Oil, Gold, and Equities: The Battle of Supply and Demand

As predicted and we wrote about yesterday, oil prices continued to climb in anticipation of an OPEC+ production cut. Reports confirmed today that OPEC+ will cut production by 2 million barrels a day. 

The Strategic Petroleum Reserve (SPR), which the Biden administration has tapped to ease gas prices, has dropped to its lowest level since 1984, and scheduled releases will end soon. The continuation of multiple Russian sanctions and the decrease in supply should exert upward pressure on oil prices.

Will the stock market rally this week and be able to shrug off rising oil prices? What do higher energy prices mean for global inflation? 

The global energy demand and supply imbalance will take time to resolve, and long-term, more resources must be put towards renewable, nuclear, and alternative fuels.

Sign up for our FREE newsletter
and receive our best trading ideas and research

On the demand side, the critical element of the European gas plan going into the winter of 2022-2023 is reducing consumption, which is regrettably not yet happening.

Although some people are optimistic, the reality is that inflation will remain problematic if the European energy crisis and the conflict in Ukraine continue. OPEC+’s production cut has the potential to increase global inflation unintentionally.

uso united states oil fund trading higher price targets new highs chart

The United States Oil ETF (USO) increased on Wednesday to 71.94 which is barely below both its 50-day moving average and 200-day moving average. USO has strong leadership, good momentum, and a divergence in Real Motion, all of which indicate higher prices ahead.

Mish writes a mid-week column for CMC Markets, and in her article today, she explains that we are looking for the end of inflation in “all the wrong places.” She covers the Supercycle in commodities and how stagflation is impacting global markets.

Mish addresses historical correlations from 1972, 1982, and other pivotal years. Her analysis addresses many areas of the commodity cycle, particularly the gold price, gold miners, and the S&P 500. 

She points out that several commodities tend to start a positive trend shortly after gold starts to outperform the S&P 500. 

In this period of historically high inflation, investors are wise to keep an eye on the oil and gold markets. 

Mish’s Upcoming Seminars

ChartCon 2022 Stockcharts October 7-8th Seattle.

Join Mish and 16 other elite market experts for live trading rooms, fireside chats, and panel discussions.

October 7th 11:15 AM (ET), 8:15 AM (PT) Stock Picking Lightning Round with Mish

October 8th 2:00 PM (ET), 11:00 AM (PT) Bulls vs. Bears Debate with Keith and Mish on opposing sides of a trade!

Stock Market ETFs Trading Analysis & Summary:

S&P 500 (SPY) 375 support and 379 resistance

Russell 2000 (IWM) 172.30 support and 176.57 resistance

Dow (DIA) 298 support and 305 resistance    

Nasdaq (QQQ) 277 support and 283 resistance

KRE (Regional Banks) 60.30 support and 64.77 resistance

SMH (Semiconductors) 197 support 210 resistance  

IYT (Transportation) 203 support and 211 resistance

IBB (Biotechnology) 119.32 support and 124.25 resistance 

XRT (Retail) 58.70 support and 62.75 resistance

Twitter: @marketminute

The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.