Now, I’m no fundamental analyst. I stick with the charts and simple things such as volume and support and resistance. However, I still pay attention to what is going on around me. What I’ve been hearing is that the Middle-Eastern oil countries have been quietly discussing their falling oil revenue, and are wondering when they should cut supply. I’m also seeing that Ike looks like he could be heading towards the oil rigs in the Gulf.
I would suspect, since I’m not hearing a lot of chatter about buying Oil or Natty prior to Ike’s destruction, that the long oil / hurricane trade will likely stand a lot better chance of working than it did during Gustav.
Technically speaking,  Oil is very oversold, and is showing some bullish divergences on both the MACD and Chaikin’s Money Flow. RSI(2) shows a bounce should be imminent.
Do not misconstrue my point. I’m not an Oil bull. I do not generally take the hurricane setups. I’m just saying that oil is technically due for a bounce, and with OPEC and Ike, it may come soon. A break above $90 should not be ignored.
Above is the chart of [[UUP]] the long dollar ETF. It is not very difficult to see that Oil and the Dollar have been inversely correlated.
If Oil catches a bid, I expect that the Oil/Dollar relationship will continue. Currently, UUP has a quite a bearish divergence on the MACD, although volume has been outstanding. Today’s candle hints at a reversal. RSI(2) is very overbought. A trip back to $24 would not hurt anybody, and would probably be healthy.
One can get short the dollar via [[UDN]] .
Woodshedder,
Long term trend is also favorable for oil long here. It is getting close to that buy point. Pull up weekly…it’s showing up there. Just surprised that oil cannot catch a bid yet.
DIG or DXO?
Japoe, I definitely like that 3 year weekly for the USO.
…learning here. Congrats btw, you’re a Covestor star! Top 10, with a low risk score. Nice!
Great post Wood!
wood is the man, nice post.
go Raiders.
A sell off in the dollar should be good for all commodities … you look at any metal or ag stocks?
Kinda surprised the dollar didn’t sell off on the FNM/FRE takeover with all the funds to be printed, er I mean injected.
I was just looking at the USD/CHF charts yesterday and thinking to myself this is way overdone.
The problem is the evil trio of gold, oil and USD need to part company as friends and go their separate ways and trade based on their fundamentals, as opposed to be being the dollars bitches.
I have been double short the Euro via DRR, it might be time to switch to double long euro (URR) for a bit. Although I will switch back to DRR in a heart beat after a small correction.
With the sell off in Russian stocks and the ruble, I will be ready to enter again soon. Russia should not be counted out just yet.
I reviewed my notes on my post for the oil/uso correlations and here’s what I have:
5,10,30 Day correlations average -.93 with .02 standard deviation for uso-uup.
Average forecast is 29.67 with standard deviation of 1.97 for 5,10,30 day ranges. (Forecast using Excel function)
Now here’s the weirdness. The standard dev is higher than expected because the 30 day correlation is off due to the recent climb of the usd. This could mean that long term correlation is about to get sketchy.
However 5,10 day forecast calls for 28.54 and it has a standard deviation of .24. So, if I were putting money in – I would put enough so that a profit is made and I would exit the trade at 28.54
Warning: I’m still dubious of the whole linear forecasting tool.
You’ve been warned.
I was talking long USD obviously.
It’s still the obvious trade here – long USO at this point looks like a request for a haircut.
Gio- thanks! I have never looked at the rankings before this morning. Cool.
8- I didn’t look at Ag stocks, but I’ll see if I can take a look at those tonight…I had to get some sleep last night.
So far, this trade is gonna get killed. I am really surprised that the Saudi’s are willing to leave production unchanged.
Maybe they are worried about the value of their sovereign wealth funds?
Woody,
imo, the saudis and opec are scared shitless of the price of crude. they would like for the price to be a lot lower and avoid or minimize the huge move to alternative energy. they have been very concerned by demand destruction. they remember the response by government and auto industry after the oil embargoes of the 70’s, and what happen to the price of crude after that. they remember that after the price drop, the move towards consevation, higher milage standards and talk about alternatives just went away. they want a business for the next 50 yrs and not just 1o yrs, just my opinion.
Chivas, very good point, and not one that I had considered.
IMO, Chivas is exactly right.
There was a lone (Saudi?) OPEC minister in the seventies who warned his fellows about the perils of demand destruction due to high prices, and he was ignored.
This tale may be apocryphal, but I’m pretty sure that guy is in really high places, OPEC-wise, today.
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Cuervo, I’ve got to get a handle on your forecasting stuff.
Jake, i think the man you’re talking about is sheik ahmed zaki yamani
Chivas,
yeah, that’s the guy. TSO getting “the whomp” this morning. Geez these refiners can give on agita.
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The way things are going, if we get a couple more hurricanes, they’ll be giving oil away. And then, pretty soon, they’ll be paying you to take it from them.
APC up 8% in AH, XME up 2.5%, could be confirming what you see in the charts USO wise. I’m 100% weighted long energy, going into Wednesday.
I’m Hoping for a great bullish oil report pre-market, which would coincide nice with the Hurricane picture.
GS up 5% in AH, so USO going up, may still give the markets a chance to end mixed or wide range, on Wed.
Nice post. I think it’s a bit too early to pull the trigger but we’re almost there!
always look forward to seeing your charts and reading your explanations…..still learning.. thx
Still not working.