Crude Oil and the Bull Game...
From NFTRH23's snippet A Brief Look at Commodities: 'In what is likely to one day degenerate into a global war for resources and capital, the time has come to begin watching these commodities closely, now that the former commodity bull herd is obsessed with deflation. This is how the markets work my friends.'
By the way, I wrote this a long time ago about deflation and it is so painfully true today:
'..."deflation" has long since become a malignant potential outcome (as opposed to the backbone of progress it had been) due to policy makers' inability to leave well enough alone. The well-spring of productivity has been drained by ever larger government and spending. Not only has productive value been drained, but the spending has continued right off the balance sheet and into mind boggling debt. Thus, a deflationary spiral could only be painful now. The same entities that have told us they will defend us against it are the ones who made it malignant to begin with. I can't help thinking of the Jungian "shadow"; the longer it is denied, [the] more fierce it will ultimately be in exacting revenge for that denial.'
Dialing back to the micro subject of this post, understand two things... 1) Oil is still in the bottoming process. It is a classic looking bottom with a higher low, bullish divergence, a break above resistive moving averages and in the last two days, a healthy looking back test of those averages (EMA 20 and SMA 50). 2) This is A bottom, not necessarily THE bottom.
The United States will likely attempt to devalue its way out of its obligations, with the full support of the public, now that we have all seen the ugly face of deflation. An NFTRH subscriber sent along some information from one of his clients that among other things paralleled Bernanke's (he is a scholar of the Great Depression after all) situation today with that of the Fed in during the Great Depression. Hint: Not bearish for gold... and not likely bearish for any precious resource, oil and other commodities included.
Still, dialing yet again back to the micro, we want to ride the waves, and my personal working plan holds that if we are able to rip a hole in the deflationary depression shroud that has so completely settled over the populace, it may only represent a false or temporary economic revival. But then again, with the intensity of this once in a lifetime meltdown and resultant monetary fire hoses spraying out funny munny 24/7, you never know. At some point we are going to get a progression that goes like this: Deflationary depression is all but a given ---> economic micro-managers work overtime to battle this ---> a brief goldilocks period as it looks like our heroic policy makers have saved us ---> increasingly intense inflation issues begin cropping up. Things like oil will surely be right there.
I just can't seem to stay on the micro this morning, can I? On the micro, the chart of oil maintains its healthy bottoming stance. The stock market is bolstered by the fact that no sooner has it produced an impressive three days in a row of upward mobility that the mainstream financial media and its chosen pundits are fretting 'too much too soon' and 'the VIX is still eleveated!'. I actually read that last night and it's bullish. That is not to say that markets - including oil - will not grind in here; they probably will. But in the near term, it looks like we could rip a hole in the deflationary death shroud. Some day it will become a long term thing. In three years, don't be asking 'what happened to the deflationary depression (there I go again... I guess that this is just destined to become a macroeconomic article as opposed to the short piece on the status of oil that it originally began life as).
As a final note, I want to give kudos to Adam Hewison at INO.com regarding oil. Check out this video where his MarketClub 'system' generated a sell signal way up near the top and then stubbornly refused to issue a 'buy' until a bottom was built. This allowed him to confendently state something like 'any decline is to be bought' once the buy signal was generated. We then had the classic retest two days ago and rebound yesterday. I just thought it was masterful. Of course, I am one of the stubborn holdouts who insists on doing his own trading with macro views and instinct mixed in there with all the technical stuff. Unlike the precious metals market and miners, my personal record on crude oil is a good arguement for a 'system' like Mr. Hewison's.
Have a great day and let's see what develops. I am looking forward to this weekend's NFTRH.