down tomorrow and that wouldn’t be good, especially a significant move. Gold, interestingly, doesn’t look as good as the commodities for the current move by the commodities.
First test for oil is the 38.2% fib resistance at $47.24 est a close above is bullish, next up the biggie at 50% fib retracement at $50.17+ followed by 61.8% at $53.11+
$54+ was the key resistance area off the $43.58 Jan low before retracing hitting a lower low at $42 then moving into major resistance at $61-$62
A lack of knowledge is a dangerous thing, Cory:
This Wed US oil inventory if another surprize large draw down it will be another driver behind this pop off $40 heading for lots of overhead resistance zones.
Still think we see $30 before $100 but I can’t make any money off my opinion, lol, long and strong UWTI till the chart rolls over
A move in oil of 16% last week and 8% today looks like more than a dead cat bounce. We have likely bottomed for the long term.
I agree Paul. We should get a retrace lower to form a confirmation bottom in due time but to me this is going to be the final bottom. There seem to be enough evidence from a variety of quarters that oil will gradually make its way higher as the spec side is turning bullish again and commodities are in play. Put another way, I would not be selling off oil companies right now.
The follow up to OPEC’s statement will be very interesting in the coming days
http://www.cnbc.com/2015/08/31/opec-concerned-by-oil-drop-ready-to-talk-to-other-producers.html
Imagine if they hint at a production cut, wow! that’s what put the floor in the crash from $147-$33 OPEC cut production
Wow! whats up with gold? there was a time when lower energy costs would have the miners popping yet the HUI continues to make lower lows this summer while oil hit sub $40 and now the biggest gain oil has seen in 25!! years can’t get gold taking out overhead resistance at $1140….dead money!
Matthew had a great chart up the other day jj. From Stockcharts I think. It was gold priced in oil if I recall and the conclusion was……sell gold and buy oil. And that is exactly what the market is doing.
Yup, gold crashed about 20% in two days vs oil. As of today, it’s more than 25% in three days.
Matthew, maybe you can help with a chart. I am trying to come up with a historical on the ten year versus the CRB as far back as I can go (1967 I think). Does Stockcharts do that comparison? It would be TNX / CRB if I am not mistaken.
I don’t subscribe there so my access is pretty limited.
TNX:CRB has been rising for three years and looks like it’s going higher. I could only go back to 1980 because I haven’t upgraded my subscription (I use my trading platform for a lot of my charting).
http://stockcharts.com/h-sc/ui?s=%24TNX%3A%24CRB&p=M&st=1980-09-07&en=today&id=p16767279985&a=422646304
Many thanks Matthew. I am thinking of trying Stockcharts for a trial. You think its worth it compared to others?
Looks like a reverse H&S btw.
Yes, it’s worth it. And you get market commentary from webinars from the well-known veterans.
“And” webinars not “from” …sheesh 😐
Good chart on the 10 year versus the CRB index.
Hey Doc what’s with the raspy voice?
Reminds me of the kid on The Little Rascals 🙂
Hello there.
I am a little confused about global demand for oil. Keith Schaefer stated in his most recent article that oil demand is up almost a million bpd in the US compared to the same time last year. He states that the numbers are from the EIA. Can anybody else verify those numbers? How about increased demand due to low prices in other countries then?
Thanks
Sure, I will answer that Nic. It is global consumption that is up a million barrels per day rather than US consumption Chinese consumption is in decline but overall the world is using record amounts of liquid fuels. Projections are for surplus stock to decline in the coming months and this will pressure oil back up. Winter is approaching to so there are seasonal considerations. Have a look at the charts and data from eia to get a better idea.
Global production and consumption of oil.
http://www.eia.gov/forecasts/steo/report/global_oil.cfm
Doc your CDN$ outlook, that’s going to have oil in the $20’s if the Oil Cdn$ chart action repeats 2002
Armstrong revealed in his weekend audio that the computer data shows a possibility of $15-$18 oil into 2020 (just not today, lol)
http://stockcharts.com/h-sc/ui?s=%24CDW&p=D&yr=14&mn=9&dy=0&id=p05042376033&listNum=1&a=422629101
First, about the Canadian Dollar, Doc. The Commercials have become noticeably bullish in the last couple months (according to the COTS) as the CAD approaches major support.
