claydoctor
Short

XOP OIH WTI & the Fracking Log

INDEX:DOWT   DOW Transportations
51 0 4
The duration of the price of OIL             collapse of 2007-08 was 210 days. IF all things were equal, and the same causes and circumstances were the same as back then, the bounce up would be very soon. BUT... they are not the same. Demand and world GDP was up, supplies constant, price of oil             skyrockets until... the cost hurts GDP, add in the housing/credit crisis, NOT unrelated was the cost of oil             increasing inflation numbers, raising housing values, all inflated, borrowing against values that would soon crash with the price of oil             . Note the lag of time between crash of oil             and crash of markets 2007-08. Now there is no housing/credit crisis, because we have not recovered from that credit crisis. This time we have FRACKING, creating an oversupply, with less demand (world GDP contracting), crashing the price of oil             again, but for different reasons, hence no market crash (yet). Saudi's want to punish Frackers, but frackers are still pumping (AKA The Fracking -back- log), because the big costs was in the set up not the pumping. Funny stat. in 2008, after demand slowed due to price, we had a 5.5 million barrels per day excess. This time Fracking added 5 million barrels per day supply, with no more demand, creating the same oversupply. Issues now are deflation and having tried to kick start economies with extreme measure QE             , currency debasing-wars, etc... (I say again, no new jobs) , have failed. US is best of the worst, and euro             QE             will take some time to spur economy. Lower price of gas cannot kick start an economy on its own. We wait for time I think before the Fracking LOG of oil             supply stops. Note the consolidation of the Dow Transports now. You would have thought with 2007-08 the huge collapse in oil             prices that sector would have not dropped, but it did. Now, what will it do,how has low oil             prices helped world GDP and economies, IT HAS NOT. With rates at zero, a drop in oil             would cause huge spike in GDP growth, creating many jobs, and growth in PE. BUT IT IS NOT HAPPENING! Why not ?????? Because world is still contracting, and deflation is a real worry. No inflation until price of oil             rises, forget jobs, Yellen doesn't raise rates until oil             pops, and there is at least a threat of inflation (wages increases are NOT happening) . Lots on this chart, hope you can see everything I am trying to say. IMO... DOWT             corrects, while price of oil             dips even lower or consilidates. Dollar spike may dip, but might have one more up side until final downtrend, as it did before, see? OIL             may have to touch 2009 low before a real bounce and uptrend, after DOWT             leads markets down and markets finally get the correction they need, to bring valuations into real time. This will be seen as a "healthy" correction of a very overvalued market, and only this will bring fundamentals back into play where companies have to spend the cash, adding jobs, to realize real growth, no more tricks to artificially inflate stock prices, M&A, buy backs, etc. In fact, maybe the governments cause this or at least authorize it (and Maybe Yellen is told to raise rates to cause it even if she disagrees) , so it happens way before the 2016 election. Hey, the world a web woven of power and money. As always, just IMO. Trade carefully. :)
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