It has taken some time, but it looks like Saudi Arabia has finally won the oil wars. The long and steady decline in crude oil, which has taken over five years, has taken its toll on many small oil producers who have effectively been driven out of business. Saudi Arabia's cost of producing oil is probably the lowest in the world and even at $30 a barrel, they are still making a ton of money.
Crude Oil
An amazing side effect was the fact that the stock market was driven higher as oil prices were driven lower. The perceived theory behind this is that the consumer could fill up their car at a lower cost and therefore would have more disposable income. Now that oil prices are moving higher, will the reverse happened and push equity prices lower? I believe that is exactly the direction we are headed in right now, oil prices higher, equity prices lower.
Our Trade Triangle technology may have already picked that up with a monthly red Trade Triangle in place for all of the major indices, indicating longer-term lower prices. In the case of crude oil, we use the weekly Trade Triangle which is now green indicating prices are headed higher. This is the first green weekly Trade Triangle for crude oil we have seen in over five months.
In today's video, I will be looking at crude oil and where I think it can go in the short and longer term. This market has created a very reliable and strong technical formation indicating higher prices.
Gold
The price of gold continues to move up on a strong performance last week. I am still looking for this market to move up to the $1300 level before it finds resistance and regroups. I will also be covering gold in today's video update.
Equity Markets
As I mentioned in my comments on Friday, I believe that the equity markets have seen a rebound in the longer term bear market. For this coming week, I expect to see a choppy two way market as conditions for the major indices rotate and begin to move back to the downside. I do not expect to see this happen in one day, in fact, I expect it may take one to three weeks around current levels before reality sets in.
Have a positive trading day everyone.
Adam Hewison
President, INO.com
Co-Creator, MarketClub
Adam,
You seem to be a day late and a wrong on your oil recommendation.
Oil is bound to go up more, but I'm hoping it stays down long enough to put most of the frackers out of business. Fracking is one of the most insane ideas in human history, and needs to be stopped. There isn't enough sanity in the political process to stop it, sadly.
Typical misinformed investor looking to stay addicted to the ME oil cartel.
Without hydraulic fracturing, we would be importing another 4 million barrels a day, natural gas would be $10/mcf or higher, unemployment would be approaching 20%, industry would be leaving this country because of high energy costs and CO2 emissions is this country would be skyrocketing because coal would not have been displaced by all the cheap natural gas. Because of hydraulic fracturing, industry is moving to the US, millions of jobs are being created, gas at the pump is under $2/gallon, unemployment is very low and our trade deficit is better because we are not paying billions of dollars for more foreign oil. If oil did not exist we would have to invent it because of its energy density and usefulness as a transportation fuel. Burning oil is a terrible way to use this natural resources, but there is nothing better. I doubt planes will ever fly powered by batteries. The energy crisis that began in 1973 with the first Arab oil embargo is officially oil because of hydraulic fracturing and our ability to get hydrocarbons out of very tight domestic rocks. We have plenty of domestic energy for the next 150 years, plenty of time to figure out what will replace these resources. One could argue that hydraulic fracturing has saved our country and, when the technology gets exported around the world, electricity (generated with clean, reliable, economic, scalable natural gas) can benefit the billions of people who live without electricity and clean water and many other things we take for granted. Without hydraulic fracturing billions of people are condemned to living in poverty for the foreseeable future.
What are your thoughts on silver? And its unusual
Price ratio to gold ?
Hi Adam, thank you for your very informative articles that you so freely share with the general public.
I would like to make a comment on the double bottom displayed on the DOW daily chart, where it shows that the price might run into some resistance at current levels.
However when we look at the weekly chart or the monthly chart we also have a double bottom on both, where the indication is that the DOW could go as high as 20500 for the weekly chart or 20570 for the monthly chart. Should we take this in consideration or ignore it untill we see a confirmed break above the daily resistance level. I am looking forward to your comment.
Kind regards
Konrad
We seem to have conveniently forgotten all the hype of Peak Oil in '07, and tankers running racetracks offshore until they could offload their product to the land based storage and refineries.
Where are these problems now? I don't recall any new refineries being built and relatively new tankers are being chopped up in Pakistan.
Were we taken for a ride 9 years ago?
James,
Fracking changed oil production.
Without it, we would be at very high prices due to oil shortages,
Exactly, had American politicians supported fracking we could have broken SA back.