Here’s Why Oil is a Dead Trade for the Next Several Months

oil-tank-1526016-640x480From Taki Tsaklanos: From both a technical and fundamental perspective, crude oil is simply not an asset investors should be putting their money into right now.

Crude oil was the outperforming asset in August of 2016, with a gain of around 20%.

That could be impressive. However, for the short and medium term, we do not see opportunities in the crude oil space.

Chart-wise, crude oil has arrived in “no man’s land”. It is trading right below huge resistance, as shown in purple on the chart. Moreover, it was not able to break above its medium term descending trendline.

From a technical point of view, though not our primary indicator but only a supporting indicator, we see that the 90 week moving average (shown on the chart below) is about to turn flat.

By far more important, though, are intermarket dynamics. In other words, which leading assets are trending, and how do they influence other assets?  As we expect rates to rise in the short and medium term, we believe that move will push the dollar high which will keep some pressure on commodities.

So from several perspectives we see a consolidation in the crude oil market. With such conditions, it is better to simply give the market sufficient time to do its work, and certainly not try to outsmart the market. Patience is key.

crude_oil_price_August_2016

The United States Oil Fund LP ETF (NYSE:USO) closed at $10.95 per share on Friday, unchanged on the day. The largest ETF tied to WTI crude prices has risen about 0.45% year-to-date.

This article is brought to you courtesy of Investing Haven.

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