Oil

January 4th, 2009

WARNING: This is not a recommendation to buy, sell or hold any financial instrument.

I was going to buy the United States Oil ETF on Friday, but it was sharply higher. I refuse to chase, though, so I’m going to wait for a pullback (that may or may not come).

I’ve never touched oil before, but my guess is that, in addition to pricing in demand destruction brought on by the economic collapse, oil has overshot to the downside as market participants moved to raise cash to cover losses elsewhere in the casino. Then the speculators brought their boots down and it got bloody for oil longs/peak oil snake handlers/commodity holy rollers/etc.

The trend on oil is very clear: Down. But I see a sort of blowoff negative volume situation leading into the recent low. And look at the OBV creeping back up. RSI is finally managing to unstick itself from the lower bands. Finally, the price has climbed over one of the down trending channel lines.


United States Oil Fund, daily interval

I almost never use fundamental analysis when considering a trade, but I am this time. Several oil infrastructure projects have been postponed or canceled due to the slide in oil prices. The collapse of production at the Cantarell field in Mexico should play a role in sending prices higher.

What really has my attention, however, is the fact that, right now, more oil is being stored on ships at sea than at any point in the last twenty years… Just waiting for higher oil prices.

This situation is begging for a false flag attack or war to help oil prices move higher.

The oil industrial complex is the second largest criminal racket in operation on the planet at this time. (Banking is the first.) How many false flag operations or wars would it take to get oil back up? I don’t know, but I’d be willing to bet that lots of crooks are thinking about it. In fact, I am going to bet money on it.

Think about it: If you had all of that oil bobbing around on the high sees, would you just let it pile up until the point at which you would have to dump it into the market, driving prices even lower?

No.

You’d get long, blow something up, blame “the terrorists,” take profit on your paper bets and sell your oil at much higher prices.

Of course, this is all theoretical and probably won’t happen, and even if it did, it would just be a coincidence anyway.

Another factor which could lead to higher oil prices is Obama’s upcoming trillion dollar clusterf*ck orgy of government spending on “recovery.” I don’t know what that’s going to entail, but it will, by definition, require a hell of a lot of oil.

3 Responses to “Oil”

  1. Loveandlight says:

    How many false flag operations or wars would it take to get oil back up? I don’t know, but I’d be willing to bet that lots of crooks are thinking about it. In fact, I am going to bet money on it.

    Which might mean bombing Iran is on the table again. Lovely. 🙁

    Another factor which could lead to higher oil prices is Obama’s upcoming trillion dollar clusterf*ck orgy of government spending on “recovery.” I don’t know what that’s going to entail, but it will, by definition, require a hell of a lot of oil.

    The mainstream scuttlebutt is that there will be an emphasis on infrastructural improvement. Though that may be a better way to spend money on the economy than a lot of other ways, I still think that my “apple” metaphor applies and the benefits derived from such spending will necessarily be limited.

  2. anothernut says:

    Your technical analysis is multi-pronged and hard to argue with, but… I can’t shake the feeling that there’s more demand destruction coming down the pike, and oil could go as low as $20/bbl.

    Some additional analysis (which supports yours, up to a point): the last time the weekly RSI was this oversold was the prelude to the big move from mid ’07 to mid ’08. However, it stayed there (oversold) for another 6+ months as the price continued to decline. (I’m counting from 3 months after the time the weekly RSI first went below 30 (the default Tradestation oversold line) back in Sept ’06, as today is roughly 3 months since the weekly RSI most recently dipped below that level.) Personally, I’d wait till you see some bullish divergence between price and RSI on the weekly chart.

    In any case, good hunting.

  3. Kevin says:

    I’d say that without any funny business, it could very well be headed for another leg down as the economy is currently in a tail spin.

    In my read of the chicken entrails, it’s starting to look like accumulation. I’d love to be wrong, though, and pick it up a lot lower!

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