Oil Breaks Below $38; Bespoke's Commodity Snapshot (12/18/08)

The amazing fall in oil continued this morning, with the commodity falling below $40, $39, and $38. As shown below, oil has now declined from nearly $150 in July to its current price of $37.95.

click to enlarge

Below we highlight our trading range charts of ten major commodities. The green shading represents two standard deviations above and below the commodity's 50-day moving average, and moves above this shading are considered overbought or oversold. Most commodities have staged rallies over the last couple of weeks, but energy just keeps on heading lower.

Gold and silver are actually trading right at overbought levels, while wheat, platinum and corn aren't far behind. Copper prices continue to get killed, and coffee and orange juice remain in downtrends as well.

Comments

[herbert hoover:]

Gee, do you think the price was being manipulated much when it shot up to $147 a barrel?

2008 Dec 18 12:13 PM

[Oneslip:]

I feel that commodities will be higher in the future as the world is flooding with currencies. Yes, commodities run up was over done and it will be overdone on the downside as well but if you are looking to add commodities as a long term asset class then this could be a good time to start a position or add to one.

2008 Dec 18 12:31 PM

[Scared Stiff:]

Why is it always that when commodities become overbought, it's because of manipulation, and when they become oversold, it's market forces. Yet, when bank stocks become overbought, it's because of market forces, and manipulation when they become oversold?

2008 Dec 18 12:46 PM

[David White:]

OPEC did cut by 2.2 million bopd. Since this didn't seem to have much effect, there is now speculation that OPEC will have a further meeting in Jan. at which they will lower production still further. When you combine this likelihood with the Obama stimulus planned for enactment in Jan., you would seem to get a high likelihood that oil will rally in the near future. Your green shaded area on the oil chart would seem to confirm this analysis. If you can think of a good reason why this is not likely, I would be very intrested to hear it.

2008 Dec 18 12:51 PM

[Henrique Si...:]

Who could imagine just a few months ago that oil futures could trade at 36 dollars a barrel? Pretty amazing. In the financial markets the old and bold traders tell you all the time to expect the inexpectable. Planning for extreme scenarios is absolutely necessary for survival in the markets these days.

2008 Dec 18 05:21 PM

[John Lounsbury:]

When oil was over 100 I said start buying at 80. I didn't follow that advice. When oil broke below 100 I said buy at 50 and back up the truck at 40. I didn't follow that advice, but I did nibble at oil at 43. My current view is to back up the truck at 30, but, as you can see from my previous track record, you better not count on me following through. I am more to keep on doing chart analysis with nibbling when possible turning points are indicated, but not back up the truck until clear strong bullish signals are given by moving averages, MACD patterns and candlesticks.

I agree that commodities in general will be great performers over the next many years, but I am prepared to wait for big bets and I'm also prepared to react to periods of high volatiliy.

2008 Dec 19 12:31 AM