Amazingly, OPEC has no reaction to plunging prices and does nothing. This morning, prices are gapping down in a big way for the price of oil and the underlying stocks. Lesson time: just about the whole energy complex has been in a bear market since the breakdown in July. How does one know when something is in a bear market? Simply put, all rallies fail in and around A DECLINING 50 DAY MOVING AVERAGE. Conversely, when the going is good, price pulls back into A RISING 50 DAY MOVING AVERAGE.
We will be posting several charts over the weekend. Notice how the USO,OIH and the XOP have lived below the 50 day moving average with the XLE , except for 2 days, has lived below it also. Notice how the rallies into THE DECLINING 50 DAY failed and not coincidentally, failing to the penny. This has been classic.
As we stated in our last report, we are amazed when some think it is bad news when oil prices plunge. These people believe this is a sign of a worsening economy. They may be correct but we also know that every 10 cent drop in gas prices is a $10 billion expense cut for the consumer…and that is just here in the states. Also, all businesses benefit with airlines, truckers,shippers and the like getting the most out of it. Of course, it is all good news except for energy companies.