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Category Archives: Brent Crude Oil

Brent Crude Oil Intraday Crash Update.

 

WTI Crude, Brent Crude and RBOB gasoline, have made a very strange top, which we can see when switching between daily and weekly charts. This happens many times with futures charts, and the shorter version of this explanation is that an expanded top may have also formed. In the last few days, I have been reading stories about what is causing the crash, and to no surprise, there were no shortages of different reasons why Brent crude is crashing. We may focus on OPEC, but at the same time the EPA comes out with inventory numbers that oil traders didn’t like.

President Trump has given a “Green” light for Saudi Arabia to produce as much oil as they want! If that wasn’t a hint that oil prices were coming down, then nothing is!

The “Bullish Exuberance” in Brent crude oil is starting to fade, but how deep this correction will go is still a flip of the coin. We are presently in an oil rally, so more upside could be coming.

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Brent Crude: Still Pushing The Bullish Buttons.

 

One more push to a new record high! Sure that can happen as we approach the $80 price level again. Of course the stories about oil going to $100 again all are starting to sound like a broken record stuck on “repeat”. Can a 4th wave rally surge this high and still be in a bear market rally? Of course it can, as it could even dip into my wave 1 bottom. Commodities play a different game and normal wave counting methods will never work. This is all part of a Cycle degree zigzag correction which has 3 parts to it.

It may seem like the 2015 bottom was part 3, but fooling the majority all the time is the job of the markets. When the Gold/Brent ratio is an eye-popping 15.10:1 then we are pushing the bounderies of being very expensive when priced against gold. In the long run I’m sure we will end up with another major world oil glut as recessions happen every 10 years or so. Any recession in the future would be over as soon as solar cycle #25 starts to break through.

 

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Brent Crude Weekly Chart Update

 

Brent crude is struggling trying to break higher, and next month should tell us more if this so called bull market has any chance to soar higher. I see a rising wedge which is an extremely bearish pattern, which should never be ignored. The bullish phase that started in early 2016 is a bear market rally from my perspective and in order for that to get confirmed then Brent crude will completley retrace this bull market and crash to new record lows. Deflation is coming folks, where commodities also take big hits in prices.

Today the Gold/Brent ratio is sitting at 15.84:1 which makes Brent more expensive that I have records for. I will continue to calculate this ratio, so I have a better longer term data base to work from. In many respects the Gold/Brent ratio is the same as the Gold/WTI ratio is from which I have a huge data base of ratio records.  I have a pool of about 20 ratios that I keep and is one of my best in-house generated signals. Math doesn’t lie, only people do, so ratios are a good objective set of indicators to follow. Very few are willing to do this work, so out working the lazy analysts is a walk in the park.

You can tell any lazy wave analyst by all the detailed wave counts they always make. I always try to be 3 steps ahead of the crowd and confirm a wave count 3 degrees lower, which is also 3 steps ahead of the crowd. Being one step ahead of the crowd is not good enough in today’s world, when we make longer-term trading decisions. There is no way that gold will soar if the oils are going to crash as the Gold/Brent ratio will stop that silly thinking in a flash.  Any kid that knows how to track the Gold/Brent ratios can do a better job of forecasting the oil price than what the experts do.

At the extremes fundamentals will always tell us the wrong things as the 2008 peak was. The experts did not see the oil crash coming in 2008 as I had it documented very well.  You don’t even need extremes if you pay attention to the news headlines. When they all start to think alike, then chances are very high that they are also wrong.  It just about always justifies betting on the opposite direction when the herd starts to sound all the same!  In the gold sectors this works very well as it is made up of very emotional investors. Oil investors get a bit hostile when you mention that oil can crash to new record lows.

Just look at the nose dive that oil took in 2014 and 2015, so what has happened once before, can happen again.

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Brent Crude 2008-2018 Review

This is the September weekly chart with 1500 custom bar settings. The COT reports do not show any real extreme, but the Gold/Brent ratio does. Since May this ratio has been averaging 17:1 .Which is about the same as the Gold/WTI ratio is. They are still so very bullish on oil that recently they say that “$150” crude oil is coming. That will not work as gold and oil are linked via their respective ratios. At 17:1 any oil price can crash like WTI did in 2014.

No Death Cross on Brent has happened, on the daily, weekly and monthly charts! We had the Brent Death Cross at the top in 2014, and the Golden Cross just formed earlier this year. With a Golden Cross already done Brent crude should explode in price! The 50-day MA can bend down and slice right through the 200-day MA. Before you know it the Death Cross has formed and Brent Crude keeps heading south.

