Bearish at the Bottom-Institutions Wrong on Oil

June 20, 2023

Mish's Daily

By Mish Schneider

On June 12th, Goldman Sachs came out with this:

Goldman Sachs has slashed its forecast for oil prices by nearly 10%, citing weak demand in China and a glut of supply from sanctioned countries, including Russia.

What the big institutional analysts have done this year, is get pretty much everything wrong.

I pick on Goldman today because our view on oil-somewhat fundamental and somewhat technical is so very different than theirs.

Plus, the prediction came out on the low tick for the last week.

Goldman claimed support for their viewpoint on the basis of

  1. Restored Russian supply and their using secret tankers to get oil delivered globally
  2. China’s real estate market leading to low demand for oil in a struggling economy
  3. Saudi’s attempt to shore up price with lower production

We look at those points differently.

Russia (Putin) may get more desperate and escalate the war thereby threatening supply chain.

China is stimulating their economy and demand for oil is increasing.

Saudi has proven that they wish to keep prices up-leaving supply/demand vulnerable.

The charts help us as well.

The US Oil fund is not futures. The fund predominantly holds near-month-futures contracts on WTI, rolling into future contracts every month.

It also has exposure to the U.S. Dollar (53.63%) so not perfect like futures.

Nonetheless, the ETF is highly liquid.

On the futures chart above, the price is approaching the 50-DMA with a declining slope. Over the 200-dma (thicker line) or price of $76, this heavily shorted raw material could fly.

On the USO chart, the price remains under the 50-DMA as well. Over 65, the chart gets more interesting.

Over 68, we can make a case for a bottoming formation that goes back to March. That could take USO up to around 78 or in futures to around $100.

Real Motion has a bullish divergence!

The momentum is indicating a bullish phase above both the 50 and 200-DMAs which are stacked appropriately.

A move under 60, all bets are off.

However, we are going with a move higher in oil forthcoming-

And yet another example of learning how to make trading decisions on your own, ignoring the “smart” analysts.


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Mish in the Media -
All clips here

Making Money with Charles Payne Fox Business 06-19-23

CMC Markets More on Currency Pairing 06-14-23

Real Vision Daily Briefing Ash Bennington 06-13-23

Business First AM The Small Caps Canary 06-14-23

CMC Markets Day trading Futures Post CPI 06-13-23

TD Ameritrade Basic Materials Undervalued 06-12-23

BNN Bloomberg Opening Bell-What to Trade 06-12-23

One-on-One with TG Watkins Stockcharts Part 2 06-05-23

Making Money with Charles Payne 06-08-23

Fox Business Coast to Coast Neil Cavuto 06-08-23

ICW Rajeev Suri-Entire Interview with Charts 06-07-23

Coming Up:

June 21 Mario Nawfal Spaces 8 AM ET

June 22 Wolf Financial Spaces 3 PM ET

June 22 Forex premarket show Dale Pinkert

June 23 Your Daily Five Stockcharts

June 27 Final Bar with Dave Keller

July 6 Yahoo Finance

July 7 TD Ameritrade

ETF Summary

S&P 500 (SPY) 440 pivotal with potential reversal-has to break under 434

Russell 2000 (IWM) 180-190 stuck

Dow (DIA) 34,000 in the Dow now pivotal

Nasdaq (QQQ) 370 target hit proceeded by some selling-360 support

Regional banks (KRE) 42 support, 44 pivotal

Semiconductors (SMH) 150 now major support.

Transportation (IYT) 237 area the 23-month moving average

Biotechnology (IBB) 121-135 range

Retail (XRT)  62 support and if clears back over 63, optimism returns

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