Oil & Transports Wave Recession Red Flags! (CL) vs (IYT)
Hi friends! Welcome to this update analysis on the oil market, via the daily Light Crude Oil Futures contract.
As many of you know, the oil market has been completely collapsing lately. I've made several posts about it, and my recent analyses have been spot on with projecting the rapid decline of the oil market. But why is the oil market falling? Well, traditional market news outlets are telling everyone that it's because the market is over-saturated with supply. There is definitely an oversupply of global oil right now true, but there is another factor that is taking the market by storm — a collapse in demand.
In front of you, I have the oil market compared to the Dow Jones Transportation Average, better known as the IYT ETF (in blue.) The blue line represents the transportation sector, of the US economy. It is our lifeblood. Within that blue line, is a combination of the trucking, railroad, and airline industries in the US. As you can see, the blue line peaked in mid September, slightly before the oil market peaked. Since then, the transports have been plummeting. As a result, the demand for oil (the fuel of the transportation industry) has fallen in equally dramatic fashion.
In other words, there has been a dramatic slowdown in the transportation of goods throughout the US economy, which is why there is a decrease in demand for oil, which is why the transports and oil are plummeting in unison.
Market watchers know this, and it isn't a good sign. For those of you who were wondering why the stock market fell so sharply today, this is the reason. The transports and oil are telling us that there is a major slowdown in economic activity. If this continues to worsen, the stock market could experience a catastrophic fall.
In terms of recession signals, a sharp slowdown in transports is typically a good indicator of a potential recession, particularly when it's coupled with an interest rate yield curve inversion, which is what we are seeing now. So, it will be interesting to see if the market can recover from this. As you can see, oil is approaching some major support levels (horizontal trendlines.) If we start to smash through those, things could get really nasty. However, we will most likely see some temporary support in the near future, both in the stock market and the oil market. Both markets are approaching major support levels. If those respective support levels are held, we could see a sharp relief rally, in both the stock market and the oil market. However, if these important levels are broken, things could get much much worse.
The correlation between oil prices and falling transport prices is clear, and I feel that it is covertly signaling that we may be entering treacherous times.
In other news, the government shutdown, the resignation of General Mattis, and Trump's expressed desire to fire Fed Chairman Jerome Powell, have also contributed to increased concern among investors.
Happy Holidays Everyone!
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-
As many of you know, the oil market has been completely collapsing lately. I've made several posts about it, and my recent analyses have been spot on with projecting the rapid decline of the oil market. But why is the oil market falling? Well, traditional market news outlets are telling everyone that it's because the market is over-saturated with supply. There is definitely an oversupply of global oil right now true, but there is another factor that is taking the market by storm — a collapse in demand.
In front of you, I have the oil market compared to the Dow Jones Transportation Average, better known as the IYT ETF (in blue.) The blue line represents the transportation sector, of the US economy. It is our lifeblood. Within that blue line, is a combination of the trucking, railroad, and airline industries in the US. As you can see, the blue line peaked in mid September, slightly before the oil market peaked. Since then, the transports have been plummeting. As a result, the demand for oil (the fuel of the transportation industry) has fallen in equally dramatic fashion.
In other words, there has been a dramatic slowdown in the transportation of goods throughout the US economy, which is why there is a decrease in demand for oil, which is why the transports and oil are plummeting in unison.
Market watchers know this, and it isn't a good sign. For those of you who were wondering why the stock market fell so sharply today, this is the reason. The transports and oil are telling us that there is a major slowdown in economic activity. If this continues to worsen, the stock market could experience a catastrophic fall.
In terms of recession signals, a sharp slowdown in transports is typically a good indicator of a potential recession, particularly when it's coupled with an interest rate yield curve inversion, which is what we are seeing now. So, it will be interesting to see if the market can recover from this. As you can see, oil is approaching some major support levels (horizontal trendlines.) If we start to smash through those, things could get really nasty. However, we will most likely see some temporary support in the near future, both in the stock market and the oil market. Both markets are approaching major support levels. If those respective support levels are held, we could see a sharp relief rally, in both the stock market and the oil market. However, if these important levels are broken, things could get much much worse.
The correlation between oil prices and falling transport prices is clear, and I feel that it is covertly signaling that we may be entering treacherous times.
In other news, the government shutdown, the resignation of General Mattis, and Trump's expressed desire to fire Fed Chairman Jerome Powell, have also contributed to increased concern among investors.
Happy Holidays Everyone!
I'm the master of the charts, the professor, the legend, the king, and I go by the name of Magic! Au revoir.
***This information is not a recommendation to buy or sell. It is to be used for educational purposes only.***
-JD-