Will The Coming Big Oil Price Drop Cause The Next Stock Market Crash?

The oil market price is setting up for one heck of a fall.  Now, could this large oil correction cause the next stock market crash?  Time will tell.  However, the indicators in the oil market are showing the largest net commercial short positions in history.  The current net commercial short positions in the oil market are even higher by 174,000 contracts than the level when the oil price fell from $105 in mid-2014 to a low of $30 at the beginning of 2016.

Furthermore, there was a previous trend in the 1980’s that suggests we are setting up for a MAJOR stock market crash.  I discuss the details of the current record net commercial short positions and the similar setup that took place during the 1980’s in my newest video, Will The Coming Big Oil Price Drop Cause The Next Stock Market Crash?

Here is one of the charts discussed in the video presentation above:

As we can see in this COT Report (Commitment Of Traders), the commercial net short positions jumped from 648,000 to 674,000 in the past week.  However, this chart only shows the change traders’ positions over one year.  To see how large the present commercial net short positions, please check out the short 12-minute video.

I believe the oil and stock markets are setting up for one large correction or even a market crash.  Thus, as the stock markets crack, we will likely see a huge move by retail investors into Gold ETF’s as well as precious metals investors tremendously increase their demand for physical gold and silver investment.

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48 Comments on "Will The Coming Big Oil Price Drop Cause The Next Stock Market Crash?"

  1. Oil price rising, stocks all time highs, gold and silver stable. Crypto’s down.

    https://www.zerohedge.com/sites/default/files/inline-images/20180116_crpto2.png

    Can we afford $80,- or $90,- oil? No. Markets will start to crack, safety in metals, a part of the greed surplus flows into crypto’s but goverments will try to prevent that because they need the fiats in the stockmarkets. At this point, we cannot even afford $60,- oil my gut feeling tells me.

  2. Hey, Steve, Related to your previous comments on Cryptos riches vs decades of hard work: I came across the 70% rule. When something is 70% ready, launch it. Rules have changed in the internet age.
    “Unless you’re breaking stuff, you are not going fast enough.”- Zuckerburg. “If you feel in control, you are not going fast enough.”- Andretti. The difference between an industrial economy of brick and mortar factories and an internet economy of quickly modified code.
    Yes, large commercial short oil position. However, I have read that the Fed.is now supporting oil like they support the stock market. Too big a problem to fail. Until it does. Thanks.

    • Sammy,

      I disagree with the new Billionaire High Tech Moguls such as Zuckerberg, Elon Musk, and Bezos and the Millennials that the rules have changed for the internet. No, it hasn’t. We don’t really need the internet, but we need water, food, clothing, and shelter in that order. Amazon is going to collapse right along with the Oil Industry. Furthermore, it may be true that the Fed is propping up the oil price, who the hell knows, but maybe they should tell that to the Commercial Banks that are doing their trading as they have the largest net short position in history.

      steve

      • Just about to watch the video Steve.. BUT a comment first.

        “but we need water, food, clothing, and shelter in that order”.

        For this statement to be true in the future we need to get back to “COMMUNITY” living NOT the faulty “VERTICAL” management system set up by the; dare I say it the Rockefeller’s and Carnegies.

  3. After the ” crypto crash” my crypto portfolio is up 100% from Dec 1 2017. My precious metals portfolio? I don’t even check it anymore.

    Why didn’t anyone listen to Alan Greenspan in 1966 when he said, ” The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.”

    Accumulate PMs for “the day” and invest in cryptos for today. Don’t listen to the “experts”. They have been wrong for years……

  4. 1) Musk knows what he is doing: get money from boys who love fancy toys and divert it to vital projects.

    2) The rule of 3’s from EMT’s: you die without: 3 minutes without air; 3 hours without shelter [includes clothing]; 3 days without water; 3 weeks without food. That’s the order: air, shelter, water, food. Just precision.

