Until Demand Changes Energy Will See More Downside

Sentiment in the energy sector has turned south. This is something I discussed yesterday and today crude is down $2.45 or 3.5%. With that in mind let's take a look at (NYSE: USO), United States Oil Fund ETF. As you can see on the chart below the we fell to support at $36 today and so far held. While this ETF is not a true picture of what actual price of oil it does give us a clue concerning investor support. If we break this level the next support is near $34 and then $32.50. If you still own this I would have a stop just below the current support in the event the selling gains momentum.

Plenty of blame today is being shifted to the jobs report released this morning for the weakness. It definitely helped today, but the weakness in crude started two weeks ago. This is the same point the chatter about the economic data not gaining enough momentum for growth. The challenge remains in play as does the weakness in oil.

Oil is not alone in this matter. Other commodities are showing weakness as well. Coal is down 3.7% after a nice bounce off support last week. Natural Gas has sold off nearly 20% the last ten days and gasoline is down 3% today as well following yesterday tumble on supply data. Gas is off 9% over the last three days. The commodities in the energy sector are under pressure and the selling accelerated today. Demand remains a challenge for the sector and until it changes we could see more downside.

There are various ETFs available for shorting both the energy sector and oil directly. They are leveraged and you should evaluate the risk of such a play prior to putting money at risk. Oil services, refineries and the conglomerates are all down in unison.

Have a safe 4th of July Holiday and remember all those throughout the history of our country, past and present, who have fought for freedom!

 |  |