Does Oil Bounce From Here?

Light Sweet Crude has an interesting relationship with equities.  On one hand, it is a “risk-on” commodity trade that rallies with economic growth.  Then again, when prices get too high it is a cause for concern.  Lower prices should provide a boost to discretionary income and margins for industrial companies, yet when prices drop too far it can serve as a warning that economic growth is stalling out, as happened in 2008.  What is the chart currently telling us?  Below is a look at the 20 year weekly chart of Light Sweet Crude futures.  After bouncing off multiple support trendlines last fall, it has now broken under most of the trendlines that provided support at that time.

That’s probably not good.  Copper, which has formed a (as yet unbroken) 3 year Head-and-Shoulders is probably the much better “tell.”  But crude could be providing a warning that global economic demand is indeed slowing significantly.

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