United States Oil (USO) Don’t Bet on a Rally Just Yet
Oil bulls are rebuilding their positions, but it will probably take some major news to shake the market out of its current mood and trigger a sustained rally.
Money managers boosted their net-long position on West Texas Intermediate crude for the first time since mid-September in the week ended Oct. 22, data released Friday show. Those bets are still at half the level they reached last month, though, while short-selling wagers have tripled in that period.
That signals there’s still a lot of skepticism in the market, despite crude’s 5.4% gain last week. But it also shows there’s growing support for a meaningful rally once short-sellers start unwinding their positions. It’s just that they don’t seem to have a reason to do that yet.
“We had some events recently that were unusual, including the unprecedented attacks on Saudi Arabia,” said Stewart Glickman, an analyst at CFRA Research Inc. “The market saw a quick uptick but then shrugged it off a bit pretty quickly.”
Last week was marked by news of a decline in U.S. crude stockpiles, a brief shutdown of a critical pipeline and signs of progress on U.S.-China trade talks. The market has seen similar pieces of bullish news over the past few months that weren’t enough to dispel uncertainty over demand in the face of growing supplies.
“Every other day, it seems like we get a new statement from the [Trump] administration related to the trade talks,” said Gene McGillian, manager of market research at Tradition Energy. “We’ve gone down this road too many times.”
Money managers’ WTI net-long position, or the difference between bullish and bearish bets, rose 8.5% to 93,856 futures and options, according to U.S. Commodity Futures Trading Commission data. That compares with more than 200,000 about a month ago.
Long-only bets rose 9.3%, while short positions climbed 10%. Short-selling is near a peak reached in January, before massive short covering through the end of April helped support crude’s rally during the first four months of the year.
Overall, the bias in prices is: Upwards.
The projected upper bound is: 12.68.
The projected lower bound is: 11.00.
The projected closing price is: 11.84.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 8 white candles and 2 black candles for a net of 6 white candles. During the past 50 bars, there have been 27 white candles and 23 black candles for a net of 4 white candles.
Three white candles occurred in the last three days. Although these candles were not big enough to create three white soldiers, the steady upward pattern is bullish.
Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.
One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 94.6524. This is an overbought reading. However, a signal is not generated until the Oscillator crosses below 80 The last signal was a buy 15 period(s) ago.
Relative Strength Index (RSI)
The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 60.14. This is not a topping or bottoming area. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 94 period(s) ago.
Commodity Channel Index (CCI)
The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is 164.This is an overbought reading. However, a signal isn’t generated until the indicator crosses below 100. The last signal was a buy 14 period(s) ago.
The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a buy 9 period(s) ago.
Rex Takasugi – TD Profile
UNTD ST OIL FUND closed up 0.100 at 11.830. Volume was 43% below average (neutral) and Bollinger Bands were 32% narrower than normal.
Open High Low Close Volume___
11.710 11.840 11.607 11.830 16,512,942
Short Term: Overbought
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 11.36 11.54 11.90
Volatility: 25 45 39
Volume: 20,536,356 27,799,680 26,166,762
Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.
UNTD ST OIL FUND is currently 0.6% below its 200-period moving average and is in an downward trend. Volatility is relatively normal as compared to the average volatility over the last 10 periods. Our volume indicators reflect volume flowing into and out of USO at a relatively equal pace (neutral). Our trend forecasting oscillators are currently bearish on USO and have had this outlook for the last 18 periods.
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