  5. Steve, I read in one of your reports, you stated that the price of silver was correlated to the price of oil, i.e. if price of oil was rising so would the price of silver. if oil price was crashing so would the silver price. In your latest video. “Coming crash of oil price cause the next crash of the stock market”. You stated in the video that if this does happen it would send the gold, silver and precious metal miners prices higher. Could you please explain to me why it would be different this time, i.e. crash of oil not sending the silver price lower? Thanks. Mike C

  6. It is not only oil and stocks. Look at Australian dollar (the proxy for growth) – its daily RSI is over 80! For gold, daily RSI is at 75. And RSI for both items spent most of this year above 70. Such rocket-powered things must go down regardless of what they are called, when their rockets burn out. One common aspect among these is they are denominated in USD. Gold in AUD looks meh, with RSI at 55. Oil in AUD also looks meh, with RSI at 57.

    As the world is not in the middle of an unrestricted inflation-fuelled growth period, the really interesting question is about the US dollar: is this actually a US dollar event? More specifically, is this a eurodollar system event?

      • They will be cutting more in near future.
        How strong is the currency of a country with +20.000.000.
        000.000$ dept. Calculate only the yield you are paying yearly on this amount.
        And funny ( sad) enough they promise to rise the yield.

        • Who can rival USA apart China ? Nobody. But chinese oligarchs (who want to rule the world looooool) do not want to fight, so they are waiting with the idea time is on their side but that’s rubbish because chinese rotten debts, over and mis capacity, and capital exodus are increasing each year. Indeed the odds are high that china will implode before USA. Some are saying that a reset is in the cards for 2018 (or 2019 at the latest), maybe but I cannot see a better game now they had 5 years ago. Their total debt is now equal to the western level and it will have to increase a lot each year from now in order to prevent its model and possible social unrest.

  7. Saw this at ZH earlier today:

    …the total debt-to-equity ratio for large companies has increased from 50 percent in 2007 to a record high of 83 percent in spite of the rising market

    https://www.zerohedge.com/news/2018-01-16/stock-buybacks-are-nothing-margin-speculation

    I wonder how bad it is with US energy companies. I remember that graph Steve had a couple months ago about the debt that US energy companies have to roll in the next 4-5 years, something like $200 billion?

    Crazy, thanks fed for creating another retirement destroying boom/bust.

  8. Really disappointed in your change of stance. What do you mean about the forthcoming drop in the price of oil?
    Oil goes higher. You need it to move around. Without it the world comes to a stop.
    The world needs more investment in oil.

  9. Ok, the tulip bubble stool market is going to correct. I say tulip bubble because one must ask what they can buy with a stock certificate in hand.
    The big question is where will the millinials look for safe haven.

  10. Steve,

    You are aware that the commercials just taking the short side while the speculators are
    now have immense long positions. The question now is the smart money or the dumb money correct? As the amount of new discoveries is now at its lowest point in 70 years I suspect you are wrong on this call and we see continuing higher oil prices. Time will tell of course. Main factor will be: are the shorts or the longs the strong hands?

    • Pieter,

      Yes, I am aware the BANKS have the SHORTS and the SPECS are betting on the LONGS. I have seen this go on and on in the Gold & Silver market for over a decade.

      However, the COMMERCIALS have never been on the WRONG SIDE OF THE TRADE… NEVER.

      So, unless this is the first exception, we are going to see much lower prices.

      steve

      • You are right unfortunately, so that every clowns that will tout over chinese are taking over the worldwide finance and pricing, the sale of T bonds and other crap, will be exposed as complete idiots one more time like jim willie, jim sinclair, bill holter and many more. Chinese oligarchs will obey as they have done for now immemorial times.

      • DisappearingCulture | January 18, 2018 at 3:23 pm | Reply

        Banks have the shorts so that portends a lower price; how much lower remains to be seen. With PM’s priced close to cost of production, they can’t hammer prices lower with COMEX shorts for long; they quickly rebound; particularly gold…due to Asian demand. With oil??

  11. I hope both events in your title happen. However I’ll say neither will (and GLADLY eat crow if lightning strikes & I’m wrong).

