The Technical Case for a Rebound in Oil....
by Jes Black
December 13/04
Making a case for crude oil is hardly groundbreaking at this time. But
from our perspective, this is now the moment of reckoning. Recall that
we accurately called the past two tops in crude oil at $50 and $55 to
the day. [Read them here Oil1, Oil2, Oil3] Now, we finally have the opportunity
to make a bullish call. Subscribers to HoT Weekly know from this week’s
issue we now see crude rallying from $40 to $60 in the next six months.
Below is the same chart we showed HoT subscribers.
Speculators now have a net short position but were net long 80,000 contracts
earlier this year in March. Therefore, the main force driving prices higher
this year were the commercial hedgers that had to cover their record short
position of over 100,000. Fundamentally, OPEC ministers are cutting back
production because of the latest decline. But as we have noted before
crude is in a long-term uptrend and we now expect to see speculators step
up to the plate and buy like no tomorrow.
Oil prices fell to the key $40 per barrel level last week and we think
this is an excellent opportunity for anyone brave enough to play the energy
market. Oil divided by gold has absolutely collapsed (not shown) even
though gold prices were decimated last week as well. What this tells us
is that the decline in crude is overdone, because crude has a real story
behind it arguing for higher prices, while gold’s only glory is the instability
of fiat money.
In the chart above we show that speculators are not only net short but also the most bearish since prices were at $30. We cannot help but think that this is a major buying opportunity with limited risk. If we are correct the speculators will soon jump into the fray taking prices to the $60 level. In turn this should drive yields substantially higher and send the stock market into a tailspin early next year.
If you don’t have a futures account to trade mini crude, you can participate
in XLE as it has a nice correlation and has again bottomed relative to
the SPY at a key support level. Recall that the last time this happened
over one month ago we went long XLE. We alerted subscribers then and promptly
had a nice rally but were stopped out when crude collapsed this month.
Jes Black
Recent Testimonial for FX Money Trends: “I find FX Money Trends’
work extremely helpful. As a macro hedge fund manager I base my success
on ideas generated both internally and through external research services:
FX Money Trends and its founder Jes Black constantly provide ideas which
are based both on very clever fundamental and technical analysis and research.
FX Money Trend’s intellectual independence makes their ideas precious,
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Francesco Clarelli, Italy.
Jes Black, hedge fund manager at Black Flag Capital Partners, specializes in foreign exchange and global macro trends. Prior to organizing the fund he helped MG Financial Group launch Forexnews.com. Afterwards he went on to found FX Money Trends, a research firm catering to professional traders.
Mr. Black holds a degree in economics from the University of Kansas and
an MBA from the ESC in France. His market commentary is often featured
in the Wall Street Journal, Financial Times and Reuters. He has also written
numerous strategy pieces for Futures magazine. To find out more about
the fund’s research letter visit www.fxmoneytrends.com. Qualified
prospective investors can find out more about Black Flag Capital Partners
by e-mailing info@blackflagfund.com
Jes Black
FX Money Trends, LLC
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