Wednesday, April 4, 2007

Pictures Never Lie

Just five of the countless headlines yesterday claiming that the price of Oil was down because Iran and the UK may kiss and make-up. "Headlines" seldom tell the whole fact, the story seldom tells the whole story, or the real story for that matter. The news media is less about reporting the news these days, than they are about manipulating it.

For what I believe is the real story in Oil, let's go to the Big Picture. Pictures can't lie, and the Big Picture always tells it like it is.

Please click on the chart to enlarge.

Oil has been on quite a roll through the first quarter of this year. From the week of January 16 thru March 3o Oil is up 30% ! 30% in any commodity in ONE quarter is absolutely huge. The Big Picture is a weekly chart of Oil. Just a quick glance at this picture and one can see that the "dip" in oil yesterday was much less about Iran and the UK settling their differences in the sandbox, and more about the relevant technical points on the chart. Oil has has come up from below it's 50 week moving average from below. That moving average is at 65.23. A market rising from below it's 50 period moving average often pauses there as it represents resistance. The resistance can be thick or thin depending on the slope of the average. In this chart, Oil's 50 week moving average is sloping down...resistance at this point was "to be expected".

Strengthening the resistance at the moving average we find that oil has found it's 50% Fibonacci retracement of last July's top at 65.44. Fibonacci numbers offer resistance to a rising market, and support to a falling market. Obviously then, because of it's 50 week moving average and 50% Fibonacci retracement, Oil has found solid resistance around 65. Oil was going to pause here no matter what the Iranians and the UK have to say to one and other.

"Headlines" are often like a magician's magic act...they're designed to make you look the other way. How many times have you seen the words "Profit Taking" in a headline about Precious Metals? Those words aren't there because the news is that profits are being taken. Those words are there because the stooge writing the headline can not explain why the price of the metals are falling. Taking profits is part of the metals markets, it's never "news". If Profits are "news", how come we never see headlines like this: "Metals Rising As Traders Look For Profits"? Yes, real "news" can and will effect the directions of markets...just beware that often there is more to the news than what you see in the headlines. Or like my father always used to tell me, "Don't believe everything you read." Always look at the Big Picture. Pictures never lie.

Silver Resistance: 13.41 / 13.54 / 13.67

Silver Support: 13.33 / 13.25 / 13.16 [13.03]


Gold Resistance: 668.50 / 670.30 / 674.50

Gold Support: 664.70 / 662.10 / 658.30 [655.50]

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