The hedge funds with WTI are still so bullish that they are net long by a ratio of 8.35:1. I consider 4:1 ratio to the extreme side while the commercials only have 1.89:1 net short position. The Brent crude COT reports are not that skewed at all, matter of fact it looks pretty boring. I’m very confident at this time, that the  impending Death Cross, has more power than any COT report, but I need to get more confirming evidence to have faith in what I’m reading.  Commercials can also make dramatic flip flops which I saw some of the currencies do.

No little $10-$20 correction will fix the problem. $40-$45 Brent crude could supply short term support but in the end the world is going to deflate and the Brent crude price will also crash. Fundamentals will “Allways” tell you the wrong things at the extremes, and when the analysts all sound the same, then it’s time to bet against them.

The gold price has been closing below $1200 which is not a good sign, as I expect gold and oil to still crash much more during the rest of this year. Brent crude will not standup to this, so it will crash as well. I will not trade any oil move with USO as it does not reflect pure oil very well at all. I closed my USO short position becuase it was so small of a position, I wanted a bit of extra margin space on my US dollar side.

Have patience as by the end of this year we could be facing a different energy landscape. Oil is being drawn to the solar cycle #24 bottom, but after that oil could soar one more time.

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Brent Crude Oil Weekly Chart: 2012-2018 Review

 

This is the August Brent crude oil weekly chart. In the future I may switch to the December contract as it’s also very busy. I made this chart up for those who are addicted to trend lines. 🙄 I try to use trend lines sparingly with posted charts, but before I put a single mark on the chart, I work 2 or 3 sets of trend lines with my editor. The wave count I’m showing started at the July, 2008 peak when Brent peaked at $148. This is 4 dollars off, from the Fibonacci number of 144. I place a great deal of importance to all the even Fibonacci numbers as they encompass so many caclulations in the stock markets, and all of life as well. Today Brent peaked at $80 after which it started to back off.

Since a corretion seems to be initiated, the top trend line may hold. The brother to the top trend line is at the bottom. The entire 2011-2014 top gave the majority the good bullish feelings and forecasts that oil will never gold below $100 again was a popular theme. Oil rallied to $125 and then started to turn down until it crashed into the 2016 bottom.

This peak was a bear market rally and the market confirmed this with complete retracement of the entire bull market that started in Decenber of 2008. Technically, it looks like a Primary degree zigzag has completed, and we should be off in another 5 waves in Primary degree.

There are some huge loopholes in that thinking because gasoline futures do not confirm new record lows in 2016, unless you want to call it a running flat! That does not fit as well if WTI is a zigzag and Brent being a flat. Ain’t going to happen folks. From the 2016 bottom we have a fantasic rising wedge, which is a very bearish signal that most analysts ignore.

Every Elliott Wave student knows what an inverted zigzag is, but yet they conjure up a bull market just the same. At this pace, the majority got fooled by a Primary degree bullish phase, and now even an Intermediate degreee bullish phase has them convinced that much higher oil prices are on the way. There is no support for a bear market rally once it starts its reversal. The only support may be at the $40-$45 price level if the actual decline produces a zigzag 5th wave.

The majority think that oil can’t crash due to some fundamental reports, but oil has a reputation of doing just that. I have deep respect for oils ability to execute fantastic swan dives. How did the 2014 crash work out? How about the big crash into the 2008 bottom? That 2008 crash hardly showed any subdivisions that you could count. This 2008 crash was extremely steep and is acually a “big” clue that it’s a zigzag and not a flat. With most flat crashes, this pattern is mostly reversed, where the “C” wave part is the steepest. Many may not suspect that a 4th wave rally can go this high, but in my experience they sure can, especially in commodities.

To decide if our present bullish phase is a bear market rally or not, is critical to know and understand.

Another indicator is the Gold/Brent ratio. I have only one reading and todays reading hit a ratio of 16.79:1. In May it was 17:1. This has change little and I would consider that on the expensive side when compared to US dollar gold. In 2014 oil reached a 17:1 ratio before it started to crash down to $28 or so. I would have to do some back checking to find the ratio for the 2016 bottom, but we can use the WTI ratios for Brent as well.

I haven’t found a good Brent COT report yet, but with WTI the commercials are shifted to the short side. This doesn’t get me all excited, about some super oil bull market to suddenly erupt.

The speculators that are chasing this trend are all commited to the long side, the exact opposite of the commercials. Who is the smart money here?  When you get such a high degree of investors all committed to the long side, who is left to jump in? Who is going to jump in thinking oil is cheap at $80? Below our present “C” wave bullish phase, all the protective “SELL” stops accumulate, and when they get hit all the bulls instantly turn into bears.

While everybody turns extremely bullish on oil, I turn bearish as I see a huge downside move coming.

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