Message of the Markets - What is Crude Oil Indicating? - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  
  • Home
  • Outlook Arena
  • Aug 19, 2019 - Message of the Markets - What is Crude Oil Indicating?

Message of the Markets - What is Crude Oil Indicating?

Aug 19, 2019

Vijay Bhambwani

The dreaded "R" word is being tossed around in conversations often nowadays. Much of the talk is more hunch than a mathematical debate.

So I decided to investigate for my readers using data.

Are we facing a possible recession?

I follow the behavioural trading method. This relies on actions (behaviour) of people who matter (traders).

What moves prices are actual trades and that costs money. Following the money trail is the best trading system.

--- Advertisement ---
India's Secret Plan to Beat China Takes Shape

China is playing dirty since the past few months.

Under the garb of military exercises, they shored up their troops at the border region in Ladakh.

What do they want? A war with India?

If that's the case, then India needs to be more ready than ever before.

India has already started deploying high-tech weapons at our borders.

It is estimated that the Indian government could spend over Rs 4 lakh crore on such defence equipment over next 5-7 years...

Pumping hundreds or even thousands of crores into a few Indian defence companies in the coming years...

As a result, select Indian defence companies could benefit in a huge way... and their stock prices could shoot up like never before...

Especially this one stock, which we call India's #1 defence stock.

It's a potential 10x opportunity in the long term.

We'll reveal all the details about this huge opportunity at our Explosive Profits Summit.

Click here to sign-up instantly here. It's free.
------------------------------

I have written in the past about how rising bullion price is a red flag for the economy. You may read about it here. It is the first evidence of weakness in the economy. Even during weak spells bullion tends to bounce back within 24 hours. My trading screen shows high relative strength in bullion compared to other hard assets.

The economy grows on the transportation of goods and people. If the economy is growing the demand for fossil fuels should grow too. But evidence I saw paints a weak picture.

USA Crude Inventory Versus Price Movement

DateUS Crude Inventory ChangeCrude Price $
Million barrels
Jun 07 20192.254.07
Jun 14 2019-3.152.48
Jun 21 2019-12.857.58
Jun 28 2019-1.158.15
July 05 2019-9.557.72
July 12 2019-3.160.3
July 19 2019-10.855.72
July 26 2019-8.556.16
Aug 02 20192.455.21
Aug 09 20191.654.23
Net Change-42.70.16
Data Source: US Energy Intelligence Agency

The US inventory plays a big role in impacting crude oil prices. In the last ten weeks the inventory has declined by 42.70 million barrels. That is almost 10% of the entire US inventory. Ordinarily prices should have zoomed. But crude oil rose a mere 16 cents.

NEW: 5 Pandemic-Proof Smallcaps You Should Know About...

Sure sentiments for fossil fuels are not strong right now. Electric vehicles, alternate energy, and carpooling are the current themes.

But these are promises of the near future. For now, the world still need fuel and CNG stations.

If the crude inventory data sourced from the US energy information administration is any indication, the oil markets are pointing towards an economic decline. That is my second argument.

Saudi Aramco has announced an IPO two years ago. Last year the kingdom announced their intention to pump fresh capital into SABIC. It is a subsidiary of Saudi Aramco and produces petro chemicals, polymers, plastics, fertilisers among others.

--- Advertisement ---
Top 3 Stocks for 2020 and Beyond

We've uncovered 3 high-potential tech stocks after years of research.

These 3 cutting edge tech stocks could potentially create a wave of Indian millionaires.

First one is present in the sector which is expected to GROW over 300 times by 2030.

Second one is one of the leading players in Artificial Intelligence technology.

And the third one is involved in putting up a global safety net to save the world from cyber criminals.

These 3 tech stocks have the potential to offer life-changing gains in the long run.

Click here to get the details...
------------------------------

The Saudis have reportedly pumped in about US$75 billion into SABIC. Recent media statements from SABIC indicate they intend to flood the world with low cost plastics and polymers in the future. To me that sounds like plan B in case the Aramco IPO is held up.

The recent announcement by Reliance Industries Ltd about a stake sale to Aramco is note worthy. RIL itself has announced a phased withdrawal from refining petrol & diesel. RIL will focus on petrochemicals.

Both SABIC and RIL focusing away from fuels is more than just a coincidence. This is my argument number three.

