Shares of the United States Short Oil ETF (NYSE: DNO) are likely to move higher
in the early going on Monday.
Chart Courtesy of StockCharts.com
Crude oil seems headed for some weakness on Monday. Of course, it's very early in the day as we write. And things can change. But the fact is that the Obama administration has given in to demands for more drilling in the U.S., both on and offshore.
And yes, none of that oil will make gasoline prices fall today. But the concept is clear. It's election season and this election may hinge on little more than jobs and gasoline prices. So Mr. Obama will do everything possible to give the people what they want, or at least make it seem as if that's what he's doing.
The issues in Europe continue to weigh on the markets. The arrest of IMF Chief Strauss Khan may stall progress on E.U. bailouts. In fact Greece is not likely to succeed in its bid for meeting criteria of its bailout. And the continuing tightening of monetary policy in China is another worry for traders.
Hedge funds bailed out of commodities in the last couple of weeks. This is another pillar that has been removed from higher oil prices, or at least their rapid ascent. On the other side, it's uncertain as to what effect the Mississipi river's flooding will have on the economy, both on the agricultural side as well as on the oil refining side.
And that may be what keeps things from unraveling faster for crude. The bottom line is that we are now in a trading range between $90 and $110. $100 is now short term resistance. $92 is very important support.
A failure for crude today could set the stage for more selling in the next few days. Look for what OIH does with regard to the 150-156 area in the next couple of days.
DNO, as of now, seems to be a sensible way to hedge both long stock portfolios and any long energy positions. Dr. Duarte owns shares in DNO.
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