(click on picture to enlarge)
CHARTS AU COURANT: In my May 16th posting, with crude at $128, I titled that comment as "Oil Peak Imminent", and began to explain what the manic blowoff would look like. In the June 26th posting, I said "Crude is in the manic spike I mentioned could happen, prior to burning out in a blaze of glory. It touched $140 today. This is classic 'late stage' behavior, and should NOT be followed on the buy side. Leave crude to the hedgies that are about to get slapped, like they were by staying at the derivative loan party too long." So far, crude peaked on July 11th at $148 in a blaze of glory, panic, and rampant rumors about Israeli war planes practicing bombing runs for targeting Iranian nuclear facilities, among other stories. From that moment, when everyone who was anyone with a free-will opinion was betting on $200+ crude and gas lines, this last bastion of speculation has fallen for 10 days, $25 dollars a barrel (17%), and is being dumped by hedge funds and banks like it was radio active.
If you think that is shocking, Natural Gas (second chart), which is even more speculative historically than crude, has just collapsed 37%, during the same 10 days. Obviously, this is too much too quickly, and a bounce is due. But the message of the market is that of exhausted, manic blowoffs and large scale reversals. In other words, along with Elvis, crude and natural gas have left the building, unlikely to return to past glory for a long time, if ever!
Bottom Line: Crude either put in a short term low this morning at $122.50 per barrel, or should do so between there and $120, setting up a bounce toward $135 +/-3. Natural Gas either bottomed short term at yesterday's $8.88 low, or will do so between there and $7.63, setting up a bounce toward $10.50 to $11.50 in the coming weeks. Once those lower peaks are in place, a dramatic liquidation in these commodities should be the next 'major' move toward either $111 or $85-$100 in crude and $7.50 or $4.50 to $6.50 in Natural Gas.
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For what it's worth,
Ken
