Retreating Crude To Put Shine Back On Gold-Minyanville

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Retreating Crude To Put Shine Back On Gold

Rod David May 29, 2008 3:45 pm

Retreating Crude To Put Shine Back On Gold


		If oil stumbles, where will investors go?

Crude Oil (basis July) has been tracking a distributive template for the past two-three weeks. This was somewhat of a secret while prices continued probing higher highs. The first sell signal didn't trigger until closing under $130 Tuesday.

Today's rejection of the initially favorable inventory reaction tells me that the distribution isn't a secret anymore. It also tells me the rest of the template is probably also correct, that the resulting downleg will be steep and deep as the paradigm shifts quickly.

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If my template does continue to track and crude oil dives precipitously in the near-term, the mainstream assumption is this will be good for S&P. Really? The same S&P that has now retraced half of the recent 70-point tumble? Perhaps tumbling oil prices will be "good" for stocks in only the same way that today's inventories report was "good" for oil prices - i.e. briefly. Somehow I doubt that equity analysts will be quick to raise earnings estimates based on potentially lower energy costs.

So where is all that oil money to go? Gold.

I should say upfront that I'm not calling for gold's bull market to resume. In fact, there's a gap down to the 862.00 area (basis August) that needs to be filled, along with a retest of the last downleg's 856.00 target. But the pattern did trigger a sell signal under $918 Monday, and the first downleg's target was fulfilled this morning under $879. The target has been probed deeply enough that a close back above $879 would trigger a buy signal - for a correction, but a buy signal nonetheless.

If crude oil is crashing, then managers and investors alike will be looking for a replacement inflation vehicle. And the sheer size of crude's rally/bubble suggests that many of its participants won't be interested in getting too exotic. Meanwhile, there's a shiny golden lump falling back to earth. It has some more falling to do, but there's room to squeeze in a bounce up to 905.00 first.


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Kenneth Rostron

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05-29-2008, 4:14 pm
Its hard to say what comes next in my book. The bonds selling off should help too, the large grave yard in the bond mkt well spoke alot of money somewhere also. I also think the brokers q end along with hammering Hank with Hat in hand over at the GCC Read More

Back Lash

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05-29-2008, 6:45 pm
if oil was just an issue of the u.s., yes, i would say it could have a nasty correction but after watching the show on china and its pent-up demand, i have my doubts i mean, these people have been living decades waiting to g Read More

Back Lash

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05-29-2008, 7:26 pm
so if the gov is going to try to jack w/ oil futures (and by extension, the USO), something to consider would be investing in oil contracts not deliverable in the u.s. mark my word, at this very moment the gov is sitting around steaming, Read More

David Bosworth

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05-31-2008, 10:24 am
Money coming out of oil will be going into.... uh,....you say....GOLD? There is one major investment that ends up not being for real more than once per generation. That is gold. There is one slice of a sector that, aside from that one big Read More


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