The story goes that the experts have now declared the world oil surplus over. It took fundamentals close to 23 months to catch-up to the oil price. Since 1980 we had about 4 major world oil gluts and each one was followed by a wild bullish phase. The exact opposite happens at every oil peak, crude oil shortages were declared, and as soon as concensus forecasting was unaminous, the oil price would crash. All the takling heads agreed that oil prices were going much higher as inventories are starting to decline.
Storing oil is big business and the last thing smart money wants to do is store oil at high prices, so inventories are reduced. They can’t figure out why the oil price would crash when inventories are declining. At the 2008 peak they were calling for a world oil shortage and price targets of $200-$300 a barrel were pretty common. In face of all that bullish oil news, within 6 months oil had crashed about $110.
Then again at the 2013-2014 oil peaks just above $110, they declared that oil would not fall below $100 again. Sure enough witnin two years oil had crashed from $115 to $28. Oil and commodities have a great track record of crashing when nobody expects them to crash. Oil has had no problem in moving $50-$60 at a crack, so another $40 oil crash would be a walk in the park. Now in 2018 we are faced yet with another major bullish scenario, as the fundamental forecasters are at it again. They don’t report the huge short positions commercials have in oil, they only brag about the long positions of the speculators.
With crude oil going vertical at about $72, two things are going to happen, one of them is another huge correction develops, and the other is an end to this entire bullish phase, which started in 2016. Very few can tell the difference between a bear market rally and a real bull market. A bear market rally “always” retraces its entire bullish phase, and we have to wait to see if this will start to happen in the next few months. A turning will force all the players in the bullish direction, to switch or get out.
You can bet there are massive amounts of protective “sell” stops below present crude oil prices, and once they get triggered, it can produce a cascading effect. There is a $10 limit to moves in oil futures but that rarely has been triggered. My “B” wave in Minor degree is sitting at about the $45 price level. The public needs to switch to a very bearish mindset, before a major bullish move can happen again. If oil is going to crash, there is no way that gold will go vertical heading the opposite way. It’s the Gold/Oil ratio that ties oil and gold together, and it’s just a bit above 18:1 as I post. During the 2013 oil peak the Gold/Oil ratio compressed to 17:1 before it crashed, so 18:1 makes a great fit at this time.
If I’m wrong about this impending decline in oil prices then oil “must” produce a clear corrective pattern in Intermediate degree. This corrective pattern must not create a new world record low price, but it must produce another higher low. Think of “must” have as a hard EWP “Rule”, not a guideline. Another 3 wave Minor degree move will not happen overnight, as it would take many months and even longer to fully correct. Some little dip in the oil price will not even come close to force a change in direction onto the bullish speculators. As I post oil is getting closer to $72 again, so this will keep many of the bullish players locked in their positions for now. Buying low and then selling high is not the concept practiced today as even in commodaties they love to chase a bull market forcing higher and higher prices on us. Bullish moves have come to abrupt halts in the past, so I’m sure this big bullish phase will also end.
I could be faced with a degree change but making one change up or down would throw “all” my other wave counts out as well, by at least 61% or more.