September, 2, 2017 Crude Oil Daily Chart Review

There is lots of turmoil surrounding crude oil and potential gasoline shortages these days during hurricane season. Gasoline has charged up, but crude oil has remained well below gasoline futures.  I looked over the weekly chart and labeled  the 2008 peak as a Cycle degree wave 3. Don’t count on that as being glued to its position, just yet as we have to wait until this entire anticipated bullish phase is a done deal. Crude oil shot up in the last days of August, and if this zigzag that I’m working is true, then we should still move a bit over $48. At $50 I will start to scream “Uncle” as at the $51 price level, this wave count will get trashed.

Another 5 wave decline would have to follow with $43-$42 being the best target price. From the early 2016 low crude oil moved in such a choppy fashion that many of the wave positions I used, did not last long. I think there is a huge expanded “B” wave, with a diagonal decline. They are not impulse waves as every single rally wave, overlapped at critical positions. Expanded patterns in “B” waves or 4th waves can make dramatic reversals and push oil to new record highs.  Any “c” wave decline can drop like a rock in a very fast move down, like a mini flash crash. Those flash crashes or algorithms wrecking havoc, can produce those long down spikes that we can see. 

We are heading into the fall, but hopefully we will see this bottom by the end of this month. I feel pretty confident that the bigger bullish phase is nowhere near a done deal as the Gold/Oil ratio is still lethargic at this time. At 27.28:1 crude oil got a bit cheaper when compared to gold, which is a good thing. 

At the 2008 peak this ratio was about 9:1, and with the 2016 low it registered 44:1. This was a massive shift by any stretch of the imagination. In 2014 this ratio was about 17:1 before crude oil start to crash again. I think we could end up going well below 17-20:1 again. If this Gold/Oil ratio becomes compressed to the point that at $89 it becomes silly again, then oil will be setting up for another crash. The mainstream media could be hyping $100-$200 oil again by that time, but we know that markets will head the exact opposite way, when those days arrive. 

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