Weekend Oct 12 2013
Talks between President Barack Obama and House Republicans to avert a U.S. debt crisis have hit an impasse, House Speaker John Boehner told GOP lawmakers on Saturday morning.
WSJ Website Saturday Morning
-Crude-oil futures settled at a two-week low Friday, after traders closed out bets on higher prices and grew concerned about slowing demand from China.
Light, sweet crude for September delivery settled 79 cents, or 0.8%, lower at $104.70 a barrel on the New York Mercantile Exchange, the lowest settlement since July 9. ICE North Sea Brent crude oil for September delivery settled 48 cents lower at $107.17 a barrel.
The decline caps a week in which Nymex crude shed nearly 3%, as some traders booked profits following a steep rally earlier this month. Analysts said prices were correcting, after rising to multimonth highs in recent weeks, driven by sharp draws in U.S. oil inventories. Despite the week's loss, the U.S. contract is still up 8% in July.
Oil Prices Fall as Traders Lock in Gains, WSJ Friday Oct 11 2013
Here is a upbeat prediction for oil supply in the US I suspect the author is over optimistic that a drop to $80 would not make much difference in activity
Let's Start with Crude oil
I noticed several gleeful news stories in papers this past week cheerfully announcing $3.00 gasoline prices. Careful what you wish for! We cannot have an oil boom and low gasoline prices at the same time. Oil prices have retreated from the top of the Keltner channel.The last two times this resulted in 2011 and 2012 a trip all the way to the 200 week MA. 95 seems a more likely target as there is a cluster of MAs there and that would be about where the uptrend line along the lower boundary of price would intersect.
Crude oil and Silver
Could the action of silver or gold offer some insight in the future of oil prices? Silver in purple matched the parabolic rise in oil during its 2008 run up. Since then both silver and oil have trended sideways. Silver has fallen to less than half its 2011 peak. Could that happen to oil?
Everyone is the oil patch is optimistic about increased production. Price spiked on the Syria story but has fallen back since. With all the world investing heavily in oil production, and needing high oil prices to support the investment, and ergo, there is plenty of supply, why are all the analysts assuming the prices will remain high? This strikes me as being about where housing prices were in 2007.
The NDX is 33% over its 200 week MA ie 800 / 2400. it has been the leader and is likely to call the top in November.
Long term bonds have worked off enough of their over sold condition to top out and head down again. While Ms. Yellen may think she is in charge I suspect the market is in charge of where rates are headed. I am guessing lower bond prices ahead.
One might think the US Dollar would have tanked this past week what with the Debt Ceiling impasse. But it id not, in fact it was up for the week. The reason is that most debt is denominated in dollars, and to pay for it, the world seeks dollars. A bottom and rally in the dollar would also send oil prices lower.
Recall that 'extreme expression of social mood tends to occur near the end of a trend.'
The same thing is true of a top. We highlighted the last $400 run up which occurred in the shortest period of time of the entire move. The last move down is likely to duplicate that mood. If the low is at tne last of October, the $300 drop could occur in the next three weeks.
We expect a top in stocks during the month of November.
Oil prices believed to be a a new permanently high plateau, as was said about stock prices in September of 1929. Massive optimism in energy projects, buildings, and even the $300 Million + Formula One Race Track in Austin Texas speaks to the sort of unbridled optimsm that occurs at market tops.
Bond prices look poised to drop further. Municipal bonds sport the same patterns.
Gold should drop hard into the month end, a target in the $900-$1,000 seems reasonable.
See our lead news item. Repbulicans describe Obama as My Way or the High Way. Obama rejects overtures as fast as they are made. The idea is not to make a deal but paint the Republicans as blocking a deal. Obama is much more focused on taking back the House in 2014 than making any deal now.
All the negative sentiment we have been writing about is now on display from Washington to Syria to Eqypt to Pakistan. This will lead to tops in various markets between with Stocks topping in November. and Oil shortly thereafter if in fact it has not already done so.
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