Never Say Never Again
Today’s Spotlight Market
Experienced traders know that commodity prices can be extremely volatile. During the 2008 run up in oil prices, pundits were confidently proclaiming that consumers would never pay under $4 per gallon for gasoline again. Now, heading into 2016, sky high gas prices seem as antiquated as tail fins on cars. This Xpresso will review the oil market in 2015 and take a look ahead to 2016.
Fundamentals
Crude oil prices rebounded from 2014 lows heading into the spring and summer of 2015. However, these gains were short lived and began to fall even as the summer driving season was still in the peak months. There are several reasons for the continued decline in crude prices. The economic slowdown in China as well as parts of continental Europe are pressuring on the demand side. Inventories have been at record highs. The Iran nuclear deal will allow Iran to resume oil sales. Finally, the United States has lifted the decade long ban on oil exports.
Technical Notes?? – View Today’s Chart
Turning to the year to date continuation chart of crude prices, we see several bearish signs. After failing to break through resistance around the $63 level, the market has been making a series of lower highs and lower lows. The 20 day Simple Moving Average (SMA) has crossed under the 50 day SMA and there is increased divergence between these moving averages with an extremely sharp downward slope for the 20 day SMA. The Christmas Week rally, on thin volume, has helped the 14 day RSI head into neutral territory of 46.55
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