Since early March oil has been on a real bullish roll that could be coming to an end shortly. Many of the fundamental news releases tell us how bullish analysts still are. How can oil crash with inventory levels fluctuating constantly? The same thing happen just before the 2008 peak in oil, when every expert in the world was proclaiming that new record highs are on their way, but yet the oil market tanked and in just 8 months, the world was in another oil glut! Oil not only crashed once, but it crashed again when experts were claiming that oil would never go below $100. How long did that expert opinion last? The next thing we know another world glut has arrived at the $28 price level, before it charged back up to the +$65 price range.
I had mentioned it many times that the $60 price level could give oil some serious price resistance, with a present price of $67. Since the April 6th bottom crude oil executed a wild run that sure seems like it is starting to fizzle out. In the last 2-3 days oil has been forming what looks like a rising wedge, which can and do produce amazing reversals once they get close to completing. In this case the wedge is a Micro degree wedge which in this case we can call an ending diagonal. Diagonals can take up the entire 5th wave, so any diagonal in any 5th wave forecasts a reversal. Any 5th wave peak must also be capped with a one degree higher wave count. We should “never” see 5th wave peaks left empty anywhere on the Internet.
At a minimum I always like to confirm a move with two lesser degrees and sometimes even three depending on physical size. To confirm a 5th wave decline in Intermediate degree, I “must” see Minor and Minute degree subdivisions and occasionally a third degree will help.
Many are calling for $70 oil, but where were they when oil tanked to $28 at the 2016 bottom?
The Gold/Oil ratio has bounced from an extreme ratio of 44:1 and in the last three months it has been sitting at an average of 21:1. This morning oil dropped to the 19.92:1 range, which was a small, fast dip that have preceded reversals before. When the ratio is hitting a brick wall so to speak, this means that something is up as that is what also happened with all my stock index ratios. This Gold/Oil ratio should start to spread again as oil declines, and until those numbers change dramatically, I will remain bearish on oil. Crashes in commodities can happen extremely fast, as oil clearly has demonstrated in the past many times.
Crude oil also has a huge Cycle degree wedge in progress which could usher in a big Primary degree move in the future. Five waves up in Primary degree would work for me. 🙄 I have incorporated solar cycle wave analysis into EW5 and at this time crude oil prices should still be attracted to the start of solar cycle #25. Oil did exactly that with the late 2008 crash and the start of solar cycle #24.
As I post crude oil is heading down, so that’s a good thing!