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Thursday, July 10, 2008

Oil and Gas: Will they Break Down?

Natural Gas (NATGAS) gapped below the rising 10 day EMA (blue line) that has provided reliable support during this up trend. Prices fell immediately to support at the 50 day EMA (red line).

Even as prices moved to new highs, MACD we losing momentum and did not confirm. Expect this move to turn into a very significant correction. A bounce back to just below $13.00 to fill the gap is possible.

Even as oil ($WTIC) prices moved to new highs, MACD we losing momentum and did not confirm. Expect this move to turn into a very significant correction. Oil ($WTIC) is at support at the 10 day EMA (blue line) where the Bulls have been able to marshal their forces for moves higher in the past. Failure here would result in a violation of up trend (black line) started in 2008 since the break OUT and UP from $100.

As equities peaked ($SPX, grey area) and money began pouring OUT of equities... it needed to find a new home. So, despite deteriorating economic fundamentals, this 'hot money' flowed into commodities. The faster equities fell, the faster commodities rose. Now this party too shall end.

9 comments:

Anonymous said...

Can you point me to a book which will help me understand what the hell you are talking about.

Really. I'd like to understand this.

Ben Bittrolff said...

"Can you point me to a book which will help me understand what the hell you are talking about."

I like Technical Analysis of Stock Trends, Ninth Edition.

Scott Finch said...

technical analysis from a to z is also good.

tomorrow ought to be an action packed day eh?

adrian said...

while i agree with you on oil breaking down and while the charts seem to support this for the short term, i have to wonder if this short term break down will work with all the "war games" and "tough rhetoric" currently going on..this seems to me like more fuel for a speculative rally.

Anonymous said...

It seems as though when oil loses a bunch a few things happen. Iran rattles their fist almost the next day...and sombody that has all thier money in commodities whales on the news about oil at $200. I think when all is said and done you will see the manipulation of a market that has nowhere to put their money. All your charts show this can't be supported...but as you say they will find a way to keep that price up there until they can figure out what to do with all that money that is headed out the door when the run for CASH begins. Sooner or later everyone will realize that cash is the only safe haven even if they end up taking a loss to get it. This " bubble " started when 401k's began and it just keeps moving around until we figure out what to do with the enormous amounts of money flowing into funds looking to earn substantial interest.

Anonymous said...

Ben,


Nice - love seeing your work. I don't do commodities, but always like to see this kind of work.

Let's see if the divergence works.

-Peruser

Anonymous said...

So where does the money go after commodities....they won't stay in cash, they can't

Perplexo said...

Perhaps some of that excess $$$ can go to people who have none so that they can buy the stuff they need to stay alive?

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