NFTRH 703 noted the buyable look of crude oil and bullish Natural Gas. This morning I added USO for these reasons…
- The daily chart, as noted in #703
- The seasonal, which is still up through the summer (on average)
- Commercial hedgers (net shorts) books are far from a sell signal
- Public optimism is middling and muted at best
- As noted in the trade log, USO has been an efficient WTI tracker for the last 2 years (not always historically the case)
After I’d already added USO, a subscriber sent along a heads up about Allianz and its Oil & Gas policies in service to meeting climate goals:
Insurer Allianz toughens oil & gas policy to help meet climate goal
The bottom line case being that this is another move by the ‘build back Greener’ movement that will blow up in the faces of carbon fuel users, with chronic high prices.
Now please realize that is not my analysis, and I have seen fool proof fundamental rationale blow up in the faces of its promoters in the past (hello T Boone Pickens, Jim Rogers and Chris Martenson). Indeed, I am on the deflationary side of the boat and if that play proves out and if it is strong enough it would take it all down, fundamental rationale or not.
Another side note is that chronic high fuel prices would impair the cost side of gold miners’ balance sheets if gold does not at least keep pace with oil.
All that said, I wanted to fill in a few more positive notes to go with the charts of Oil and Gas in #703 and my trade log note adding USO this morning.
For better or worse I bought some pm miners today at the open.What worries me are the high energy prices. Some of that must be currently priced in, but the supply and demand fundamentals continue to favor higher prices for both oil and gas.
@Gary, are you still keeping an eye on those potential SM gap fills?
Also note that NDX has just filled its open gap. That’s not nothing.
Yes, another subscriber asked me about that yesterday. Here’s my response: “Well, using SPX as an example the gap fill would be at 4020 (current level: 4131). But support is below it at around 3980. That is what I’d look for as a potential interim low if the gap fills.”
I’m sure Gary knows it, but just in case others don’t know or forgetful like me: as soon as backwardation turns into contango, USO will start underperform WTI.
Yes Armen. Exactly why I’ve checked the relative performance trends for both UNG and USO over the last couple of years. I’ve seen these POS’s wildly under-perform in the past. Great point and thank you for adding it for others to consider.