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Oil drops, another recession indicator for the US. Graph Brent Crude. Iran a ‘barrier’ for a lower oil price.

Posted by Adrian on August 5, 2008

Oil (Brent crude chart) dropped significantly from 128.59, to it’s current of 120. Again the assumption could be that support of 120 is keeping the oil price from falling any lower. Please refer to previous post in regards to oil price support of 120.

But this sell off is quite rapid and has fallen below the 50 day moving average of 132, 100 day m.a of 123. It all looks oversold, but there may be room for more selling and the oil price could drop under the 120 support.

Both CCI’s show downward pressure, more so the CCI (2) set at 3. The CCI (1) set at 22 looks more stabilized. Both CCI’s indicate that oil looks oversold (on a one day graph).

Still with oil prices moving downward as they have come of all time highs of 147 reached on 11 July 2008. This could be another clear indication that the US is falling into a deep recession, with a volatile and fragile economy a falling oil price can now only exasperate the bear market in stocks (particularly energy related stocks) – as the market reads a falling oil price as a slowing economy, wiping away any confidence that the US has a resilience in copping with high oil prices. It is from all sides now, inflation being as severe as it is, falling house prices, commodities prices still high and a weakening US dollar.

I am not entirely convinced the Iran threat (via Israel) is going away anytime soon. With Iran passing the deadline that UK prime Minister Gordon Brown and Secretary of State Condoleezza Rice verbally imposed; Iran continues to antagonize the West. Threats from Iran that they would close the Straits of Hormuz and a recent missile test – would indicate that a military conflict is all but invertible.

refer to graph (please click on larger image)


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