June crude oil futures plunged on Thursday and closed in a position to do further damage to the charts as investor worries over the global supply glut essentially wiped out all of the gains attributed to the OPEC-led plan to cut output, trim supply and stabilize prices.
With crude oil trading lower for the year when OPEC began its ambitious program to fix the crude oil market and below the late November bottom when it first announced it was going to implement such a plan, traders may now have their sights set on the next major bottom from August 2016.
When the dust clears, investors are going to debate whether the OPEC-led plan was actually working, or if aggressive, optimistic hedge and commodity fund money managers were painting the tape and creating a self-fulfilling prophecy because they believed it would work.
I can remember at least three times in March, April and now May when these major players cannibalized their own positions by first slowly eating away at support then dumping positions at the same time when buyers decided to pull the rug out from under the market.
The type of trading we’ve seen in crude oil this year strongly suggests that the “Herd Theory” is alive and well. Given all the technical and fundamental data available, it’s hard to conceive that the money managers just followed each other into the pit, not once, but at least three times this year. They may have spread the buying all around while the crude…