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-- Posted Wednesday, 20 February 2008 | Digg This Article | Source: GoldSeek.com
Rick’s Picks Wednesday, February 20, 2008 “Phenomenally accurate forecasts” What would it take to bring the price of oil down to $75 barrel? How about the completion of a bearish chart pattern such as the one imagined in the chart below? We can just hear Brian Williams on the evening news six months from now, introducing technical analysis to the masses: "The price of crude oil fell sharply again today, hitting $75 a barrel – the lowest it’s been in nearly a year. Experts attributed the drop to the completion of a bearish head-and-shoulders pattern and predicted that if it breaks the neckline, prices could fall to as low as $68 over the next seven to ten days." 
We’re joking, of course. Even so, we thought it might be useful to visualize a bearish price scenario that is likely to be far from the minds of the news anchors and pundits in the days and weeks ahead. Admittedly, if you take away the imaginary red bars on the chart and focus on the actual price surge represented by the blue bars, it’s hard to believe oil prices are going anywhere but up from here. Even by our own technical runes, a thrust over the next 3-4 weeks to as high as $116 cannot be ruled out, especially if quotes settle above a "Hidden Pivot" resistance at $101. Global Downturn However, it’s also possible this headline-grabbing rally is the blow-off that will cap oil’s price for a long time to come. Fortunately, we won’t have to speculate on whether an important top is at hand, since the power and resiliency of the rally will be manifest on the intraday charts. Specifically, if significantly higher prices are coming, we should see bullish Hidden Pivot patterns reach or exceed their rally targets on the hourly chart while corrective patterns fail to do the same. Hidden Pivots aside, we should not lose sight of the fact that the global economy appears headed into the steepest downturn since 1973-74, a prospect that could not possibly be bullish for oil. Accordingly, we expect oil’s chart six months from now to have more closely followed the path depicted in red than to have traced out a spike to $200 a barrel. Our guess is that, long before quotes could ever hit such heights, demand for oil would plummet. Deflation’s Perfect Storm? If our reasoning is correct, then OPEC will not soon be methodically cutting output in order to tighten supplies at the margin, as some have speculated, but to desperately chase plummeting demand in the months ahead. That might be good news if the world economy were more resilient. Unfortunately, it is in a critically weakened state, and, at the moment, it is recycled petrodollars more than anything else that have prevented the economy from collapsing into a deflationary black hole. Were asset deflation to lay siege to the oil patch as it already has the financial system, it could hasten the return of hard times such as we have not experienced since the 1930s. *** Who Needs a Guru? When the Hidden Pivot seminar that was held earlier this month sold out, I added an additional session on March 8-9. If you’d like to attend, click here for further details and instructions on how to register. The class will be held on Saturday/Sunday from 9:00 a.m. to 12:30 p.m. Mountain Time. If you want to learn how to forecast stocks and commodities as confidently and precisely as top pros, this is an opportunity you should not pass up.
*** Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2008, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Wednesday, 20 February 2008 | Digg This Article | Source: GoldSeek.com
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