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Is Oil Close To A Tradable Bottom?
Submitted by Charles Hugh-Smith of OfTwoMinds blog,
Consider this chart of the gold-oil ratio.
By all accounts, the world is awash with oil: production remains high while demand is softening along with the global economy. This has led many observers to forecast further declines in oil from the current price (in USD) of around $35/barrel.
This Is Why $20 Oil Is A Possibility (Zero Hedge)
IEA Offers No Hope For An Oil-Price Recovery
Despite the downward pressure on oil, the devil's advocate wonders: could oil be setting up a tradable bottom? By tradable bottom I mean a level from which oil might bounce. For example, oil reversed from the low $40s earlier in 2015 and climbed to about $60 before resuming its downtrend.
Put another way: if oil's ultimate bottom is $20/barrel, it is likely to experience sharp rebounds/retraces along the way, just as it did early in 2015. These near-term lows are tradable bottoms rather than the final long-term low, which is anyone's guess.
Consider the daily chart of WTIC oil, which is tracing out a bullish descending wedge. The stochastic is also oversold. MACD is weak and bleak, but the punch through the lower Bollinger Band leaves the door open to an exhaustion move.
The weekly chart of WTIC oil is also tracing out a bullish descending wedge. Interestingly, MACD has been diverging, rising even as oil has broken down to new lows. Oversold can stay oversold for a long time, but it is still worth noting the stochastic is approaching oversold levels.
One way to assess if an asset or commodity is at an extreme is to compare its price with the price of gold and oil. Over the long-term, these ratios tend to revert to the mean.
Consider this chart of the gold-oil ratio: it is now pushing 30, which means one ounce of gold buys 30 barrels of oil.
You can see that typically the ratio is between 10 and 20. When oil was almost $150/barrel, the ratio sank near 7--an extreme at the other end of the scale.
Gold to Oil Ratio Historical Chart
What would it take for the ratio to return to 15? Either oil must rise or gold must drop significantly. In a world in which phantom collateral and phantom assets are vanishing before our eyes, I don't see gold declining much--rather, I see its current basing phase as setting up a long-term upward bias.
If gold doesn't drop significantly, the only way the ratio can resume its historical average is for oil to go back up to $60-$70/barrel or more. This looks "impossible" at the moment, but if the gold-oil ratio has any relevance, it's something to leave in the realm of the possible.
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NOP (Negative Oil Prices) should fix the economy.
How many times on the way down are you going to ask this?
Way down to infinity
Some advice. Don't trade with Charles
That oil-gold ratio is a total non-starter.
Cheap GAS ->Muscle CAR ->more CHICKS:
http://goo.gl/xFQREO
Youre a piece of shit .... TYLER Ban THis PORN TROLL.
RIPS
I knew a girl with a tradeable bottom. In Pittsburgh.
Tradeable bottom = short term point of entry to make a few quick bucks, not a true bottom. Can't some of you read?
and it has to be oily
Last thursday i called oversold near short term. But going to 20s within 6 months.
Looks like its lining up. Resistance 40.50-41.50.
Oh the joy of trading with house money.
RIPS
"Hell yeah it's a tradeable bottom!" - Lindsey Lohan
I wonder if Charlie Sheen tried out Lindsey's tradeable bottom?
Oil will be almost "free" soon.
Buy a barrel get three for free.
No oil pumping country can say "what the hell, we will leave it in the ground. It won't spoil".
See Something Pump Something
what about yellen's tradeable bottom?
Yowsa!
What Would Gartman Do?
Blow himself while balancing a Quarter Pounder with Fries on his belly.
Now that's talent. Maybe he should stick to his strength.
Oh my, he is such a talented young man. His Mother should be so proud. Balancing things is oh so hard. Heaven forbid he drops something. Oh Lord no.
I can read titles like this on the CEE-ENN-BEE-CEE scroller.
or theres this, which is as good a reason as any to think that oil pops from here...
http://www.bloomberg.com/news/articles/2015-12-14/hedge-funds-boost-bear...
tradeable bottom is when WTI hits $20 USD, also it can stay/float there for a number of years. Your sample data is invalid, since it only accounts for several years worth of data. Oil/Gold ratio is poor reasoning, since gold and oil can go out of sync, and this has been the case before historically. Downvoted, overall.
Technically 34.60/34.80 is the 3rd very oversold bottom of a descending wedge. Alot of technical traders on the futures market have signalled this level. But lot of oil bulls have gotten burned trading purely technically lately.
