Thursday, December 30, 2010

2011 Crude Oil Price is All About The Double Dip

At this point the future of oil isn't about inventory and current demand. Obviously oil is in the position to trend higher to $100 and higher. What it is really about is do you believe a double dip in the U.S. economy is inevitable. If you listen to the talking heads they seem to think commodity demand in general will move forward even in the face of a double dip. Everyone is on board the bull train. But how quick they forget.

We personally think that if this type of demand increase continues 2011 is shaping up to be a carbon copy of 2008. Remember 2008? Spiking oil and food prices combined with housing prices taking another hit bringing down more banks and financial institutions with them.

All of this could be a distant memory and $93 oil will be called the bull run of 2010. As refinery issues in Canada fade, the Chinese continue to inflate their currency reeling in inflation, end of year low inventory tax advantages disappear and traders come to their senses that none of this was possible without the QE2 printing presses going full speed. This may be no time to short oil but January 15th and a whole new set of rules is right around the corner.

But we are trading TODAY, and here's the numbers we'll be using......


Crude oil was lower due to profit taking overnight as it consolidates some of the rally off November's low. Stochastics and the RSI are diverging but remain neutral to bullish signaling that sideways to higher prices are possible near term. If February extends the rally off November's low, May's high crossing at 93.87 is the next upside target. Closes below the 20 day moving average crossing at 89.63 would confirm that a short term top has been posted. First resistance is Monday's high crossing at 91.07. Second resistance is May's high crossing at 93.87. First support is the 10 day moving average crossing at 90.24. Second support is the 20 day moving average crossing at 89.63. Crude oil pivot point for Thursday morning is 91.77.

Natural gas was higher overnight as it extends the rally off last week's low and is trading above the 20 day moving average crossing at 4.298. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near term. Closes above the 20 day moving average crossing at 4.298 would confirm that a short term low has been posted while opening the door for additional short covering gains into the new year. If February renews this month's decline, November's low crossing at 3.913 is the next downside target. First resistance is the overnight high crossing at 4.343. Second resistance is the reaction high crossing at 4.554. First support is the reaction low crossing at 3.985. Second support is November's low crossing at 3.913. Natural gas pivot point for Thursday morning is 4.271.

Gold was slightly lower due to light profit taking overnight as it consolidates some of this week's rally. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near term. If March extends this week's rally, December's high crossing at 1432.50 is the next upside target. Closes below the reaction low crossing at 1361.6 would confirm that a short term top has been posted. First resistance is the overnight high crossing at 1415.40. Second resistance is this month's high crossing at 1432.50. First support is the reaction low crossing at 1361.60. Second support is the reaction low crossing at 1352.00. Gold pivot point for Thursday morning is 1410.00.


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1 comment:

Ken Lowe said...

i don't think anyone know what happen in 2011 with the price of oil. there's so much conflicting points of view.

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