A Look at the Oil Sector
posted Jul 16, 2006 at 12:29AM
Crude Daily Chart
Crude Weekly Chart
XOI Daily Chart
XOI Weekly Chart
Like the HUI did below at the 250 level, I expect the XOI to pull back slightly, and then break out to new highs.
A Blast from the Past
Crude Oil COT Data
As regular readers know, I have been bullish on crude for quite awhile. In an earlier posting I used the weekly chart to set a target of $82 which corresponds to the middle resistance rail of the weekly chart.
Now that $82 was within the context of a status quo geo-political enviroment. Of course that status quo environment no longer exists. Israel is in a state of war and is looking like they have every intention of trying to drag Syria into this, while at the same time pointing every possible accusatory finger they can find at Iran.
There is absolutely no way that Israel will allow Iran to even have a peace-time nuclear capability.
As you know I have long held the belief that it is just a matter of time before military action is taken against Iran. These recent developments do nothing to change my mind. Once the current US administration starts to actively try to influence events, one can bet that the situation will just get worse.
Now when oil has hit all time highs, it is hardly a contrarian call to say "buy". And I wont't do that here. I will leave you to your own devices.
Again the daily chart especially looks to be in need of some backing and filling. But there are cases when changes in the situation render the technical condition at the time to be, if not obsolete, then not in proper alignment.
Cynics may say that a good chunk of the oil price is nothing more than a risk premium. Of course, oil has risen from $18 to $80 very much on the basis of that risk. Here is thing though...that risk premium is fully justified.
My big picture view remains that oil should rise in the same inexorable fashion that bullion had rose in the cycle before it. (Oil lags gold by 18 months) Indeed given that it is making new highs even while fighting the downward pressure of the 8-year Cycle
suggest that the next two years could see oil prices that are beyond most people's imaginations.