You would never think from looking at the WTI and RBOB charts that there’s an energy crisis of any kind.

CL has now spent a month below its 200-day moving average, failing for the 8th time to retake the important resistance.

And, RB has broken below its October highs and isn’t far from its May 2018 highs – as in when a gallon of gas ran $2.80.

These drops will obviously play into CPI data for August. But, it won’t be enough to satisfy the Fed’s inflation goals.

continued for members…

The big picture for ES and SPX shows more downside following a backtest of the SMA50s.

The backtest… COMP is also coming up on an important TL test. As it stands right now, VIX has made a higher high and higher low, with the SMA200 still below as support and a clear 10/20 cross. Currencies are essentially unchanged from yesterday. USDJPY is still inching higher and EURUSD is still on a ledge 40 stories high.

Now, on to oil and gas. The chart that recently caught my eye was the XLE.  It recently completed an inverted H&S pattern promising new highs.

But, it broke down below its neckline this morning on the heels of a dramatic 4% plunge yesterday.  It’s been a while since I displayed this chart, but remember that the CL cycle still shows a downturn by April 2023. Since the 2020 pandemic crash was obviously out of sync with the cycle, the question remains whether the cycle will pick back up where it left off.

Yes, the Fed is determined to bring inflation back down. But, it is just as determined, in my opinion, to do so without a sharp increase in long term rates.

They can’t do much to lower wages or food prices. But, they can slow the real estate market by holding mortgage rates at an elevated level (making every effort not to induce a crash.) And, even a mild recession and the passage of time should help with supply chains and vehicle prices.

Can they reduce oil and gas prices to also help lower CPI? The rising dollar should help. Judging from the nice, clean falling channel from the June highs, they have had cooperation from the Saudis – probably stemming from whatever horse trading Biden did during his recent visit.

Stay tuned…