Thursday, 11 July 2013

WTIC Oil, breaking out

Whilst equities continue to broadly climb higher since the sp'1560 low, the more dynamic mover is Oil. WTIC has now clearly broken higher on the hugely important monthly charts. There is soft resistance in the 106/07 area, but is it the $110 level that will be far more decisive.

WTIC Oil, monthly, 20yr

WTIC Oil, monthly2, rainbow


Just a few short notes on Oil, which as many are starting to realise, is seeing some very significant..and consistent daily gains.

As ever, what will be particularly important, is how we close the month. Any close in the $110s, would bode for 120s in August, and that is going to put some serious (at least short-term) pressure on the US economy.

The 2008 high of $147s look extremely unlikely this year, global demand just isn't that strong right now. What is clear though, higher Oil prices are going to spook the equity market at 'some point'. Already, the airline stocks are starting to decline (see UAL post), and they are a typical leading sector that can warn of trouble.

Looking ahead

There is the usual weekly jobless claims, import/export prices, and also Treasury monthly data on the deficit. There is no significant QE for the bears to be concerned about, and indeed, there are no major QEs until next Friday (opex, July'19)

For Thursday, bears should be seeking at least a moderately lower Thursday close, somewhere <1646, preferably something in the 1630s. The 50 day MA will be around 1630 late Friday, and would be a very understandable level where the market can find support.

**Late evening update

As of writing (10pm EST), futures are sp +15pts, so, we're set to open @ 1667. Perhaps the most disturbing realisation, is that is a mere 20pts from the May'22 high.

If we open up 15pts, that will make for a 107pt rally in just 13 trading days....sickeningly incredible.

sp'60min'2 - bollinger/Keltner bands

A gap straight to the upper 1660s is going to put the market into very overbought territory again. Indeed, regardless of any gap higher, primary downside target will be the 50 day MA, but that is rising each..and every day.

*I am short the indexes from sp'1654, seeking an exit in the low 1630s by the Friday close, although with the likely Thursday gap higher, the 1630s now look a long way down.

Goodnight from London