It has been awhile since I posted anything. I do this as a hobby and recently I have had little I felt contributed to the discussion.
For quite some time I had been bullish on oil prices (Mar 24, 2018 – oil at $65 – felt it was going higher; Nov 6, 2017 – upside target for 2018 was $80; May 4, 2017 – suggested the decline was not a new bear market; Nov 5, 2016 – suggested crude was bottoming for the next leg; Jul 29, 2016 – posted a chart targeting $68; Jul 23, 2016 – refuted a presentation calling for a re-test of $25; Jul 13, 2016 – suggested 2017 would be a good year for oil; and although being early – I cant pick a bottom – Dec 9, 2015 – wondering about a double bottom).
These trades worked well for me.
Chart courtesy of Stockcharts.com
After being on the bull side for a few years, I actually turned bearish on oil in the fall when oil failed a third time at the 2014 breakdown.
Chart courtesy of Stockcharts.com
This entry worked out well for me.
Chart courtesy of Stockcharts.com
I think it is time for a bounce.
Rates and oil tend to trend in the same direction and more often than not rates peak first. I do not think rates have peaked.
If the yield curve continues on the current trend it will not invert until 2020-2021. As an aside, if you have never checked out Yardeni Research you are missing out on all the amazing charts.
The ratio of leading to coincident economic indiators has not rolled over as it has for every recession since the 1960s. This gives the FED room for more hikes.
In addition, light truck sales have not gone negative as they have before every recession.
Chart courtesy of Stockcharts.com
The bullish percent index for the oil sector is at 2014-2015 crash levels.
BreakPoint Trades does a better job of showing the divergence in MACD, RSI and the bullish percent index and how that has in the past been a bottoming indicator.
The move from backwardation to contango has been felt mostly on the front end of the curve. From Oct 24 to Nov 29 there has been a $15 move in the front end vs a $6 drop in the long end. This is the result of the increase in supply since April to cover expected lost production from the Iranian sanctions.
Managed money is nearly out of the market. Total longs across WTI, Brent, gasoline and heating oil has declined to Jan 2016 levels.
I do believe there is a recession that will be dated in 2019-early 2020, as discussed on June 27, 2018. In that discussion I felt it would be obvious by March 2019, but I think that guess was aggressive.
I borrowed this chart from@HKS55 on Twitter and made a few changes. I agree with his premise, but my low happens in 2020 and there should be a counter trend rally into the new year. I believe the market is looking for a catalyst
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