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HomeStockBearish at the Bottom; Institutions Wrong on Oil

Bearish at the Bottom; Institutions Wrong on Oil

On June 12th, Goldman Sachs (GS) came out with this:

Goldman Sachs has slashed its forecast for oil prices by nearly 10%, citing weak demand in China and a glut of supply from sanctioned countries, including Russia.

What the big institutional analysts have done this year is get pretty much everything wrong.

I pick on Goldman today because our view on oil — somewhat fundamental and somewhat technical — is so very different than theirs. Plus, the prediction came out on the low tick for the last week.

Goldman claimed support for their viewpoint on the basis of:

Restored Russian supply and their using secret tankers to get oil delivered globally.China’s real estate market leading to low demand for oil in a struggling economy.Saudi Arabia’s attempt to shore up price with lower production.

We look at those points differently.

Russia (Putin) may get more desperate and escalate the war, thereby threatening supply chain. China is stimulating their economy, and demand for oil is increasing. Saudi Arabia has proven that they wish to keep prices up, leaving supply/demand vulnerable.

The charts help us as well.

The US Oil fund is not futures. The fund predominantly holds near-month-futures contracts on WTI, rolling into future contracts every month. It also has exposure to the U.S. Dollar (53.63%), so not perfect like futures.

Nonetheless, the ETF is highly liquid.

On the futures chart above, the price is approaching the 50-DMA with a declining slope. Over the 200-DMA (thicker line) or price of $76, this heavily-shorted raw material could fly.

On the USO chart, the price remains under the 50-DMA as well. Over 65, the chart gets more interesting. Over 68, we can make a case for a bottoming formation that goes back to March. That could take USO up to around 78 or in futures to around $100.

Real Motion has a bullish divergence! The momentum is indicating a bullish phase above both the 50 and 200-DMAs which are stacked appropriately. A move under 60, all bets are off. However, we are going with a move higher in oil forthcoming — and yet another example of learning how to make trading decisions on your own, ignoring the “smart” analysts.

For more detailed trading information about our blended models, tools and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.

“I grew my money tree and so can you!” – Mish Schneider

Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth and a special bonus here.

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

For more detailed trading information about our blended models, tools and trader education courses, contact Rob Quinn, our Chief Strategy Consultant, to learn more.

“I grew my money tree and so can you!” – Mish Schneider

Get your copy of Plant Your Money Tree: A Guide to Growing Your Wealth and a special bonus here.

Follow Mish on Twitter @marketminute for stock picks and more. Follow Mish on Instagram (mishschneider) for daily morning videos. To see updated media clips, click here.

Mish in the Media

Mish and Ashley discuss buying raw materials and keeping an eye on Biotech on Fox Business’s Making Money with Charles Payne.

Ahead of the Fed’s announcement, Mish shares her take on major currency pairs, starting with EUR/USD, in this appearance on CMC Markets.

Mish joins Ash Bennington to discuss the market’s response to today’s inflation data, the AI-powered tech rally, whether we’re seeing signs of exhaustion in equities ahead of the Fed announcement on Real Vision.

Mish explains how the Russell 2000 is the canary in a coal mine on Business First AM.

Mish offers her technical forecasts for gold, EUR/USD, USD/JPY and WTI Crude Oil ahead of today’s CPI report on CMC Markets.

Mish Schneider and TG Watkins continue their chat about the business of trading in this video from StockCharts TV. Topics range from their work/home life balance, how being a consumer does or does not play into their trading decisions, and what they do in their free time to unwind.

Mish and Nicole Petallides go over rates, key sectors and the economy in this video from TD Ameritrade. They also discuss what raw materials are coming into vogue.

Mish and Jon talk about what could make markets continue or reverse and what to buy right now on BNN Bloomberg’s Opening Bell.

Mish and Charles talk inflation fears, the “wall of worry” and trading large-caps on Fox Business’ Making Money with Charles Payne.

The first 5 months of 2023 have been rallying on optimism going forward. Will that continue for the next few months? Mish digs into that question in this Twitter Spaces conversation with Wolf Financial.

Mish discusses impacts of weather, labor market and the FED on tap on Fox Business’ Coast to Coast with Neil Cavuto.

The US dollar rallied following a positive US jobs report last Friday, but could the Federal Reserve’s upcoming interest rate decision halt the greenback’s rise? Mish offers her views on USD/JPY, the S&P 500, and light crude oil futures on CMC Markets.

Mish talks GME (Gamestop) and more on Business First AM.

Where is the US economy actually heading? Rajeev Suri of Orios discusses this question and what trends suggest with Mish in this video.

Coming Up:

June 21: Mario Nawfal Spaces 8am ET

June 22: Forex Premarket Show with Dale Pinkert

June 23: Your Daily Five on StockCharts TV

June 27: The Final Bar with Dave Keller on StockCharts TV

July 6: Yahoo Finance

July 7: TD Ameritrade

ETF Summary

S&P 500 (SPY): 440 pivotal with potential reversal, has to break under 434.Russell 2000 (IWM): 180-190 stuck.Dow (DIA): 34,000 in the Dow now pivotal.Nasdaq (QQQ): 370 target hit, proceeded by some selling; 360 support.Regional Banks (KRE): 42 support, 44 pivotal.Semiconductors (SMH): 150 now major support.Transportation (IYT): 237 area the 23-month moving average.Biotechnology (IBB): 121-135 range.Retail (XRT): 62 support and if clears back over 63, optimism returns.

Mish Schneider

MarketGauge.com

Director of Trading Research and Education