    • Emil,

      Yeah… let’s wait and see. However, if we look back in history, HUGE MARKET CORRECTIONS & CRASHES aren’t abnormal. So, if you actually believe THIS TIME IS DIFFERENT…

      … Well then, GOD BLESS YA and GOOD LUCK. If you are heavily invested in the Bubble Stock Markets, you are going to need it.

      steve

  12. Chris in Arkansas | January 17, 2018 at 11:59 am | Reply

    Someone commented above that Amazon would collapse as well. Doubtful. They are still eating into the market share of other brick and mortal retailers and forcing shut downs of such businesses on a daily basis. While Amazon might take a hit in a stock market correction or crash, they still retain the millions of customers who have been conditioned to shop online and host retail suppliers and even manufacturers that sell using the Amazon platform. I even buy my name brand dress clothes for work and car parts on Amazon. Didn’t want to but local retailers are out of business, priced far too high on typical items or reducing inventory to the point where there is nothing to draw me into the store. Anyway, the sort position in oil mentioned by Steve is a solid indicator price is about to take a beat down. Geopolitical risk (war) is the only likely disruptor in the equation.

    • Amazon’s margins are less than 1 percent. It is a high priced stock that enables it to be so successful. Expensive oil will make the whole thing uneconomic. In terms of energy it is cheaper to ship to stores than to a gazillion homes. A declining eroi will collapse the hyped up consumer craze. Amazon will survive but be smaller in size and scope.

  13. Oil is very seasonal. It usually bottoms in Nov thru Jan and rises until may or June. It’s been doing this for years. Yes a big crack later in the year.

    Also commercials can deliver against those contracts. Finally, a lopsided cot can always get more extreme.

  14. My challenge to Steve:
    By December 31st 2018 the crypto sector will be $2 Trillion plus.
    If that happens will you admit you are wrong?
    Or will you just say, “It’s going to crash, just wait” like we have been waiting for years for the metals to rise? The gold and silver analysts NEVER take responsibility for misguiding their followers. Fortunately people are waking up to that nonsense. So many in the crypto sector ALSO have a large portion of their capital invested in the precious metals sector. You are constantly attacking your supporters ( former supporters ) WAKE UP!

      • Collapsing? Really. This is called a correction which the sector has every January. ( My portfolio was “set back ” 3 weeks / now only 10 days back ) This sector isn’t like the PMs which are heavily manipulated to stay just above the mining cost. When I figured this out I dumped my PM stocks and bought cryptos. I still have all my physical metals. Imagine that, someone who likes the PMs AND cryptos. Not as rare as you might think. ( hint: the younger generation is catching on while the old dinosaurs are living in Jurassic park )

        https://twitter.com/ltc/status/953677800409632768

    • It really saddens me to see the older generations, who claimed for decades to want a way out of the control of government and central banks, shit all over cryptos because they were not tech savvy enough to get into them early. I own both cryptos and precious metals, and both are long term investments.

      However, my small initial crypto investment (of 5000$) is still up 5000% despite this massive correction (blow off top, which happened before in early 2014), while my pm investment (70000$) has barely budged in a decade (up 5% at best).

      Now I know we will not see PM’s move until the FIAT financial system finally crashes under the weight of all it’s ponzy schemes, but certain cryptos (not all of them, but some) will most likely act as another option for wealth transfer outside of Central Bank control. It will be very interesting to see how they act when stocks and bonds come crashing down. I think the PM absolutists don’t want to see a large portion of wealth transfer away from pm’s when the shtf. It’s pure ego.

      Cryptos have value because they are a mathematical solution to multiple problems, some of which have never been solved before (the byzantine general’s dilemma comes to mind). They certainly have more value just by virtue of not being issued by central banks and not being under Rothschild/IMF control. Just because boomers didn’t come up with it doesn’t mean they are worthless. Bitcoin specifically? Yes, it probably is worthless because it’s technology is obsolete, which is why my position isn’t in bitcoin.

