United States Oil (USO) Recession Fears Kept Lid on Prices
Recession fears were raised earlier in the week after the bond market flashed a troubling signal about the U.S. economy. This increased worries over lower future demand. The fears were triggered when the yield on the benchmark 10-year Treasury note briefly broke below the two year rate, “an odd bond market phenomenon that has been a reliable indicator of economic recessions,” according to CNBC.
EIA Reports Surprise Inventories Build
On Wednesday, the government reported that U.S. crude stocks grew by 1.6 million barrels the week-ending August 9, compared with analyst expectations for a decrease of 2.8 million barrels, as refineries cut output, the EIA said in a report.
Additionally, at 440.5 million barrels, inventories were about 3% above the five-year average for this time of year, the EIA said.
OPEC Reveals Bearish Outlook
Late in the week, OPEC provided a downbeat oil-market outlook for the rest of 2019 as economic growth slows and highlighted challenges in 2020 as rivals pump more, building a case to keep up an OPEC-led pact to restrain supplies.
“While the outlook for market fundamentals seems somewhat bearish for the rest of the year, given softening economic growth, ongoing global trade issues and slowing oil demand growth, it remains critical to closely monitor the supply/demand balance and assist market stability in the months ahead,” OPEC said in the report.
Traders are focusing on two things: Possible OPEC production cuts and lower demand due to a weakening global economy. They don’t seem to be too worried about U.S. growth at this time. However, they are expressing concerns about the rising U.S. production.
Unless there is an escalation of tensions over a global recession, WTI and Brent are likely to remain rangebound. We could actually see an upside bias develop as traders continue to build confidence in dovish central bank policies providing the stimulus needed perk up the global economy.
Overall, the bias in prices is: Downwards.
The projected upper bound is: 12.19.
The projected lower bound is: 10.63.
The projected closing price is: 11.41.
A white body occurred (because prices closed higher than they opened).
During the past 10 bars, there have been 7 white candles and 3 black candles for a net of 4 white candles. During the past 50 bars, there have been 24 white candles and 24 black candles.
A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.
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 37.9845. This is not an overbought or oversold reading. The last signal was a sell 1 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 47.05. 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 45 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 -10. This is not a topping or bottoming area. The last signal was a buy 5 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 3 period(s) ago.
Rex Takasugi – TD Profile
UNTD ST OIL FUND closed up 0.050 at 11.400. Volume was 15% below average (neutral) and Bollinger Bands were 25% narrower than normal.
Open High Low Close Volume___
11.380 11.440 11.280 11.400 23,478,424
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period 50-period 200-period
Close: 11.30 11.65 11.81
Volatility: 45 43 42
Volume: 35,153,988 29,963,430 28,433,210
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 3.5% below its 200-period moving average and is in an downward trend. Volatility is high 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 12 periods.