Daily Archives: May 7, 2018

$70 Crude Oil Forecast Reached: What’s Supposed To Happen Next?

I get a real kick out of these consensus forecasts as they know that a certain move in oil could hit $70, which it did today.  One thing they never will tell you is what is supposed to happen after their price target gets hit!  You will never hear them say and BTW, “when crude oil hits $70 it will tank to $40”!

When oil is at $65 it’s not rocket science to forecast that oil could go to $70. Crude oil is pushing all the buttons, but every new record high could be the last record high just as well. Sooner or later we will achieve the high for all of 2018. I have posted many links and COT charts showing how the experts are all leveraged to the bullish side in oil, and even the commercial COT reports back that up. When a trade is this lopsided, it has no choice but to crash.  All the protective “Sell” stops are piling up below present prices and some professional traders know how to trigger them.

To say the least I’m very bearish on crude oil, until such a time when I can see a real and proper correction has taken place. That will all depend if the entire oil bull market was a fake or not! Otherwise known as a “Bear Market Rally”  All bear market rallies eventually return to where they started from and bullish investor will be in shock that an oil crash can even happen. Of course, then the blame game will start again as it usually does.

Everyone will regurgitate fundamental reasons why oil should continue to soar, but the biggest fundamental they are all ignoring is the huge amount of bullish bets in one direction. Who is left to get in?  All these one sided bets are all looking for the greatest fool to sell too, but usually all they have to do is look in the mirror, and they will see the last greatest fool still standing!

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HUI Gold Stock Index Review

Each gold stock related asset class has slightly different wave patterns, but this HUI chart is also forced into a wedge, even though the wedge is a sideways pattern. That actually may be the scariest part of this setup! The HUI has a long way to go to catch up with gold, which as the experts say gold stocks will catch-up to gold in due time. I’ve heard all that before at the 2011 peak and it never worked then and it sure will not work this time.

In order for this HUI index to be in the bullish phase already then that 2013 low,  must “not” get breached by the slimmest of margins, otherwise the HUI bear market is still in progress.  The 150 HUI price level would trash that 2013 low by a wide margin, which would confirm that the bearish phase is still running.  The top trend line is the main trend and the HUI would have to bust out of that range as well. What’s next HUI 150 or HUI 225?

The bottom rising wedge can be used because the HUI is still in a small rally.  It would take very little effort to break that bottom rising wedge, so this HUI needs to send us a clear direction sooner or later. This Micky Mouse move is just not doing it for me.

In 2008 Gold, Gold stocks and all related oil futures crashed right along with the stock market so, saying that it is “Different this time”, may not work as well!

Gold stocks heading north, while oil heads south would force the Gold/HUI ratio to change in a very short time. The Gold/HUI ratio is sitting at 7.24:1 which is about average, but I think it has been hitting a ratio brick wall, since April, 1, 2018.

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GDXJ, Trapped In The Cone!

Every gold stock related ETF or index has a slightly different pattern to it, especially this sideways pattern that GDXJ is trapped in. Some of them are pointing up while others are even pointing down.  GDXJ is trapped in the cone like cattle boxed in a canyon, sooner or later they’ll panic and try to break out.

To which price level is the trapped cattle going to flee to? The price level that has the weakest link in the fence!  I could give the same bullish song and dance as all the gold bulls are telling us which is the easy part. I tried that, but started to realize that GDXJ was having great difficulty in trying to break out.

This forces a review going all the way back to the 2011 peak and initiate another wave count from a diagonal perspective.  That 2016 peak was very impressive as I called for a correction at that time. Corrections have to look like one of my 3 simple patterns, but this pattern doesn’t fit the bill at all when I made this up last night.  Being trapped in this situation can happen when a false start or bear market rally is in progress.  Every bear market rally retraces itself sooner or later, and it’s up to GDXJ to “Do or Die” soon. I will be posting more ETF’s and as far as I see it these wedges are very bearish.

In a diagonal 5 wave decline the 5th wave can always contain a zigzag which can produce violent moves to the downside in a very short period of time. Single stocks are much worse to figure out as they can run against the grain for very long periods of time as well.  “Buying on the dips” is what the bulls are saying, but that suggests that they are convinced they are in a big bull market. Pattern, not price makes a bull or bear market and this sideways pattern sucks because no exciting bottom has even occurred yet. That late 2016 low ($28) would have to be the “bull market” corrective low,  if we are already over on the bullish side. Gold stocks opened up with a small jump this morning, but it has to keep going and bust out of this double cone trap.

The Gold/GDXJ ratio is not at any real extreme, but for the last month it has been hitting the 39:1 range, which also can act as a brick wall when the ratio no longer compresses. There are too many bulls around for too long of a time period, with gold stocks going nowhere. Where are the buyers?, as volume has also been completely subdued!

If we draw a horizontal line at the $50 price level, and follow it all the way back to spring 2013, we can see one lonely little gap had opened, from which GDXJ was repelled.  This still makes the $50 price level a serious resistance threat as well.

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