The Unfolding Commodities Panic
August 23rd, 2008 at 12:42pm · 2 Comments
A central theme of pay attention of pay the offer has been that those investors focusing on inflation are in for a surprise as gold and oil head unexpectedly lower and the dollar shows similar strength. Since the mid July top in crude oil, it’s been pretty much impossible to be too bearish on either oil, gold or the euro. Friday’s dramatic trading action drove this basic point home one more time. Gold, oil, euro and the yen had all rallied smartly, seemingly completing their bottoming formations that had been building for a time. My own daily crude oil chart below shows the six separate buy indications that had occurred, four RSI divergences, a cycle-trap turn and a net-line buy signal. In sum, this oil turn saw prices move up to the 122 area after repeated testings of a 112 low. All that was undone as oil saw a 5.4% decline on Friday and it is once again within $3 bbl of new lows for this move. I think the question to ask is, after Thursday’s run-up, who would be short oil? Very few I think, which means in all these markets; oil, gold, euro and yen, you have had extensive moves but there now are very few people on board what are obviously strong trends. This is a recipe for still more of the prevailing trend. Gold, oil and the euro will continue to surprise on the downside, and the dollar yen chart will move similarly higher.
I’m showing both the daily and weekly charts for oil here. Notice how oil nearly made a range-bust reversal bar (green wick, black body) this week. Daily charts for gold and the yen and the weekly euro are included too.
click chart to enlarge
click chart to enlarge
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Tags: Crude Oil · Euro · Gold · Yen
2 responses so far ↓
1 muellerjoerg // Aug 24, 2008 at 10:28 pm
Chris,
Can you please comment on long-term bonds? – I understand that with the deflationary outlook, treasury bonds should raise in price (yields go down) over the next two years or so. On the other hand, we seem to have made an important high with the double-top January / March. For the perspective RE buyer, housing prices will surely decline further. However, almost equally important is the trend in mortgage interest rates. It would be great to hear some more as also in the special report it was only briefly covered.
Thanks, Joe
2 deuxsous // Aug 25, 2008 at 12:47 pm
http://www.hussmanfunds.com/wmc/wmc080825b.jpg
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