Sunday, November 23, 2014

WTIC Crude Oil Weekly and Daily Charts Lower Band Violations Price Extended to Downside Positive Divergence in Place and Developing

WTIC crude oil is slapped in the face week after week. The last time these charts were shown the daily chart positive divergence (yellow lines) wanted a bounce, which occurred, but the weekly chart wanted price to come back down again, which occurred. Same-o dealio now. The daily chart is agreeable to more up with the indicators sloping higher but the MACD line on the weekly chart remains weak and bleak so another matching or lower low is desired after the near-term bounce. The expectation is that oil price bases as the year comes to an end. If oil price bounces for a week, then retreats again, and the MACD line turns to positive divergence a sustainable base will be placed.

The OPEC meeting is this Thursday (Thanksgiving) so that adds drama to this week's trading. The daily chart possie d (green lines) created the bounce late last week. The lower band is violated on the daily chart and price has almost tagged the middle band, which is needed at a minimum, so 77-78 is in play. The 80 resistance also serves as an upside target.

For the weekly chart, the stochastics and money flow are positively diverging at oversold conditions wanting to see price bounce (on a weekly basis) even if just for a dead-cat bounce. The lower band is violated for the last four months so a move back to the middle band, now at 90.37 and dropping, is on the table. The middle band may fall to the 80-83 resistance area by the time price recovers so this may serve as an attractive upside target zone.

Overall, speaking on commodities and oil more broadly, Keystone's expectation is that a global slowdown in demand is occurring and prices will likely stagger sideways for months or perhaps a year or two ahead. There will always be success stories, however. Cocoa demand remains strong while supply is challenged so that is an attractive commodity and Keystone will likely name sugar as his favorite commodity pick for 2015. Keystone named coffee as the best commodity for this year and it did not disappoint. JO was a rocket launch this year. The sugar charts can be assessed in December.

The overwhelming consensus says lower oil prices have nothing to do with global demand and everything to do with the flood of supply as the Saudi's maintain high production rates to squeeze out the North American shale and oil sand producers. However, as evidenced by other commodities, metals, grains and copper, the slowing demand is broad-based. China's growth target is slipping under +7% for this year which caused the PBOC to panic and start lowering rates. That is ridiculous when you think about it--panicking at a +7% growth rate. Obviously, the Chinese economic numbers are likely made up in a back room, even more so than the data from the developed nations, and Chinese growth may be more in the +3% to +6% range. The pop in Aussie dollar and commodity plays due to the Chinese goosing last week may be short-lived going forward. Keystone continues to expect global disinflation and deflation although this idea is challenged by recent rosy economic data.

The projection for oil based on the charts above is a near-term bounce and quick recovery rally into 77-83 but the weak and bleak MACD line on the weekly chart likely wants a matching or lower low over the next couple-three weeks to occur again; then oil should stabilize and base moving forward. Oil and commodities in general likely have lots of sideways on tap for the months ahead. Anything can happen on Thursday after the OPEC announcement. This information is for educational and entertainment purposes only. Do not invest based on anything you read or view here. Consult your financial advisor before making any investment decision.

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