Friday, January 30, 2015

Light Crude Oil Rallies Off Long-Term Weekly and Monthly Support Lines

As shown on the two charts below (weekly and monthly closing prices) light crude oil spot prices bounced off long-term support lines at the end of this week.

The rally left bullish wicks that could be signs of a trend reversal as they have been in the past.

As noted on the weekly chart, light crude oil prices are still at extremely oversold conditions, which may increase the odds that the rally will continue.

Corporate high yield bond prices may benefit from a stabilization or reversal in light crude oil price trends if investors fear that low oil prices could trigger an increase in high yield bond defaults by some energy companies. 

Most predictions we have seen appear to indicate relatively low overall default rates for corporate high yield bonds through 2015 (2.0-2.5%) when compared to the long-term average (about 4.5%). 

Click Chart to Enlarge

Click Chart to Enlarge

Not Investment Advice | Important Disclaimer: 
The content in this article, including the identification and discussion of any specific security (e.g., bond fund), is NOT meant to be and should NOT be construed and/or used as investment advice. This article is for general information and educational purposes only. Please read the Disclaimers  for in their entirety. The U.S. Securities and Exchange Commission website has guidance on selecting an investment adviser.

Financial Disclosure:
The author/publisher has positions in several corporate high yield bond mutual funds and a small position in oil futures (USO) at the time this article was written

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