So in yet another amazing flip flop Goldman Sachs has revised its oil outlook from a $115 target by years end to just $70, with a possibility of $50. This is thrown in there after oil has of course already come alll the way down to $77 as of last friday (bounced up to 81 Monday) from the all time high of $147 in early July. Yes, you heard it right, Goldman has predicted the price to be $70 by year end. Going out on the limb there dont you think there guys?
Ok I'll give them credit for calling the run up to $150 last spring but this latest call is just another example of why listening to analysts will never make you any money. Oil has lost 48% since the peak was hit just 3 months ago, pretty much a slaughtering. And NOW these professionals come out and say they think its going to $70. ARE YOU KIDDING?! What a joke.
It was clear the trend in oil (and commodities for that matter) was over when crude broke thru $120 and even before that you could see that the BRIC story was a scam that was pushed a bit too far. That demand from emerging markets was already slipping before crude had its meteoric rise. The Baltic Dry Ship Index (the index that tracks the cost for shipping rates that big bulk shipping carriers to transport dry goods) had started to crash from the peak in late June and clearly pointed to a slowdown in the global economy before any fundamentals showed their heads. Anything that is used to feed global economic growth was dropping in price. And quite rapidly infact. And so where was Goldman?
Oh they were waiting to tell their clients about the revision to their forecasts of oil till it lost nearly half its value. This is a great reason why every individual investor should be able to do their own due diligence or not play at all. Read a book. Educate yourself. You can do the analysis yourself and let the analysts make their bad calls as they use their complex financial models to no avail.
Ok, enough of that. So what do I think of crude right here? Well, when it was over $130 I was saying there is a very real possibility it can come down to $87 by Dec. It blew right thru that and hit $77 last Friday. Looking at the chart I see a broken commodity which means the downtrend is in full effect. I wouldnt be surprised to see a bounce in oil here around the 75-80 level because you have the 200 week moving avg. just below. However, I wouldnt count on it getting back over $90 right away. It has plenty of support down here around the 75 level so I would assume it trades sideways for a little while but eventually may head into the 60s if it cannot hold the 75-77 level.
Bottom line is that you soon will be seeing gasoline at a local pump near you around $2.50 or less. Never thought I'd be happy about that a few years back, but hey lets smile. :)