Commodities Analysis & Opinion

Crude Oil: Monthly Charts Signal Higher Prices Going Ahead


Before we begin, just a note to mention that TLT took out the fast MA featured in the last piece, while SPY underperformed. USD-Monthly Chart

Loyal readers of the Daily know that we often focus on zooming out to longer timeframes to assess bigger trends.

Clearly, the 80-month moving average in small caps and retail has become an important support “line in the sand” to measure the potential for recession and/or stagflation.

In the case of the chart of USO (US Oil Reserves), the 80-month moving average is a line in the sand to measure the inflation narrative or higher oil prices likely coming.

Historically, the 80-month moving average (green line) served as resistance in USO since 2008 when the market crashed.

Then, from March 2022 until July 2022 USO traded above the 80-month MA.

However, that was short-lived thanks to rising interest rates.

3 months ago, that changed.

Once oil cleared $80 a barrel, we saw the price spike to about $94.00.

USO then cleared the 80-month MA in August on the heels of OPEC+ and the US dwindling oil reserves, plus higher-than-expected demand.

The oil market appears to have priced in current interest rate values.

Although the current geopolitical situation does not have a pure impact on oil prices, what the chart suggests is that a lack of impact can reverse a much larger impact.

The USO price closed the month of September at 76.00.

This month, USO opened higher. Currently, the price is above the 80-month but slightly below a pivotal point at 76.00.

Quite simply, a move over 76 suggests higher prices with a good risk point to under 73 or the 80-month MA.

That would correspond with oil holding $80 per barrel and returning above $86.00.

More importantly, if the trend is your friend, this break higher of the 6-7 year business cycle if sustained, should drive oil prices to the next target of around $110.

ETF Summary

  • S&P 500 (SPY) 435 resistance
  • Russell 2000 (IWM) 177 resistance
  • Dow (DIA) 338 resistance
  • Nasdaq (QQQ) 368 pivotal
  • Regional banks (KRE) 39.80 -42.00 range
  • Semiconductors (SMH) 150 resistance 143 support
  • Transportation (IYT) 237 resistance 225 support
  • Biotechnology (IBB) 120-125 range
  • Retail (XRT) 57 key support if can climb over 61, bullish


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