Sand Spring Advisors LLC
Heating Oil Head & Shoulders
May 28, 2002
by, Barclay T. Leib
We will be the first to admit to have jumped off the gold bandwagon prematurely this year. But alas, we did make some nice profits first. At this point we feel many gold equities to be well ahead of themselves, and have somewhat sheepishly been sitting on the sidelines.
One chart that particularly bothers us, and detracts from a general commodity bull case, is that of weekly Heating Oil shown above. There are few other ways to view this chart except as a huge head and shoulders top with a now broken neckline -- recently retouched and then rejected. Under traditional Edwards & Magee charting rules, 26 cents would be a downside objective here. Oof!
Is this a first sign that some sort of debt deflation looms as the consumer finally rolls over under a boatload of debt? Or is it a sign that war in the Middle East will soon subside as we move into the latter part of June (after a potentially dangerous June 10th predicted by Arch Crawford -- see our "Sand Spring Hurt" from a few days ago). We would be inclined to believe more in the former than the latter, but this is a complex world.
All we know is that the last time we saw a head and shoulders this large and this well defined, it was in the chart of Amazon.com back in 2000 at a price in the mid-$50's.
On a purely technical basis, count us as bears on the petroleum products sector as of now.
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