Anyone heard that a bit of unrest is taking place in the mid-east? What usually happens to the price of Crude Oil when that region heats up? As we all know, frequently it pushes up the price of Crude. So why is Crude soft in light of the unrest?
Crude oil looks to be inside of a rising channel that dates back almost 30-years, with a failed breakout of this channel a few years ago. Over the past 5 years, Crude has remained above a pennant-pattern support line.
A break of support would be bearish for the most influential commodity on the planet, especially when events are taking place that are usually bullish for the asset.
Possible Support
If 5-year support fails to hold, long-term support comes into play around the $70 zone. I believe what happens to Crude over the next 6-8 weeks could tell us a good deal about where the macro state of the economy will be around Christmas.
A month ago I noted that the TR commodity index was nearing a breakdown. Since then, the trend remains down. Continued softness in the sector often means global softness is in the cards going forward.
Humbly, I believe what happens to Crude and the broad-based commodity complex in the near future is important to portfolio construction going forward.