It has taken some time, but it looks like Saudi Arabia has finally won the oil wars. The long and steady decline in crude oil, which has taken over five years, has taken its toll on many small oil producers who have effectively been driven out of business. Saudi Arabia's cost of producing oil is probably the lowest in the world and even at $30 a barrel, they are still making a ton of money.
An amazing side effect was the fact that the stock market was driven higher as oil prices were driven lower. The perceived theory behind this is that the consumer could fill up their car at a lower cost and therefore would have more disposable income. Now that oil prices are moving higher, will the reverse happened and push equity prices lower? I believe that is exactly the direction we are headed in right now, oil prices higher, equity prices lower.
Our Trade Triangle technology may have already picked that up with a monthly red Trade Triangle in place for all of the major indices, indicating longer-term lower prices. In the case of crude oil, we use the weekly Trade Triangle which is now green indicating prices are headed higher. This is the first green weekly Trade Triangle for crude oil we have seen in over five months.
In today's video, I will be looking at crude oil and where I think it can go in the short and longer term. This market has created a very reliable and strong technical formation indicating higher prices.
The price of gold continues to move up on a strong performance last week. I am still looking for this market to move up to the $1300 level before it finds resistance and regroups. I will also be covering gold in today's video update.
As I mentioned in my comments on Friday, I believe that the equity markets have seen a rebound in the longer term bear market. For this coming week, I expect to see a choppy two way market as conditions for the major indices rotate and begin to move back to the downside. I do not expect to see this happen in one day, in fact, I expect it may take one to three weeks around current levels before reality sets in.
Have a positive trading day everyone.