The fundamentals regarding crude oil changes as fast as the wind, besides that I bet there isn’t a single analyst that knows what fundamental news made oil rise into last year, and then crash and burn into early 2019. I sure don’t know as well but the gold/oil ratio sure gave me a clue that it was going to happen. Even though satellite spying is extremely sophisticated as they can track the floating roofs on storage tanks.
The US has been accused of refined oil product contamination which happened recently in South Korea, to where they refused shipments. Of course, they just turned that oil around and sold it to China.
Beside that most fundamentals regarding oil supply and demand can be just pure false news to keep enemies guessing. In today’s world, it is very easy to manipulate the news, so unless you have a Bull Shit Detector App on your smartphone we will never know the facts.
Even though wave counts can be pretty foggy most of the time they still over more “Truth” than fundamental news does.
Yes, oil can go higher but we are at a 20.98:1 Gold/Oil ratio which is the most expensive it’s been since November 2018 when it was at 17.37:1.
Oil seems to love crashing at around 17:1 which it did in the 2014 decline.
Math doesn’t lie only people do, so any gold/oil ratio can supply more objectivity in a world filled with fake news. “Fake News” and “Propaganda” is the same thing, so its not rocket science to see which countries use the most propaganda.
The commercial hedger’s net short positions make the potential for a big bullish move very unlikely, as open interest is also hitting record lows.
There are “No” daily trading limits in crude oil so that does produce some very long free falling type moves. Traders will be piling on the protective sell stops and once they get triggered, there are no daily limits to slow it down.
In bear markets, it gets ugly as all the bad fundamental news become front page blog news. There is also a whole lot less cooperation as deals fall apart or governments make wild moves that reverberate around the world. It’s a mixed bag of news so the fundamentalists are getting conflicting news.
Yet with all that, the US dollar doesn’t want to die but is still making bullish progress. I stayed with my 4th wave bottom but the 5th wave could also be another zigzag. I have a set of overlapping waves that defies description except a diagonal. I have also seen these “C” waves explode and extend that also defies logic but happens regularly.
One reason the USD has not died just yet is that it is in a much bigger bull market than many of us do not understand. It is also the main reason why gold and silver continue to underperform.
This is last Friday’s USD COT report and something wild did happen that was a rather rare event and that was that the commercial hedgers removed a big amount of long positions when they were net short already.
This turned into a 41.8:1 net short position which is a huge jump I have seen in all the years looking at COT reports. It also puts my bullish wave count at odds with the commercials, like I’m playing “Chicken” with who turns first.
I could see it if a big vertical spike was developing, but we’ve only had small spikes since early 2018.
Yes, the USD could make a sudden move south but with this pattern, it’s much harder to tell.
After a small bullish move, most analysts will give you a continuation of the trend usually when the trend can reverse and head south. It’s the top trend line that has to be broken by a wide margin and that has not happened yet.
Last week the HUI and gold stocks started to back off right at the trend line which keeps me looking for the bearish wave counts which may take the rest of the year to find out. Hui has been in a bullish phase since September 2018 and it would have to take a complete retracement taking out the 131 price level. I have a peak in February 2019 (180) as the secondary high is starting to look like a completed wave 2.
The Gold/Hui ratio isn’t all that bad at 7.6:1 but that doesn’t mean it can’t go back to a 10:1 ratio all the same.
I added the Barrons Gold Miner Index this time, as it has more history than most all gold related indices or ETFs out today. For a “Choppiest” pattern rating, I would give it an 8-9 rating out of 10. It wasn’t until I switched over to diagonal wave counting that this pattern made any sense at all.
All commodities have diagonal wave structures as their core pattern which has been going on since the Little Ice Age, which I use as my Submillennium Elliott Wave 2 bottom. Elliott wave counting is not what you think we are seeing but its all about how well we understand the idealized wave count that is most important. Looking for that perfect impulse like they show in the books is futile at best and you will never find them. There are two types of diagonal waves and I have posted both as examples.
There is a 30-year cycle to most commodities with a ± 1-year error rate that still boggles my mind. The long term CRB chart shows this very well with gold doing the same thing but following 5 waves in Cycle degree.