Barron’s Has Done It Again

posted in: crude oil, Energy | 0

After oil’s 40%+ in the last few weeks, Barron’s headline calling for $20 crude oil last month looks set to go down in market annals as one of the best contrarian cover stories ever:


barrons oil

While Barron’s did actually offer a bullish longer term view of oil, saying that prices would move back up around $55 later in the year. The sentiment shock value of the big “Here Comes $20 Oil” headline is significant and the sort of thing that major market bottoms are cast from.

It also must be said that oil continued to fall nearly 20% over the subsequent days before bottoming at $26.05/barrel on February 11th:



Nevertheless, just like it did with the euro currency during the summer of 2012 the early indications are that Barron’s has done it again; producing a cover story with a shock value headline that helped to push a market over the edge to a sentiment extreme that generated a major low within one week.

While the rally in oil during the last month has been impressive, I expect that we are quickly approaching a short/medium term price peak – the confluence of support/resistance near $38 and the 50% retracement of the October-February decline could turn into a steel ceiling for crude oil especially considering the massive storage glut and surging Iranian/Iraqi output.