I have kept it very simple on playing the oil market this year and have stuck religiously with the long
term seasonal pattern. There was a terrific long side trade in the market during winter - spring
this year. I have backed off since, and skipped the market when West Texas crude dropped as
expected down to $40 bl. in early Aug., which is normally a choppy month. Traders know that
from a seasonal perspective, the oil price tends to have a strong positive run in Sep. and have
been positioning for it during Aug. Traders also know that the oil price tends to weaken seasonally
from Oct. through the following Jan. and some are advising clients to begin shorting the market
in late Sep. as oil demand drops after the northern hemisphere driving season winds down. Fancy stuff.
The chart shows resistance now at $50 and the market must clear this hurdle to rise to $60,which
would be the next substantial hurdle. The market also must clear $50 to confirm that the uptrend
that started in early 2016 remains intact.
The concerning factor here is that bullish money down sentiment in the futures market has risen
again toward near record levels. It strikes me as odd that speculative interest in oil should be so
strong and have recovered so quickly after the price blowout in 2015. Running with the large
speculators on the long side when they are going hot and heavy has not been a wise
practice. For my part, I'll skip the long side seasonal trade in Sep. and see what the lay of the
land is later in the autumn. Finviz Oil future
- Peter Richardson
- Retired chief investment officer and former NYSE firm partner with 50 plus years experience in field as analyst / economist, portfolio manager / trader, and CIO who has superb track record with multi $billion equities and fixed income portfolios. Advanced degrees, CFA. Having done much professional writing as a young guy, I now have a cryptic style. 40 years down on and around The Street confirms: CAVEAT EMPTOR IN SPADES !!!