Mish’s Daily: Monthly Chart Points to Much Higher Oil Prices Coming
Written by Michele ‘Mish’ Schneider
Before we begin, just a note to mention that TLT took out the fast MA featured in the October 10th Daily, while SPY underperformed. If that is a trend, it behooves you to review that Daily.
Loyal readers of the Daily know that we often focus on zooming out to longer timeframes to assess bigger trends.
Clearly, the 80-month moving average in small caps and retail has become an important support “line in the sand” to measure the potential for recession and/or stagflation.
In the case of the chart of USO (US Oil Reserves), the 80-month moving average is a line in the sand to measure the inflation narrative or higher oil prices likely coming.
Historically, the 80-month moving average (green line) served as resistance in USO since 2008 when the market crashed.
Then, from March 2022 until July 2022 USO traded above the 80-month MA.
However, that was short-lived thanks to rising interest rates.
3 months ago, that changed.
Once oil cleared $80 a barrel, we saw the price spike to about $94.00.
USO then cleared the 80-month MA in August on the heels of OPEC+ and the US dwindling oil reserves, plus higher than expected demand.
The oil market appears to have priced in current interest rate values.
Although the current geopolitical situation is not a pure impact on oil prices, what the chart suggests is that lack of impact can reverse to a much larger impact.
The USO price closed the month of September at 76.00.
This month, USO opened higher. Currently, the price is above the 80-month but slightly below a pivotal point at 76.00.
Quite simply, a move over 76 suggests higher prices with a good risk point to under 73 or the 80-month MA.
That would correspond with oil holding $80 per barrel and returning above $86.00.
More importantly, if the trend is your friend, this break higher of the 6-7 year business cycle if sustains, should drive oil prices to the next target of around $110.
Educational purposes only-trade at your own risk.
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Mish in the Media
CMC Markets Daytrading Commodities 10-11-23
Final Bar Sub Host for Dave Keller 10-09-23
Making Money with Charles Payne Fox 10-05-23
Yahoo Finance 10-05-23
Real Vision 10-04-23
Kitco on gold 10-04-23
BNN Bloomberg Opening Bell 10-04-23
Schwab with Nicole Petalides 10-02-23
October 11 CNBC Asia
October 12 Dale Pinkert F.A.C.E.
October 27 Live in Studio with Charles Payne Fox
October 29-31 The Money Show
Weekly: Business First AM, CMC Markets
S&P 500 (SPY) 435 resistance
Russell 2000 (IWM) 177 resistance
Dow (DIA) 338 resistance
Nasdaq (QQQ) 368 pivotal
Regional banks (KRE) 39.80 -42.00 range
Semiconductors (SMH) 150 resistance 143 support
Transportation (IYT) 237 resistance 225 support
Biotechnology (IBB) 120-125 range
Retail (XRT) 57 key support if can climb over 61, bullish