Wow, it has been a bit of a year for crude oil ($WTIC) . The break of support actually occurred in September 2014 and currently we are down 50%. In August we were down 60% from August 2014. Is going from 60% down to 50% down an improvement?
We can see the huge volume piling into crude oil as it bounced out of the high $30 range. It looks dramatic. Could that be the final low? Let's look at a longer chart.
The drop from crude's 2014 high to crude oil's 2015 low so far has been 65% and down 67% from the 2011 high. From the all time high back in 2008 we are down 74.5%. In the oil price drop during the financial crisis, we were down 77.5% in less than 8 months. Why should the market care any differently this time? I've heard comments like "So it takes a few years to get back to the previous highs. Will that be any different than before?"
I must admit that I found it almost laughable when the $SPX went into the weekend of August 20th, 2015 down about 5% that one of the well known talking heads said the Fed needed to get involved right away. When the price of oil drops 50% it doesn't matter, but if stocks drop 5% there must be something the Fed can do to tighten this up. Comparing that drop to this drop looks laughable. I think that is one of the reasons that so many investors were surprised. With the oil patch wiping out a quarter of a million jobs directly worldwide, and a massive number associated / related to the oil patch, this is a big deal. A common ratio is 5:1 so that is 1.25 million jobs worldwide, not USA. This collapse is also entering its second year with no sign of a bounce.
Its a good time to review the Canadian oil sector, the pipelines, $NATGAS, and the general health of the Canadian economy. It seems as long as Toronto's housing market is pointed up, no one believes we can be having a recession in Canada. I'll be covering that off on the webinar this afternoon at 5:00 EDT. This webinar is all things from a Canadian perspective. I will dip into the Canadian Dollar and commodities. Click here to register. The Canadian Technician. Even if you are not a Canadian investor, we have lots to share.
Good trading,
Greg Schnell, CMT
