Tuesday, November 10, 2009

A Third Reason To Own Crude Oil

We had two reasons to own crude oil, and now we can add a third.

Figure 1 is a weekly chart of a West Texas Crude Oil (cash data). The indicator in the middle panel measures crude oil's 52 week performance relative to a basket of 8 currencies.Those currencies are: 1) Australian Dollar; 2) Canadian Dollar; 3) Swiss Franc; 4) Eurodollar; 5) British Pound; 6) Singaporean Dollar; 7) Japanese Yen; 8) US Dollar. Priced in these currencies, crude oil is out performing, and it is far from extreme.

Figure 1. Gold v. Currencies v. Sentiment

The data in the lower panel comes from the Market Vane Corporation, which publishes the Bullish Consensus. The current value is 44 meaning that only 44% of advisers are bullish on crude oil; peaks occur when the value is above 80%. When I last showed this data, the value was 39% when crude oil was 10% lower.

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