WTIC Oil - warning of trouble

Whilst the main equity indexes closed broadly flat, there were still signs of underlying weakness out there. WTIC Oil closed lower by 2.2% @ $88.65. The important weekly and monthly cycles are warning of significant downside risk into early 2013. As is often the case, weakness in commodities is often a precursor to major equity declines.



WTIC, daily

WTIC, weekly

WTIC, monthly, rainbow

Summary

With the indexes ramping in the closing hour, a lot of the bears will be understandably disheartened, yet there are still some very important signs of weakness out there. Today's WTIC close in the 88s was a key one, and I think it bodes well for index declines as the week progresses.

Next target for WTIC Oil is $88.00, a close in the mid 87s should open a fast move to $84. If 84s fail to hold, then a test of the June $77 low looks very viable.

Interestingly, the monthly rainbow chart is now sporting an outright bearish red candle.

I believe WTIC is indeed warning of underlying global economic weakness, and that - despite the money printing of the central bankers, Mr Deflation is still due another visit.


Looking ahead to Tuesday:

I am seeking opening moderate index gains, with VIX in the low 16s, but with an intra-day reversal, and at least moderately lower indexes at the Tuesday close. Opening moderate gains should be enough to fully reset the hourly index cycle, and set up a strong decline across Wednesday, and perhaps all the way into the Friday close.

One thing is for sure, with all the earnings and econ-data later this week, it will be very busy!

Goodnight from London