This may not yet be the final bottom but the chart is telling me there will be a healthy rally once support is finally hit. Perhaps it will not feel that different than the oil rally we just saw. Crude may also be signalling that the CAD is about to rise so that’s worth keeping in mind as there is a fairly strong oil / CAD correlation.
As September arrives tomorrow and holidays are officially over for a lot of brokers the action could start heating up quickly. Given that backdrop I am perhaps a little more bullish oil than you right now and the Loonie is important in making that determination.
My second point is about Coffee. Where the ETF Cafe is concerned we are literally sitting on support today. I agree this has great potential in the next few weeks. If you pull up a daily chart of coffee futures you can see price is already turning positive from the bottom of the trading channel. Over on a two year Cafe chart the picture is similar and implies a little better than 10% upside inside the channel and could get underway at anytime now.
Might sound a silly question – has the El Nino had any affect on coffee harvests?
No idea. I mostly just watch the charts.
LOL – thanks. I occasionally do a lot of research into weather…. Whether, no pun intended, the long-term weather has potential to wreck harvests. Admit that I am out of date. Will go away and do some research 🙂
I might follow along. I could stand to do a little more bird watching and get away from the damned computer once in awhile.
Interesting thoughts on whether the weather will affect coffee harvests Bob UK.
I’m tracking the ETF CAFE and am thinking of taking out a position on the next pullback.
http://stockcharts.com/h-sc/ui?s=CAFE&p=D&yr=0&mn=6&dy=0&id=p60121380578
Same here Shad. Possibly tomorrow. Just a little downside left to bottom in the channel and away we go.
Bob, the beginning of the El Nino is predicted to take place this winter.
Daily and weekly, I’m liking the loonie here.
http://stockcharts.com/h-sc/ui?s=$CDW&p=D&yr=1&mn=3&dy=22&id=p42597369051&a=404784889&listNum=1
100% agree Matthew.
GDXJ now has back-to-back daily closes above both the 20 day sma and 20 day ema.
Encouraging upturn on the slow stochastics as well.
http://stockcharts.com/h-sc/ui?s=GDXJ&p=D&yr=0&mn=6&dy=0&id=p19154644302
Next resistance at 50 day ema – $21.22
For those who can view a monthly chart, that was a great way for oil to finish the month. Not the February 2009 low at $33 have we seen such a good looking bull hammer.
http://stockcharts.com/h-sc/ui?s=$WTIC&p=M&yr=11&mn=11&dy=11&id=p71798045266&a=418727636&listNum=1
Typo: Not SINCE the February low…
It was fantastic. I see a clear five wave rising Elliot count on the daily though so am expecting a sharp pullback before another resumption higher. What’s your take on it for this week?
I took out a position in DWTI at the end of the day expecting a pullback on Tuesday.
I thought long and hard about it – well done you.
The goal is to make 10-20%, sell it, and then buy back UWTI for the Wednesday announcements on Oil inventory. We’ll see what kind of ideas Mr. Market has tomorrow, but so far in overseas trading it’s in the money.
On September 1, 2015 at 8:53 am,
I just sold 55% of my position in DWTI for $113.13 (for a profit of 22.3% since taking out yesterday’s position of $92.47). I’m waiting just a little longer for the remainder before going back into UWTI.
On September 1, 2015 at 11:04 am,
Well I sold the balance 45% position at $112.12 as I’m just not sure what is going on in Oil. I wanted to lock in the profit of 21.25% but may be leaving money on the table. I just want to be ready to buy UWTI and we’ve been stuck in a range.
On September 1, 2015 at 11:31 am,
I just took my first position in UWTI at $1.15, but it is like trying to catch a falling knife.
My thoughts are that Oil will still try for $50-$55 later this week before the rally tops out. We’ll see how it goes…..
Darn – DWTI ratcheted even higher now at $113.94. Should have held my 2nd position longer, but earlier today it looked dismal. Oh well, it was a good trade regardless. I’m done for the day and hope everyone had a great day in the markets.
I am not convinced by this rally in oil – it only started on the news of Saudi invading parts of Yemen.
It started going back down today – presumably because all the oil shorts had covered in a panic by end of Friday – and then a convenient OPEC press release comes out and oil soars again.
It is not logical that the Saudi’s have spent the past year – and presumably many tens of billions of USD in lost oil revenues – merely to quit now just as they were about to destroy many of their competitors.
It would make them look a joke – a bit like a man crawling across a desert for a drink of water and then stopping mere yards from his aim.