• 142 days Could Crypto Overtake Traditional Investment?
  • 147 days Americans Still Quitting Jobs At Record Pace
  • 149 days FinTech Startups Tapping VC Money for ‘Immigrant Banking’
  • 152 days Is The Dollar Too Strong?
  • 152 days Big Tech Disappoints Investors on Earnings Calls
  • 153 days Fear And Celebration On Twitter as Musk Takes The Reins
  • 155 days China Is Quietly Trying To Distance Itself From Russia
  • 155 days Tech and Internet Giants’ Earnings In Focus After Netflix’s Stinker
  • 159 days Crypto Investors Won Big In 2021
  • 159 days The ‘Metaverse’ Economy Could be Worth $13 Trillion By 2030
  • 160 days Food Prices Are Skyrocketing As Putin’s War Persists
  • 162 days Pentagon Resignations Illustrate Our ‘Commercial’ Defense Dilemma
  • 163 days US Banks Shrug off Nearly $15 Billion In Russian Write-Offs
  • 166 days Cannabis Stocks in Holding Pattern Despite Positive Momentum
  • 167 days Is Musk A Bastion Of Free Speech Or Will His Absolutist Stance Backfire?
  • 167 days Two ETFs That Could Hedge Against Extreme Market Volatility
  • 169 days Are NFTs About To Take Over Gaming?
  • 170 days Europe’s Economy Is On The Brink As Putin’s War Escalates
  • 173 days What’s Causing Inflation In The United States?
  • 174 days Intel Joins Russian Exodus as Chip Shortage Digs In
  1. Home
  2. Markets
  3. Other

Crude Oil Bottom Likely to Propel Dow Industrials Higher

"The minute you settle for less than you deserve, you get even less than you settled for." ~ Maureen Dowd

The chart below clearly illustrates that a relationship exists between crude oil and the Dow. For most of the 1st half of 2015, oil traded sideways, and the Dow followed suit. Then, around July of 2015, oil broke down, and the Dow followed in its footsteps. We see a similar pattern from Nov-Dec 2015; oil headed lower, and the Dow once again followed in its footsteps; so much for the argument that states lower oil prices are conducive for the markets.

Dow Industrials and Oil Daily Charts

Fast forward to Jan-Feb 2016 and you notice that the Dow followed crude oil to a "T". The only difference being that while crude oil dropped to a new Low in Feb, the Dow put in a higher low. After trading above $51.00, oil consolidated and many a naysayer would have you believe that the oil rally is over. They will soon be proven wrong once again, but that is a story for another day.   Given the strong run up the pull back that oil experienced was minor in nature, and crude oil has put in a bottom. From low to high, crude oil almost tacked on 100% in gains.

We were expecting it to pull back to the 40.00 ranges with a possible overshoot to the $39.00 ranges; it traded as low as $39.19 before reversing course.  As far as we are concerned, the oil correction is over, and it is getting ready to trend higher. Moreover, it appears that the Dow is once again following in its footsteps as illustrated in the above chart. In this instance, the Dow bottomed early than oil. After dropping down to the 18,300 ranges, the Dow reversed course and soared to new highs. Potentially it could still test the 17,800 ranges; former resistance turned into support, before attempting to trade past 19,000.


Conclusion

The consolidation in oil appears to be over and given their relationship, the Dow together with Crude oil could be gearing up to trade to new highs.  Ideally, (but it is not necessary) the Dow would test the 17,800-18,000 ranges before making a break for 19,000. Thus all sharp pullbacks should be viewed as buying opportunities

"The art of acceptance is the art of making someone who has just done you a small favor wish that he might have done you a greater one." ~ Russell Lynes

 

Back to homepage

Leave a comment

Leave a comment