July Crude is taking its sweet old time getting off the launching pad, considering that Mosul and Tikrit just fell to Islamic radicals. The news was out earlier this evening, but it wasn’t until around 4 a.m. EDT that the futures blasted out of a consolidation pattern with enough wattage to push them — presumably just for starters — over the very near term to at least 106.75, a ‘Hidden Pivot’ target. That would be a down-payment on the $119 technical target I posted three weeks ago, when I was unable to imagine what would cause the price of crude to turn so strong. For now, I’ve posted a time-stamped trade entry at 104.79 in the chat room, so that’s where you should head if you want to stay on top of this, um, ‘developing situation.’
The ISIS jihadis have few friends in the region, and it is by no means certain they will move on Baghdad. They would face fierce resistance there not only from Shia militias whose stronghold is in southern Iraq, but also, possibly, from Iranian Shiites. Even if the ISIS jihadis merely consolidate their gains without taking Baghdad, the fear they’ve already aroused has extremely bullish implications for crude oil futures. To me, at least, tonight’s market action seems like a rare no-brainer trade, although in the U.S., only insomniacs will be able to take advantage of it. Gold has yet to budge, but it has been comatose for so long that it may take a good kick in the ass before bullion traders see what the oil traders are seeing.
Bad News for Europe
Meanwhile, Europe may be about to rediscover that even though it has grown more frugal than ever about burning fuel, that supply can impact prices as much as demand. As for the U.S., Americans have imbibed enough fracking success that some may be envisioning a return to the good old days of $2.00 gas and $100 monthly heating bills. They may be in for a shock, however: According to the International Energy Agency, lower U.S. energy costs are more dependent on the expansion of Iraqi output than on growth in the production of domestic shale oil and gas.
Meanwhile, the U.S. stock market will have an excellent opportunity to do the right thing — i.e., drop dead. Finally. If so, deliverance is nigh for permabears who have had their patience tested to the utmost for the last five years.