      • The dollar value of gold and silver is IRRELEVANT. Did gold and silver all of a sudden become valuable when America was born and the dollar was created??? Of course not… so why are you valuing gold in terms of dollars? Nobody buys gold to get back more worthless fiat. You buy gold because you distrust fiat and want to have money and wealth for when fiat collapses.

        Like Thomas Jefferson said, if we allow private banks to control our currency that’s more dangerous than standing armies, we will become homeless on a continent our fathers conquered first by inflation then by deflation.

        So your gold will shine AFTER the deflationary collapse of all asset prices that have been inflate by fiat.

        Got 10k worth of silver now? Well that will probably end up being 25-30 years worth of days wages after fiat dies. Got a few ounces of gold? Well good for you, that mansion you always wanted will be your outright.

        Amazing how people on here value gold like it’s some stock or crypto.

  15. IMHO this short position (same goes for the bib banks short positions in the PM space) are actually (true) hedges for oversized (undisclosed) paper/fiat long positions in all sorts of markets (including the debt loans to the oil industry !!!). There is still room to run higher over the short/mid-term imho, but indeed, I have no clue where prices will be headed… My guess is still higher, before some catastrophic plunge that will be accompanied by a stox and bond market crash. Time will tell. GLTA.

    P.S. It’s all a gamble when it’s just a game… …and I do treat it as a capital crime by the banksters (and their cronies).

  16. And the miner stocks? At a 20 year low.Without a doubt the worst investment ever.
    Year for Year the same old broken record.

    Even after the crash i made 300% with Litecoin.And i was no early adaptor.

  17. The stock market doesn’t go down anymore.

    You are wrong, steve. And even if you are right, it’s too late. We grow old every single day.

  18. I am not a professional trader like many BUT I would consider myself experienced in the area of buying and selling equities on one exchange only. My reasoning was; if I can’t trade one “Facility” correctly then I would be just wasting my time on others. Probably the best lesson I learned was patience. Consequently I have a list of “TRADING RULES” which hang in my office; they are “PATIENCE, PATIENCE, PATIENCE”.

  19. Hi thanks for the video steve. The largest commercial shorts in history,I would hazard a guess are never wrong, as it is my belief they are privy to what the oil price will do, and or have a DIRCET control over the price of the commodity of oil
    …. Just curious how long these short positions are out in date, ( when do they expire June 2018?? August 2018 ?) as this will tell us WHEN the market correction will be or when the crash is, as these BIG BANKS are not going to LOOSE $$. I saw an article up here in Canada that said that the price of gasoline was going to go much higher this year because of the ” strengthening economy ” and the halt to oil production. Yes it did say HALT to oil production.

    The nay- sayers to peak oil will claim ” yeah well Canada has 3.5 BILLION barrels of oil reserves ”

    Having said that IF true that’s 3.5 BILLION barrels of OIL….. that’s not shipped to refineries, not refined into gasoline/ diesel. Besides which what do they use to TRANSPORT the oil to refineries and then ship gasoline to gas stations with again?? oh yeah DEISEL powered tanker trucks…. ( as you already know )

    Some more quick “facts ” for you…….

    Canada ALLEDGEDLY has 3.5 BILLION barrels of oil in reserve…. you know how much oil that is ?( 50 gallon drums ) .If jam oil barrels side by side stacked 5 high over an area of 100 square miles, that’s 3.5 BILLION barrels of oil. Could it be similar to Saudi Arabia vastly overstating their oil reserves.??

    Yes we have the oil sands ( in Alberta ) which our prime minster SOLD to a company wholly owned by the Chinese govt numerous years ago, and from my research, its think gunky sand filled oil, likely very expensive to extract, and refine.

    The BIG 3 U.S. oil companies you mentioned are BILLIONS of $$ in the hole, and they
    BORROWED the $$ from SOMEWHERE ( central banks? )They obviously cannot and will not be able to earn enough revenue to EVER pay back this mountain of debt.

    At what point in time will the central banks STOP lending the big oil companies $$$ because they are not and will not get paid? I’d say not too long at all.

