Doctor Copper Death Cross Forming

A quick review of key commodities and the Fed this evening.

From Bloomberg:
Oil declined for the first time in four days in New York as investors speculated U.S. fuel demand may weaken after the Federal Reserve lowered its economic growth outlook for the world’s biggest crude-consuming nation.

Futures slipped as much as 4.5 percent after a report today showed U.S. jobless claims rose last week. Fed officials yesterday cut their forecasts for growth and employment this year and next, and an Energy Department report showed U.S. oil stockpiles fell less than forecast and inventories at Cushing, Oklahoma, the delivery point for the New York-traded West Texas Intermediate grade, increased for the first time in four weeks.

Oil for August delivery on the New York Mercantile Exchange declined as much as $4.30 to $91.11 a barrel in electronic trading and was at $91.28 at 1:44 p.m. London time. The contract yesterday rose 1.3 percent to $95.41 and has gained 20 percent in the past year.

The Bernank is up to his old tricks. QE3 here we come:

Federal Reserve Chairman Ben S. Bernanke left the door open to a fresh shot of monetary stimulus should the economic rebound he’s predicting fail to materialize.

The Fed would be “prepared to take additional action, obviously, if conditions warranted,” including the purchase of more Treasury securities, Bernanke said yesterday after U.S. central bankers met in Washington. The economy will probably overcome constraints from elevated energy prices and Japan- related disruptions to manufacturing, he said. Still, declining home prices, high unemployment and weaknesses in the financial system may restrain the recovery in the longer term, he said.

Policy makers in a statement yesterday acknowledged the slowdown even as they agreed to complete $600 billion in bond- buying as scheduled this month in the second round of so-called quantitative easing. While the outlook for employment and inflation is better than before the latest bond purchases, Bernanke said he’s not sure how long the economic headwinds will persist. Stocks fell in New York trading.

Note that a death cross has almost formed in the copper market. Given it's current momentum, it seem inevitable as Slow Stoch & MACD indicate.

The deterioration in the oil market is also well advanced, though not as developed as the copper market. The two most important features of this chart is the 4 day EMA has crossed outside the bottom of the Keltner channel and the spot price for crude is now below the 200 day MA.

The violation of the Keltner channel by the 4 day EMA has been a consistent indicator predicting further downward movement in the oil market.

While a death cross has not formed to date, given the negative fundamentals that keep popping up everywhere, it seems likely that we will see further price deterioration and hit our long term target of $65 to $70.

To this analyst, it is starting to look like a repeat of July 2008.


  1. Great stuff as usual.

    I think it is interesting what has happened in the last week, Greece problems, Bernanke admiting US is crappy, and oil problems too. A crazy week, I am guessing there is a bigger move coming on the market.

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  2. Thanks for your comments John.
    The video is excellent and I would recommend all my readers view it.
    This coming week could be interesting to say the least!


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