A few weeks ago, I pointed out that the price ascent toward the bottom of the rounded top suggested commodities, and oil in particular, was about to sink. Well, sink it did, bottoming (as did most assets) this past Wednesday. This was followed by a hearty bounce. I’m not sure if this bounce is already done, or if it’s going to get back to its price gap, but regardless, it won’t be long-lived.
This has expressed itself nicely with the energy stocks. The oil and gas index, shown here, is sporting a very large, complete reversal pattern, and the modest bounce we saw at the end of last week might be just about all it’s going to get, as the world markets begin to build in the reality of a major recession into energy prices.
Oil prices, by way of USO, already seem to have sufficiently retracted to the topping pattern to suggestion we could begin falling immediately when the market re-opens.
I lightened up my two bearish energy positions early in the week, based on the supposition of a bounce coming, but I’ll probably bump up their size again if it’s clear that we are re-weakening. As always, click on any chart for a larger version.
