Decoding the Dance of Oil, Inflation, and Changing Markets
"Oil is the lifeblood of modern civilization, fueling progress and shaping the course of nations."
By ChartScope
Published on August 25, 2023
Consider the shock of paying significantly more for your daily fuel needs. This not only affects your driving expenses but can ripple into higher costs for essentials like groceries and clothing. Enter the role of light crude oil, a behind-the-scenes player that holds more sway than meets the eye, influencing our economy in profound ways.
Oil's Ripple Effect on Spending
Light crude oil serves as a building block for everyday products and fuels. Lower oil prices usually translate to more affordable transportation and manufacturing, giving us a break in costs. Yet, when oil prices surge, a ripple effect ensues. As production and transportation expenses rise, businesses often pass these costs on to consumers. This chain reaction can trigger the already-known inflation, leading to steep price increases across the board.
Market Shifts in the Spotlight
Now, imagine the stock market as a roller coaster. It's been on a thrilling ascent for some time, but murmurs of a slowdown grow louder. The ride might become bumpier, leaving investors on edge. They start exploring alternative avenues to safeguard their investments and generate returns.
Unveiling the Commodity Connection
Enter commodities, like gold, crops, and even oil. These tangible assets retain value even amidst economic turbulence. As inflation starts to climb, people often turn to commodities as a haven for their money.
Charting a Path Forward
But let's analyze the data a bit more. My technical analysis indicates that light crude oil might dive below the $64 mark this year or the first half of next year, which could diverge from the narrative presented by Truflation's recent article. They posit that the turning point in CPI data has been reached, with growth ahead. However, with CPI potentially rising further in August and September, my analysis could show a decline by year-end or the first half of next year due to the dynamics of the oil market.
Analyzing the Charts: Weekly Perspective
After the prolonged correction phase following the 2008 financial crisis, 2020 marks a turning point for light crude oil. Elliott Wave Theory, a complex analytical tool, identifies an impulse phase followed by a correction phase. Currently, the chart appears to be stuck in the correction phase of the second wave. However, this correction is not yet complete based on the Fibonacci retracement, this is ideally within the Golden Pocket - the area between the 61.8% Fibonacci level at $56.07 and the 65% Fibonacci level at $52.22. The price could also go lower to test the upper side of the multi-year correction channel (blue). The maximum targeted price would be $35.84 or the 78.6% Fibonacci level. Note that these chart assumptions are based on technical analysis, not immediate news, which often occurs at event time. Looking at the price of oil relative to the stock market, this could be a turning point for both stocks and commodities. Multi-year oil price targets could be headed for $200, while equity markets could drop significantly as inflation hits a new high.
Predicting time frames is difficult, but as mentioned earlier, the trend for light crude is downward. The chart below details the specific correction targets in more detail.
In Summary
Oil's influence is far-reaching, affecting inflation and the broader economy. Market shifts and the growing importance of commodities underscore the evolving financial landscape. As a technical analyst, my charts suggest a potential conflict with current CPI predictions, hinting at a different trajectory due to oil fluctuations. Navigating these interconnected dynamics requires vigilance, understanding, and an eye on both data and market trends.
Technical Analysis - Not Financial Advice
Remember that the insights shown here are for informational purposes only and should not be considered financial advice. I will be looking at indicators, chart patterns, and potential trends. To make informed decisions, it is important to understand the broader market landscape. Stay informed, stay alert, and remember that this is not financial advice.
By ChartScope
Published on August 25, 2023
Consider the shock of paying significantly more for your daily fuel needs. This not only affects your driving expenses but can ripple into higher costs for essentials like groceries and clothing. Enter the role of light crude oil, a behind-the-scenes player that holds more sway than meets the eye, influencing our economy in profound ways.
Oil's Ripple Effect on Spending
Light crude oil serves as a building block for everyday products and fuels. Lower oil prices usually translate to more affordable transportation and manufacturing, giving us a break in costs. Yet, when oil prices surge, a ripple effect ensues. As production and transportation expenses rise, businesses often pass these costs on to consumers. This chain reaction can trigger the already-known inflation, leading to steep price increases across the board.
Market Shifts in the Spotlight
Now, imagine the stock market as a roller coaster. It's been on a thrilling ascent for some time, but murmurs of a slowdown grow louder. The ride might become bumpier, leaving investors on edge. They start exploring alternative avenues to safeguard their investments and generate returns.
Unveiling the Commodity Connection
Enter commodities, like gold, crops, and even oil. These tangible assets retain value even amidst economic turbulence. As inflation starts to climb, people often turn to commodities as a haven for their money.
Charting a Path Forward
But let's analyze the data a bit more. My technical analysis indicates that light crude oil might dive below the $64 mark this year or the first half of next year, which could diverge from the narrative presented by Truflation's recent article. They posit that the turning point in CPI data has been reached, with growth ahead. However, with CPI potentially rising further in August and September, my analysis could show a decline by year-end or the first half of next year due to the dynamics of the oil market.
Analyzing the Charts: Weekly Perspective
After the prolonged correction phase following the 2008 financial crisis, 2020 marks a turning point for light crude oil. Elliott Wave Theory, a complex analytical tool, identifies an impulse phase followed by a correction phase. Currently, the chart appears to be stuck in the correction phase of the second wave. However, this correction is not yet complete based on the Fibonacci retracement, this is ideally within the Golden Pocket - the area between the 61.8% Fibonacci level at $56.07 and the 65% Fibonacci level at $52.22. The price could also go lower to test the upper side of the multi-year correction channel (blue). The maximum targeted price would be $35.84 or the 78.6% Fibonacci level. Note that these chart assumptions are based on technical analysis, not immediate news, which often occurs at event time. Looking at the price of oil relative to the stock market, this could be a turning point for both stocks and commodities. Multi-year oil price targets could be headed for $200, while equity markets could drop significantly as inflation hits a new high.
Predicting time frames is difficult, but as mentioned earlier, the trend for light crude is downward. The chart below details the specific correction targets in more detail.
In Summary
Oil's influence is far-reaching, affecting inflation and the broader economy. Market shifts and the growing importance of commodities underscore the evolving financial landscape. As a technical analyst, my charts suggest a potential conflict with current CPI predictions, hinting at a different trajectory due to oil fluctuations. Navigating these interconnected dynamics requires vigilance, understanding, and an eye on both data and market trends.
Technical Analysis - Not Financial Advice
Remember that the insights shown here are for informational purposes only and should not be considered financial advice. I will be looking at indicators, chart patterns, and potential trends. To make informed decisions, it is important to understand the broader market landscape. Stay informed, stay alert, and remember that this is not financial advice.