Question: Who the F#$@ cares about what "technical traders" think?
I don't know what technical traders are doing in the oil futures market, but hedgers are short all-in and stacking still.
The short futures and options position in London-traded North Sea Brent is the highest since October 2014 at 141m barrels, rising a quarter in the last week, while bets against US benchmark West Texas Intermediate have jumped nearly 60 per cent since early October to almost 200m barrels.
The only tradable bottoms I've seen lately are on all of the college girls in yoga pants here in State U. town.
aaaa yeah, sounds good bro. )))
The market followed the oil bump today. IMHO oil is near bottom and will bounce around there for a good amount of time. All know more to flow out of the ME soon. Same with NatGas and warmer temps. Refining cost will keep gasoline/gasses near current price.
The speculators are running out of places to warehouse the glut.
Maybe a ridiculously crazy options bet if you have money you don't care about gambling with.
The big question is whether ( actually, how soon until..) Saudi Arabia devalues aka resets/drops the dollar peg or Obama decides to fuck the nation in the ass with some outrageous new taxes on petroleum 'to save the world from Globull warmin'.
when you look at all the charts except the spx and other equity charts the bottom looks like it is forming. it may take a coupla more months to clear the inventory out but it doesn't look like an overwhelming, everything is going to collapse, type of situation. it is never going to be 1999 again but more like a dirt road with potholes like it has been since 2008. of course ww3 changes everything but i think they will wait until the next president is chosen. election years are usually pretty good for the market. we'll see what happens ina coupla days with the fed.
ten
ZH promised $20 oil by summer 2015.
A "Tradeable Bottom" is when Obama swaps his husband Michael to Reggie Love for Ben Finkenbinder, Bobby Titcomb or Lance Bass, usually during an Obamacare sleepover.
I learned SO much from your comment RonArgent. Your talent is boundless indeed. And your high class writings inspire the souls of the common citizen. Thank you so so much young man.
how do you know he is young? You wouldn't be Manchelle, would you?
Bashing Obama is all you ever have to say on ZH. Did he fuck your mama or what.
in fact, he did. RonArgent's mama's health ins premium went up 300% because of Obamacare
lol ... maybe ppl just dont have a sense of humor ... Joan Rivers - RIP
I <3 cheap gas. Bring on $20. oil.
Everyone does unless you are in the oil biz. I wish I could store a bunch of it but a boating accident would kill all my fish.
Ultimately we're all living in a fiat world so the price of commodities will get hammered for a time but then I'd expect them all to form good buying oppotunities soon.
The world is not going to go away, and stop using oil, despite John Kerry, Obama, and the rest of the druids.....
This buying opportunity in oil, is starting to remind me of 28 dollar gold, once upon a time........
Make mine a bounceable bottom, bounce a quarter off it.... if it don't come back it wasn't meant to be, but you can still hit it anyway.
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Cut the technical crap.
Oil trades on oil… What comes out of the ground.
1. We got the Saudis ramping up production for both financial and political reasons.
2. We've got inventories building and filled.
3. We've got Iran and Iraq coming on line, with millions of barrels heading our way on ships.
Tell me: What is all this going to do to the price considering the S&D curve again?
•?•
V-V
Before long we should find out if they're going to lift the export ban, Wednesday I think. It sounds like Barry is feigning softening on the issue and the Dems just want paid off. It's hard to imagine how this will affect things when we import so much oil but they will come up with some shell game. According to a NoDak paper:
"The Senate aide said Democrats were very likely willing to trade lifting the ban for a multi-year extension of wind and solar tax credits and reauthorization and full funding of the Land and Water Conservation Fund, which maintains national parks with revenues from oil operations."
"There were still major disagreements over the funding bill ahead of a deadline on Wednesday on the $1.15 trillion package to fund the government through September, 2016. Many of the disagreements are related to Congress' response to the recent gun massacres in Paris and California."
Apparently the Mexicans have done REALLY well this year and next.
They hedged production for 2015 and have earned over $6 billion from their hedges. Next year? Mexico has hedged 212 million barrels at an average of $49/barrel.
There are a LOT of people going to lose their shirts....
I know :) Maybe next year we will have even more gringo ex-pat bitches in our Paciic shores.
Pussy is close to a tradeable bottom.
Someday soon it may even be free again.
"tradeable bottom".....LMAO!.......
Watch out, or Janet Yellon might add that as another reason to not raise......