Lenny, Andy and a Head Debate Oil and Bonds

The relationship between Crude Oil, ($CL_F, $USO) and Treasury Bonds ($TLT) has been a rocky one over the past few years. Just ask my friends Leonardo de Pisa, also known as Fibonacci, and Alan Andrew’s, inventor of the Andrew’s Pitchfork tool. The weekly chart of the ratio of Crude Oil to Bonds below contains tools from both. And they pretty much agree that the ratio is headed lower, further in favor of Bonds. The bullish Pitchfork (green) saw price cross the Lower Median Line back in early May and is now at the Hagopian Trigger Line. A continued move lower would trigger a sell signal. Adding weight to the downside, the bearish (red) Pitchfork has price being drawn lower to

the Median Line. Looking at the Fibonacci’s, the move lower in 2011 was retraced 50% before falling back. After stalling at the previous low, it is heading lower again. How low can it go? A Measured Move comparable to the 2011 move lower would take it to a ratio of about 0.32. But there is another target even lower if you zoom out to the monthly chart below. This shows a Head and Shoulders Top that is about to trigger with a price objective of zero. It is never going to get to zero, but there is useful information in these charts. There is a clear showing of strength in Bonds over Crude Oil. So much so that it may be worth staying away from one in favor of the other.

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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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