I wouldn’t stick a fork in the Crude bull yet. I don’t know if a major change of trend is underway, but based on the bumper to bumper traffic I face every day in Beijing, I’d say no — this is just a “correction” (I hate that term) in an ongoing bull market. I’d still be looking to get long off reversals on the daily (and lower time frame) charts.
Of course I’m making a joke about this bit of absurdity: SEC to Limit Short Sales of Fannie, Freddie, Brokers
Meanwhile, back in the real world:
“U.S. gasoline demand fell 5.2 percent last week, the 12th consecutive weekly decline, a sign record pump prices are changing driving habits.”
Some guy wearing pajamas recently pointed out that monthly crude was mighty stretched … thank god no one pays attention to those blasted bloggers.
Here’s the monthly chart of crude oil going back about a dozen years. Yes, it’s up over 13 times off its 1998 low (that’s 32% annually for the last decade, the power of compounding, yow!) and recently started poking out of the regression channel (>2 SD). I expect it to go sideways for awhile at least after hitting the “magic” $150/barrel mark.
When crude broke out of the long sideways consolidation I didn’t think it would be an “easy” breakout and would dip back into the range to mess with the short-term traders, but I was wrong.
I know that posting to the blog has been a little doggy recently (neglect is on my mind), so in my defense (continuing the Janet Jackson What-Have-You-Done-For-Me-Lately theme) readers should kindly recall that I guessed that Earl would break out of the range to the upside and warned y’all to resist the temptation to countertrend trade black gold.
Adjusting to $7 per Gallon Gas in America (PDF)
“Compare driving behavior in the United Kingdom with driving behavior in the United States. Over 90% of American households use a car to get to work, while over 60% of US households own two cars or more. By comparison, just 60% of British households use a car to get to work, while less than 25% own two or more cars. Moreover, Americans drive their cars more. They make four trips a day while Brits make two. And last, some 30% of Brits don’t even own a car. In the US less than 10% of households don’t own a car.”
All these guys jumping on the $200 a barrel bandwagon brings out the skeptic in me, but the trend is their friend and I won’t call a top in crude earl until I see a turn (the same turn everyone else will see).
I can report that the recent 17% gas price hike (to $3.37 a gallon) here in Beijing has done absolutely zilch to curb demand, and I remain stalled in bumper to bumper traffic every day.
On a purchasing power parity basis, $3.37 a gallon is a fortune to the average Chinese, but as I’ve noted again and again never think of the “average” Chinese. There are now at least 100 50 million Chinese who live like Americans: they have big houses/apartments, big cars, plasma TVs, big fridges, washer-dryers and they certainly don’t bat an eye when paying $3.37 at the pump.
Only one in five urban households in China owns a car — stay long Energies.
I like to post intraday charts following massive bloodbaths, so here is crude followed by the dollar, bonds, stocks, and gold. (Fellow chart fiends love reviewing these, I think.) This plunge wasn’t completely unexpected if you were paying attention to other markets around the world and Lowry’s (abysmal) numbers.
Gratuitous horn tooting: I mentioned on Tuesday that crude would probably break out to the upside given recent failed trade set-ups from the Box.
The Box has had a quiet June finding only ten with-the-trend set-ups so far this month. It also has found 17 countertrend ideas, which I encourage subscribers to ignore. Nevetheless, I think it’s always good to pay attention to all the ideas, especially when they fail.
Last Friday the Box suggested getting short two Energy sector stocks (PDE and FTI). Both ideas were deeply countertrend and were ignored by subscribers, but the fact that both trades triggered and failed is useful information, I think.
It leads me to expect that Crude will break out of this range on the high side. (Coin toss?)
Reuters got the scoop that China would raise fuel prices. I don’t have a Reuters terminal, but it would be interesting to know what time (precisely) they published the news. Bloomberg was very late to the game, I believe, with their first headline (referring to Reuters) at around 9:53 AM, long after the market had digested the information. Can anyone tell me exactly when the Reuters headline hit?
I love comparing the intraday charts with time-stamped “news.”
The monthly trend in crude has been continuously up since April 2002. The weekly trend has been continuously up since April 2007. What this means for traders working off the daily chart is that there has been only one side of the market to consider: the long side. Here’s an animated lesson that I hope makes this clear. I’m looking forward to comments!
Oil for 2016 Surges More Than 14% to Near $140 Over Three Days
“Oil for delivery in December 2016 surged $17.08, or 14 percent, in the three trading days since Goldman Sachs forecast oil would average $141 a barrel in the second half of 2008 and $148 a barrel next year because of supply constraints.”
Sorry, that looks like a blow-off to me. No doubt the $150 to $200 a barrel target (by simple trendline extension) is a possibility, but I’d be looking down instead of up in the very short term.
Anyone who read this post from December 2005, Third Ring Road at 5:30 PM, has no excuse for missing the bull run in the Energies.
Similar to my currencies monitor, I also have a page in LaunchPad devoted to commodities. I can quickly scroll down through the major Energies, Metals, and Agricultural commodities to see what’s going on. I featured tin in the screenshot — it’s had a huge run these last several years.