Economic growth means more projects. That means higher demand for industrial metals. Copper is known as 'The Tin Roof of the Economy' and 'Dr Copper.' It is a good gauge for estimating economic activity.

Of late the price of Copper is showing weakness on the exchanges. Taken together with Aluminium, Zinc, Lead, and Iron ore, the picture is worrying. The markets are sending out a distress signal by pricing metal prices lower. This is my fourth and final argument.

The message of the market signals weakness ahead. Investors need to keep an open mind about the possibility of a recession.

Have a profitable day.

Warm regards,


Vijay L Bhambwani
Editor and Research Analyst, Weekly Cash Alerts

Vijay Bhambwani

Vijay L Bhambwani, is the editor of Weekly Cash Alerts and Fast Income Alerts. He is a professional trader, author, trading mentor, and lifelong student of the markets. He has been an active trader since 1986. Financial markets are his life and passion. Everything else in his life revolves around his main objective - trading. Vijay believes that no matter how much a trader has lost in the market, it is possible with hard work and smart work to get it all back over time. Understanding the method behind the madness of the markets interests him more than the profits. He specialises in predictive style of technical analysis, in the commodity, currency, and equity markets. That is the foundation stone of his style of trading - Neuro Behavioural Technical Analysis. Vijay trains other professional traders. He is empaneled with the BSE & NSE as a visiting faculty for various finance market courses. He created the early course content for the Diploma in Commodity Markets (DICM), certified by the Forward Markets Commission. He was a training mentor at the MCX between 2005-2009. He is the first author to have his book - A Traders Guide to Indian Commodity Markets published by CNBC Publishing 18, in 2009 - approved and sponsored by the NCDEX. Vijay has done over 8,000 TV shows in the last 17 years and has written over 4,000 columns/articles in the print and electronic media. He is one of the first columnists to write a weekly column in the English language print media after the commissioning of the MCX, via his columns in the DNA Money, Business Standard and others. Vijay lives with his family in the posh Breach Candy area in Mumbai.


Equitymaster requests your view! Post a comment on "Message of the Markets - What is Crude Oil Indicating?". Click here!

  

More Views on News

How to Participate in India's Drone Revolution (Profit Hunter)

Oct 20, 2020

The Chinese drone market is 14 times that of India's. Billions may flow into Indian drone companies too. Don't miss out on this wealth creating opportunity.

Equity Mutual Fund Cut-Off Timing Restored. Find out What it Means for Investors (Outside View)

Oct 20, 2020

SEBI has restored the cut-off timing for subscription and redemption in mutual fund schemes with effect from October 19, 2020, except for debt and conservative hybrid schemes.

PSU Stocks Are Looking Positive Now (Fast Profits Daily)

Oct 19, 2020

Has the market changed its opinion on PSUs?

Will the Government's Attempt to Boost Consumption Succeed? (Outside View)

Oct 19, 2020

On October 12, 2020, the government came up with a stimulus package to give a boost to consumption which has taken a hit due to the COVID-19 pandemic.

I Trust Tanushree to Do a Jim Rogers and Unlock Huge Gains from Defence Stocks (Profit Hunter)

Oct 19, 2020

The set up that made Jim Rogers famous is now up for grabs in India.

More Views on News

Most Popular

My Latest Stock Recommendation (Fast Profits Daily)

Oct 9, 2020

How I picked an exciting stock using trends from both the commodity and equity markets.

The 'Seedhi Baat, No Bakwaas' View on ITC (Profit Hunter)

Oct 12, 2020

Is ITC an investment or a speculation at current levels?

How to Shortlist the Best Stocks for Trading (Fast Profits Daily)

Oct 7, 2020

In this video, I'll show you how to identify a confluence of factors in the market which will point you to the best stocks to trade.

The Inflection Point for Defence Stocks is Getting Closer (Profit Hunter)

Oct 9, 2020

Few Indian defence companies could use their engineering capabilities to eventually become global leaders.

More

Covid-19 Proof
Multibagger Stocks

Covid19 Proof Multibaggers
Get this special report, authored by Equitymaster's top analysts now!
We will never sell or rent your email id.
Please read our Terms

S&P BSE SENSEX


Oct 20, 2020 02:04 PM

MARKET STATS