WTIC Crude Oil Weekly Chart

Oil remains the main talking point. The universal consensus is that lower oil prices is great news for the stock market and economy. Is it? The positive argument is that lower oil prices create lower gasoline prices and higher consumer sentiment and spending. All true. The consensus says the drop in oil is purely due to oversupply conditions. GS CEO Llloyd Blankfien says "lower oil is a blessing."

The negative argument is that a drop in oil price is due to lower global demand as well as oversupply. Both OPEC and the IEA have lowered their demand estimates through next year. Lower demand indicates a global economy that is disinflationary and perhaps deflationary and far weaker than thought. After all, China has built all the empty sky scrapers that it can handle for a while. Further, the chart above clearly shows oil topping in summer 2008 and the waterfall stock market crash began in October only about four months later. All the same pundits were probably touting the greatness of lower oil prices back then as well. On Labor Day 2008, they were grilling Black Angus steaks and waving flags celebrating the drop in oil prices professing happy days ahead; at the end of the year, they were heating franks and beans over a Bunsen burner. The red circles show th etop in crude so a similar fractal may play out now with the stock market since we are about four or five months from the peak in oil this summer just like in 2008.

The yellow sideways triangle is in play with the larger one pointing to an uber low of 20 bucks but reining in the chart and focusing on the smaller tighter triangle a projection to 55 is targeted. The 55 is also longer term support from 2008-2009. The red lines show weak and bleak indicators as highlighted in previous charts. In the near term a bounce in oil is and should be expected, even a dead-cat bounce, but the weekly chart projects further softness through early 2015. Keystone continues to forecast the lower demand and deflationary story ahead for global markets. 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.