In all likelihood, my crude oil model will generate a sell signal at the close
of this month.
The signal will in all likelihood will be profitable as the entry signal for
the model was back in early October, 2010 when crude oil was trading at $80
a barrel. This is little consolation, however, as the high point (about $114)
to the time of likely sell signal has been an unacceptable 20% draw down.
The concerns for lower economic growth appear to be real. Crude oil peaked
when stocks peaked and bonds bottomed (i.e., yields moved lower). Whether this
was due to lack of organic growth or financial stimulus fatigue (i.e., end
of QE2) is difficult to state. Either way and as you can see in figure 1, the
ETF proxy for crude oil, the United States Oil Fund (symbol: USO) is leading
the market lower. In addition, the graph clearly shows the SP500 topping out
and bonds, as represented by the i-Shares Lehman 20 plus Year Treasury Bond
Fund (symbol: TLT) bottoming.
Disclaimer: Guy M. Lerner is the editor and founder
of The Technical Take blog. His commentary on the financial markets
is based upon information thought to be reliable and is not meant as investment
advice. Under no circumstances does the information in his columns represent
a recommendation to buy or sell stocks. Lerner may on occasion hold positions
in the securities mentioned in his columns and on the Web site; in all instances,
all positions are fully disclosed at http://thetechnicaltakedotcom.blogspot.com/.
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