    As you know banks are only interested in one thing PROFIT. I believe we are at the beginning of the end where these central banks will ” just say no ” to these big oil companies who are bleeding out BILLIONS of $$. As the COST of oil production, refining gasoline, diesel continues to go into the stratosphere and the price may continue to go down, it will be game over.

    I don’t have to go into detail about what a nation of 350 million people looks like with no gasoline, no diesel that’s teetering on brink of bankruptcy, record unemployment , stock market crash looming, pension crises everywhere, states and cities going chapter 11 and 110 million armed pissed off people.

    There seems to be a ” perfect storm ” coming ( by my research all by design )

    I would have only 5 words of advice to ANYBODY living in the U.S. ” get the hell out A.S.A.P. ” ( Canada wont be much better off )

    Thank- you very much for all your research/ videos, I have seen every single one of your videos some of them multiple times.

    your friend in the great white north

    Brian

    • DisappearingCulture | January 19, 2018 at 12:56 pm | Reply

      “At what point in time will the central banks STOP lending the big oil companies $$$ because they are not and will not get paid? I’d say not too long at all.
      As you know banks are only interested in one thing PROFIT. I believe we are at the beginning of the end where these central banks will ” just say no ” to these big oil companies who are bleeding out BILLIONS of $$.”

      The central banks, at least the Fed [Reserve currency], doesn’t have to be highly concerned with profit. They create currency out of thin air with a printing press & much more digital currency with a computer. There is no auditing, almost no accounting or legal oversight, and little truthful disclosure.
      That said it may not be the Fed that is loaning to the oil industry, but a cartel member, I mean member bank. When they stop loaning depends on how far the treasury department + Fed is willing to backstop them.

      • The central banks will NEVER stop lending the oil companies money. The oil companies and their product are the most important support for the central banking system as we know it. The central banks charge interest. The only way to pay that interest is an ever-expanding economy. The only way to have an ever expanding economy is ever-expanding energy use (especially oil). Once the oil flow stops growing, the central bank paradigm will collapse.

    • The USA alone uses 8 billion barrels of oil per year. The world uses about 30 billion barrels. Also the USA is an oil importer. MSM says it exports oil, but if the USA extracts 9 million barrels/day and uses 20 million barrels/day how can it be an oil exporter?

  20. After listening to Steve’s Youtube video, I started thinking about system weaknesses. In my mind Mexico could be the achilles heel we’re not considering. Just this month, gasoline prices went from 3.60 to $3.75 a gallon. Doesn’t sound like much until you keep in mind the average annual salary in Mexico is $15,571. As you can imagine that puts a squeeze on the average Mexican. So gasoline theft is big business.
    https://www.nytimes.com/2017/04/26/world/americas/mexico-fuel-theft-crisis.html

    Since gasoline affects everything…their official inflation rate is around 7% annually. Their true inflation rate is probably running higher then that. If we recall one of Steve’s earlier articles, Mexico’s oil reserves would be gone in 9 years without additional reserves. Well its almost a year since Steve wrote that article so closer to 8 years. I’ve got to start wondering what a failed state on our southern border would look like. Some things to keep in mind, Mexico is the largest silver miner in the world. In 2016 the U.S. imported $294 Billion in food from Mexico. Mexico is our (U.S.) third largest trading partner with $525 Billion of combined trade.

  21. Steve,

    Could you please give us an update article on Silver and Gold Eagle sales in 2017?
    Thank you.

  22. Marius Mikulenas | January 22, 2018 at 1:16 pm | Reply

    The crash had just started?

    Philadelphia Energy Solutions LLC, owner of an oil refinery that supplies more than a quarter of the U.S. east coast’s crude refining capacity, filed for bankruptcy with a plan that could allow it to shed some environmental costs.

  23. An extremely interesting post but we can’t forget that correlation doesn’t mean causation. And the field of economics is full of chicken and the egg questions.
    Anyway, thank you mr. St. Angelo.

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