Tuesday, January 12, 2010

Large speculator bets that oil goes higher also highten importance of $70 for support level

Interesting news reported today about traders' bets on oil - just before oil slid today! But that's just one day so the real issue obviously is whether oil can vault to new highs. Or will it sink back under $70. We've pointed out that $70 needs to be support or it may go into a bearish pattern. Frankly I'm becoming somewhat pessimistic - so am hanging back. I'm starting to think the whole movement up from the lows could be counted as an abcxabc=B wave, i.e., bearish now for a C wave down. But it's coming down to the range from $70 to $83. If it breaks under $70 I'd like to be short, if it makes new breakout highs I'd like to be long. Check out the COT chart below, then the Stockcharts chart I've set up for $WTIC crude light. And look at this news story, partly quoted below: Funds Make Record Oil Bets as Freeze Spurs Prices: Chart of Day - Bloomberg.com, 1/12/10 at http://www.bloomberg.com/apps/news?pid=20601109&sid=agS0wA06QFwQ&pos=15
Funds Make Record Oil Bets as Freeze Spurs Prices: Chart of Day

By Alexander Kwiatkowski

Jan. 12 (Bloomberg) -- Hedge funds and other investors have made record bets on higher crude and fuel prices as freezing weather boosts consumption.

The CHART OF THE DAY shows the total net number of long positions, contracts betting prices will rise, held by so-called large speculators in New York crude, heating oil and gasoline futures, according to Commodities and Futures Trading Commission data. The lower line shows crude oil prices.

"The CFTC data is showing large speculators are behind the current oil rally from $70 a barrel," said Olivier Jakob, managing director of Petromatrix GmbH in Zug, Switzerland. "Large speculators are now holding all time record net length in WTI, record net length in gasoline, record net length in heating oil."


So that's the quote, you can read the whole article at the link above. And here are the charts I mentioned. In the COT chart, taken from the COT site in the list at the right side of the page, you can see how the commercial traders remain decisively short:

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