Thursday, September 22, 2011

It's a Simple Theory.... Lower Equity Prices, Means Lower Consumption of Crude Oil

The massive move down in the crude oil market today is largely reflected in what we have been saying about this market for the past several weeks. It only underscores just how powerful our longer term Trade Triangle technology is. As you may recall we are tying the crude oil market with the equity markets. As the equity markets go, so does crude oil at the moment.

The theory is lower equity prices, means lower consumption of oil. It’s not important whether we agree or disagree with that statement. What is important is how the market is acting. Pay attention to the MACD that is beginning to lose momentum and could be rolling over to the downside if we have any more negative closes. Short, Intermediate and Long term traders should continue to be short the crude oil market.

November crude oil closed sharply lower on Thursday as it extended this week's breakout below August's uptrend line. The low range close sets the stage for a steady to lower opening on Friday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near term. If November extends this week's decline, August's low crossing at 76.61 is the next downside target.

Closes above the 20 day moving average crossing at 87.49 would temper the near term bearish outlook. First resistance is the 20 day moving average crossing at 87.49. Second support is last Tuesday's high crossing at 90.60. First support is today's low crossing at 79.66. Second support is August's low crossing at 76.61.

Monthly Trade Triangles for Long Term Trends = Negative
Weekly Trade Triangles for Intermediate Term Trends = Negative
Daily Trade Triangles for Short Term Trends = Negative
Combined Strength of Trend Score = – 100

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