This is just a quick crude oil update which has a lot to do with the fears of oil shortages due to the trade sanctions against Iran. Market moves based on fear never last that long if the real trend is still down. Most of the oil rhetoric we have witnessed has more to do with the midterm elections that any real fundamental reasoning. Some analysts also say that there is “no” fundamental reason why oil is heading down. I laughed when I read that as the “fundamentalists” have no fundamental reasoning for crude oils decline.
Maybe they should look at the Gold/Oil ratio as it was hitting a brick wall at 17:1. Today we are at over 19.53:1, which is a bit cheaper in recent weeks, but not near any extreme at this time. Commercials are not even close to becoming net long, any time soon. That doesn’t mean oil can’t rally, but chances are slim a new trend will develop from it.
Any real support is down at the $40-$45 price level but the Gold/Oil ratio also has to confirm it. The Gold/Oil ratio would be much better between 25 and 30:1, but not match that 2016 bottom of 44:1.
If the declining pattern starts to look like a zigzag then, yes I would turn into an oil bull. The weekly chart 200-day moving average is down at the $52 price level after which we hit a “Death Cross”.
On the daily charts, $65 would get us close to another Death Cross position. The 200-day MA can also give us support so it will be critical to watch once we get closer.