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Friday, April 04, 2008

Weekend Charts to Ponder

The oil market makes no sense right now. U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 7.4 million barrels from the previous week. At 319.2 million barrels, U.S. crude oil inventories are in the upper half of the average range for this time of year.

Yes, refinery utilization is down. But so is gasoline demand – 3% year over year. And if refiners are running at lower rates, why would they need more feedstock? Why are oil prices going up?

But they are going up. And it’s a truth of the market that when a commodity or stock rises in the face of bad news, that is a BULLISH INDICATOR.

My friends in Chicago and New York say traders are buying crude because of the action in the US dollar. The dollar is slumping because of recession fears. But you’d think a recession would send oil use plummeting … so why is crude rising again?

Like I said, when something rises despite bad news, it’s bullish.

Let’s look at the dollar next …

Oil industry stocks are leading the way higher. Let’s look at the XLE …
Technically speaking …

-- The 10 day SMA has just crossed above the 20, which is above the 50 -- a bullish orientation.
-- The 10 and 50 day SMAs are all moving higher, and the 20 is about to.
-- Prices are above all the SMAs

The XLE is now at overhead resistance from February. We’ll see if it breaks out here.
And what about gold?

Turkish gold imports have fallen to a record low … but if the dollar is going to crap out, people are going to buy gold.

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