chartists say the back was broken on the oil price rally

The Oct NYMEX crude oil contract closed at $109.71 after hitting a low of $105.46, down over $13 from the high at $118.60. Wow, that’s an abnormally wide high-low range. Stocks rose and other commodities, including steel, copper and grains, fell. See the gold chart - it closed at $805.00 from the high at $840.70, another very wide range. We know a drop in demand is partly behind the drop in oil and commodities, but the price declines are excessive relative to the drop in demand. This gives us the familiar analytical problem of pondering whether a bursting bubble is quantitatively or qualitatively different from a normal cyclical reversal. They always overshoot, too.

We remain dependent on the weather for the oil price forecast. Now that Gustav has weakened,
watchers are turning to Hannah and Josephine forming in the ocean. While chartists say the back was broken on the oil price rally by the drop under the 200-day moving average and the May spike low, a “target” of $100 (or $80) is still just an idea without any real basis.

Bye For Now

Barbara Rockefeller