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BLACK
GOLD A
new scientific truth does not triumph by convincing its opponents and
making them see the light, We wrote two articles on this subject; the first was done jointly with John Tyler (The Looming Energy Crisis & Its Effect On Gold Dec 2003) where we predicted Oil would trade as high as 48 dollars, everyone thought we had lost our minds at that time. The second article was published jointly with George Paulos (The Energy Crisis - 29 April 2004); again we stated that we envisioned higher energy prices in the near future. Now that everyone is bullish on oil and seems to think that the sky is the limit, we think that oil is going to correct. In fact we mentioned this to our subscribers about 2 weeks ago as oil continued to put in new highs. Notice we are not talking about a crash but a simple correction.
A quick look at the weekly chart reveals that oil has had a very nice run up. From June 2004 the price started to go ballistic; this was the last stage in this huge run up that began around April 2003. Oil will now slowly consolidate back to the main up trend line; currently in the 33-34 ranges. When Oil breaks below 40, all the penguins will come out screaming that oil has now entered into a serious bear market. Do not listen to them as they only thrive from making unnecessary noise. It is quite natural for oil to correct; if it did not then we would start to get extremely worried. Every bull must pause for a breather, in order to build up strength for the next phase. This is what we said on Aug 10, 2004 to our subscribers:
The first chart is of oil and the second chart is the Amex oil index. Notice anything interesting, while oil keeps making new highs the XOI has been topping. This suggests that this last move up in oil is mostly due to momentum players and news related events; which means that the masses are finally reacting. As usual the masses are like vultures they come in to feast when the beast is dead and decaying. So we expect oil to correct for the next 3-6 months, this will have the equivalent effect of several interest rates cuts; lower oil prices will neutralize Greenies current rate hikes. Remember we are not talking about a crash but a correction. A correction is perfectly healthy, normal and it is something every mega bull market needs to undergo. The oil index is looking into the future and it sees lower oil prices in the near term. Long-term oil is still going to keep going higher. Another interesting fact is that Petrol prices are actually falling, while oil keeps making new highs. ©
2004 Sol Palha, Tactical Investor CONTACT
INFORMATION What
does the future hold for the black gold? Firstly, let me quote line and verse of a Dec 2003 article that was publicly issued: “I would like to make a few comments on the weekly spot chart of Nymex light crude. There is a broad converging triangle, and a breakout on the upside suggests a move to $48 a barrel. Remember that this is in $US terms, so a fall in the $US exchange rate makes this target look realistic. Note that with each cyclic pull back, there is a higher bottom. This suggests a gradual increase in demand, and thus an upside break is more likely.” This was written when oil was $32 a barrel. Many thought that Sol and I were loopy and wrote in, reminding us that inventory was fine and that there were huge reserves. You can read the original here: http://www.Trader007.com/Infognome/articles.htm It doesn’t stop here. Here’s an exact transcript of what was sent out when oil was still at $48 a barrel, sent out on Aug 22: “The oil surge is still running, but this is one of those futures set ups where there is a good chance of winning big. We are in a steep weekly minor up trend, so move to the daily bar chart and short the Dec. contract when it falls below the red trend line”.
I repeat this entire here not to only brag , but to say that this is a perfect re-run of the typical history of any bull market! Gold and equities for example… There is little doubt that what follows over the next 5 years will also be typical. The behavior of the gold bull market shares the same characteristics, as does each major equity bull market. I can almost hear your screaming: “ Come on! Spill the beans!” However I don’t want to spoil all the fun. The joy of watching the Elliot Wavers surfing their little hearts out (I do apologize for being critical in the past http://www.Trader007.com/Infognome/elliot_wave.htm, but we do need you so much), and the Dowists scratching their heads while the good old stolid fundamentalist are so cock sure with all their facts. Their reaction and advice is as predictable as the true course of the markets. There are some serious sides to all of this however, and the “average Joe and Gillian” is not being warned about:
Sol and I have only one important mission, and that is to leave the world a better place. Our trading and newsletters are our chosen means to work toward this. If that means standing against the crowd, so be it. If it means that we get our calls wrong at times, so be it. But if it means that we can be agents of change, and at the same time help individuals on their path to wealth, the world will be a better place.
CONTACT
INFORMATION The opinions of FSU contributors do not necessarily reflect those of Financial Sense. |
