Update on Oil: Aug 30, 2016

Last week [see: Oil Takes a Breather] we identified key support for CL at 45.34.  At the time, that represented a nifty intersection of the SMA100 and the top of the broken white falling channel. 2016-08-22 CL 60 0600

It looked likely to happen within a few days.  And, CL was kind enough to trace out a well-formed falling channel pointed right at it (seen below in red.)

The following day, however, someone pulled the plug on the falling channel.  CL spiked out of the channel (on reports of much higher inventories, at that!) then spent the next five sessions going sideways.

Until today.  Moments ago, API reported a smaller than expected inventory build (which should have sent prices higher.)  CL, which spent all day going nowhere, suddenly spiked lower, reaching 45.75 and finally tagging the (now higher) SMA100.

2016-08-30 CL 60 1534

The move wasn’t terribly difficult to see coming, and it provided a nice guide to stock prices.  Again, from Aug 22:

The big question now, is whether it can properly flesh out something resembling a channel, and backtest the large white channel it left behind on the 16th.  If it doesn’t spike higher, SPX should have no trouble reaching 2165 or even 2161.

SPX tagged 2160.39 four days later, the low over the past 3 1/2 weeks — yet again, validating oil’s value as a great tool for influencing stock prices.

My son, a bright and successful financial planner in Austin, asked me today what I thought were the three biggest drivers of global oil prices.  Without hesitation, I answered “BoJ, ECB and FOMC.”

The bigger questions remain: will CL bounce here, and what are the repercussions if it doesn’t?

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