Technicals | Sep 29 2010
By Rudi Filapek-Vandyck
USD down, everything else up. September has so far looked a rather easy trade as the global investment community is preparing for more quantitative measures by the Federal Reserve. Economic data have been relegated to second, if not third rank (they only seem to matter in that they have to continue confirming things remain really bad, in effect shortening the odds the Fed will jump into action).
But… while commodities backed currencies, agri commodities and metals have enjoyed a similarly buoyant trading environment as global equities, crude oil has found the going tougher.
If we take guidance from some updated views in the market, things are not looking like crude oil's fortune is about to reverse for the better. US based commodities trader Dennis Gartman announced in his daily newsletter yesterday he has turned once again bearish on crude oil.
Gartman argues the relative price discrepancy between grains and crude oil has blown out too much in favour of the latter. What this means, predicts Gartman, is that grains are going to make up for it. Thus apart from a bearish view on crude oil for the short term, Gartman's view is negative on a longer term horizon relative between the two commodities.
Reports Gartman: “Over the past several years, it has taken, on average, about 13-14 bushels of wheat to buy one barrel of crude oil. This morning it is taking about 10.2, and we can imagine this falling toward 5-7 before the bull market in grains and the bear market in crude ends”.
Technical commodities analysts at Barclays Capital have observed how crude oil futures are battling with a rather unusual convergence of resistance trendlines on price charts, as four year, six months and one year trendlines are all merging in between US$75 and US$80 per barrel.
Can this explain why crude oil has been unable to surge past US$80/bbl as predicted by many?
The team at Barclays suggests trendline resistance around US$76.80/77.75/bbl levels is likely to remain a stiff barrier to cross in the short term. Ultimately, the analysts expect crude oil the join the “short USD” party, but for now range trading seems to be the main menu.
It would take a sustained fall below US$73.10/bbl to turn WTI crude oil's technical outlook negative, reports the team.
