Oil over 90?
Just after the publication of the article about Oil on the 20th of September, I was asked to name the price Oil would hit in the near future. As a general rule, I don’t name prices as something fixed and unchangeable. It’s impossible for a normal human being to know where prices will go on a certain date. A person can estimate or expect the price to move to some level, but that can never be held as an unchangeable fact. I therefore answered the question, that I believed the Oil would most likely hit 88 quite soon. The reaction I got was such that I decided to lessen the blow and came up with another estimate of 84, a price seemingly more acceptable.
But why did I mention 88 to begin with? The problem with Oil is that we are constantly breaking new highs every time the price moves upward, and thus from a technical point of view, makes it difficult to estimate
price levels. Usually when estimating price levels, one looks at resistance points or support levels. But in an environment like the one the Oil prices are at, that is not a possibility. We need to look at other things.
Market psychology is basically the same in all markets. The markets are made up of individuals that normally follow the psychological norms of the societies they live in. When shops are pricing their products, a price of 1.99 or 9.99 is quite common. This type of prices is not a result of a mathematical calculation based on cost and handling. It’s based on the fact that shoppers are psychologically connected to units. A person is more willing to buy a product if the price does not pass the next unit, and would therefore pay 1.99 for a product, but a price of 2 would make them think about it. On the other hand, after the price has passed into a new unit, the shopper is more willing to let it rise, so a person who would be willing to pay 2.20 for a product, is quite likely to pay 2.99 for the same product.
So when we look at where Oil prices are going, we have to keep this in mind. When we look at both the November and December Oil contracts, we can se how the prices fluctuate around the tens, 70 and 80. So we can estimate that when the price breaks through such levels, it will continue quite close to the next one. This is why I mentioned 88 in the beginning. So if it breaks 
through 90, who knows.
The SSTO also indicates that the pause around the 80 dollar mark has eased off some of the overbought pressure that had been evident before. This is obvious in both the November and December contracts, and thus possible that prices will move higher.
The next focus point, if the 90 limit is broken, would therefore be 100 dollars. That is quite high and doubtful how long such a price can hold. But this level is also based on the possible psychological mood of the market participants. For some time now, we’ve heard the phrase “Oil is going to hit 100”. A mantra like that gradually makes people immune for the price of 100 and makes them subconsciously acceptable to such a price.
Technical analysis are based on prices and price movements that are thought to reflect the market psychology. As such, any estimate of future price movements will be based on that psychology. If you believe the market psychology to be open for higher prices, they mostly will come through. The top of the Oil market is anybodies guess at this time, but possible higher prices can not be ruled out.
