Crude Oil and the HUI
posted Aug 14, 2006 at 08:33PM
Crude Oil Daily
The gap down was a knee-jerk reaction to the UK terrorist attempt, based on the thought that airline fuel demand would decrease.
Post 9-11 showed that the war on terror, and the demand from Asia and India more than offset whatever problems the airlines were having. I think the same will apply here.
In the least I do believe, since this was "incident" driven, that the gap will be filled.
Crude Oil Weekly
Obviously not the easiest chart to buy from a contrariarian point of view. There may be some backing and filling required to reload certain indicators but I think, like gold, technical indicators can stay overbought for quite a while.
I am sure I am not the only one that has gotten bucked off a trend by putting too much emphasis on technical indicators.
At the same time the chart is hardly at an "obvious" selling point either. Iran is coming back on the radar screen and that alone should put a floor in on the bid side of things.
Everything about the price action still strikes me a being bullish from a swing trader's perspective. You have a clear a-b-c corrective wave down from the peak followed by an impulsive wave up. It is now in some kind of consolidation that has similar charateristics to a reverse head and shoulders pattern.
I still see one more leg up before any kind of serious correction. What happens after that is open to conjecture. Right now I am of the mind that there will be one more severe downleg, to set the stage for the fireworks to follow, but we will have to play that by ear.
Cash is good, but I do think you want to have some exposure to either golds or oils, and preferably both.