Higher Prices In The U.S. Oil ETF Translates To A Major Disaster For Stock Prices

“Oil prices have risen sharply in the past couple of weeks, which may inevitably put an end to new stock market highs. Oil has recently closed as high as $82 per barrel, as the stock market has put in new 2010 highs. There has been a positive relationship between oil prices and the stock market over the past year which will likely end sooner than later. Rick Szpila of JPMorgan Futures and J.J. Burns of J.J. Burns & Company discussed their outlook with CNBC on Thursday, March 18, 2010,” Matt Duffield Reports From Examiner.

Duffield goes on to say, “Szpila agreed there has been a positively correlation between oil prices and the stock market during 2009 and 2010. Burns warned that the oil and stock market relationship is the beginning of a major disaster for stock prices. Sound familiar? The same thing happened in 2008 when gas prices hit $4 per gallon. Unfortunately, nothing has changed and the U.S. is still unprepared for high gas prices. He went on to say the U.S. is a consumer-driven economy and every penny increase in gas prices costs consumers $1.3 billion. This will create negative sentiment later this year for most consumers.”

“Looking at a weekly chart of stock symbol (USO), which is an etf that tracks the movements of crude oil, it is on the verge of breaking out of an ascending triangle pattern. The target of this pattern measures 25% higher, which means if this pattern plays out, crude oil as well as gas prices will rise 25% in the coming weeks and months. Gas prices will definitely move above and possibly settle above $3 per gallon,” Duffield Reports.

See more details to the story: HERE

Here are some more details on the United States Oil ETF (USO):

The investment (USO) seeks to reflect the performance, less expenses, of the spot price of West Texas Intermediate (WTI) light, sweet crude oil. The fund will invest in futures contracts for WTI light, sweet crude oil, other types of crude oil, heating oil, gasoline, natural gas and other petroleum based-fuels that are traded on exchanges. It may also invest in other oil interests such as cash-settled options on oil futures contracts, forward contracts for oil, and OTC transactions that are based on the price of oil.

Related posts:

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2. Drop in Oil and Gas Prices Masks Production Problems
3. United States Oil Fund Says Don’t Blame The ETF For Big Oil Price Swings