Thursday, April 29, 2021

Chartology: Crude Oil

Over the years I've mentioned one of my pet peeves with technical analysts* is their habit of applying the general principles to extremely long time periods. A trendline of Treasury yields going back to 1982 has no predictive power. The only reason this stuff works at all is because the charts are just graphic representations of what people did, and in the case of the "yields are breaking above the 30-year trend" observations, who cares? Chart memory/price memory is people memory.

The people who ran those trades in the 'eighties are dead. Or at minimum retired. Well, most of them.

On the other hand this chart from Kimble Charting Solutions may have it just right on one of the lines, in this case the support/resistance highlighted in pink:

Commodities prices have risen rather sharply over the past 12-18 months, adding to worries of pricing pressure and inflation.

As you can see in the chart above, businesses are taking note. The word “inflation” is being mentioned at a record rate by S&P 500 companies on earnings calls.

Although there are several inputs that effect consumer prices and inflation, perhaps one major indicator is worth watching right now: Crude Oil..... 


*Two others are doing analysis of non-tradeables such as ratios: "The tuna/rhodium ratio bounced as we foresaw, right at the 38.2% Fibonacci  retracement level"; and the Elliot-Wave Theorists propensity for seeing multiple trajectories from the same data meaning their forecasts are non-falsifiable so they are never wrong. Just give me your best guess and we'll see how it works out, scaling in if there seems to be any of what the computer modelers call "skill".

Because human beings are such great pattern recognizing animals, it's what we do, you have to be constantly on guard against seeing patterns that aren't even there.