The trading in the June contract started to come to a halt and it never had enough trades in it to push it as high as the December contract.  When they roll over into the July contract then the July contract pushed much higher. It’s not good to stay late in a contract month, so I took the December contract. There was a 3 wave crash that took oil to a new low, but that lasted all of a few minutes before it retraced that entire “D” wave drop. I could count out the “E” wave a bit different.

When I see a triangle I also have to be prepared to jump one degree.  If I don’t know what higher degree I would get, then I need to scramble to make sure I get one by the time we get there. I’m a big fan of always trying to find a “better fitting” wave count, and not just change wave positions for the sake of having to do it.  The herd of bulls are  looking for higher oil prices as they think that fundamentals somehow dictate higher oil prices.  They freak out about every little move in inventory levels when reports come out that are above or below expectations.  At this rate the oil price will never crash if they can execute a balancing act in inventory levels.  So if the price of oil keeps crashing, does that mean all the tanks are going to be full all the time?  The last thing they want is their tanks full with high price oil, with no room to store cheaper oil in.

Oil storage is big business and smart oil traders have private tanks that go deep in the ground, where  inventory levels cannot be seen. All Trump has to do is announce a sale from government reserves and the price of oil would crash.  Having the faith that somehow OPEC doesn’t cheat with their production numbers is rather naive as well.

A recession is coming folks, and we know painfully well how fast the oil price did crash during the last recession. The oil bulls think that a trade war will have no impact on the price of oil. Commercials have an extreme short position in WTI crude, while the speculators are all geared to the long side. Both groups can’t be right, so something has to break this summer.

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Since the peak last month nothing that has happened indicates a correction has taken place except for small counter rallies.  (Mini bear market rallies)  We have to understand any bear market rally is they will determine if we should hold a bullish position or get the hell out. There is nothing more horrifying than think about a bull market that some say is going to $300, but it turns and crashes to $40 or even lower. Bear market rallies in any degree always retrace themselves, so there is no sense in staying, as bear market rallies make for excelent short bets.  The trick is spotting a bear market rally before all others do and I will keep trying to do that as we all need that information early.

Most of the oil bulls do not understand the concept of a bear market rally as they treat anything that goes up as a real bull market. In commodaties and oil specifically is in a big Cycle degree wave 4 bear market, with most of them being giant zigzags. It may take the rest of the summer to play out so expect some wild counter rallies like we just had.

I switched mywave count to another wave 1-2 in Minute degree but ultimatley we need 5 waves down in Minor degree or one zigzag in Minor degree. Any zigzag could form where the “B”wave looks just like another 4th wave rally. These types of rallies would be very hard to spot if we’re not looking for them.  All this trade war rhetoric is just to much for the oil bulls to handle. Maybe $50 billion worth of duties, the markets could handle, but $200 billion, was just too much.

Fear drives the commodities, not some logical fundamental explanation why oil is going up or down.  Sure I can see another world oil glut coming up, but we know that oil gluts are very bullish for the price of oil. The last record oil bear market low was about $28, which technically should be breached again, if the 4th wave peak is on its true location.

My wave counts may make little sense to some, but my oil wave count starts with the 2008 peak. This makes the oil bear market about 10 years old so far. Thinking in 4-5-month steps, we could see September/October with another new record low.  I may be very bearish on oil, but I assure you I will turn very bullish after this 5th wave plays out.

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This morning crude oil created another higher high. There can always be another spike higher but this rally sure looks like it is fighting the bigger trend. Over lapping wave structures is the first clue, and a wedge is another. You usually don’t get one without the other as most bear market rallies can turn into wedges. The “C” wave part is all diagonal as it started near the bottom.  The only way we can see these small zigzags is with a 30 minute scale chart.  Anything bigger and you would not see many of these small zigzags.

The wedge looks impressive but we can dream up wedges just about anywhere if we are very biased. I believe there is more downside to come this summer so jumping on the oil bandwagon could overload it at a time, when the wheels are ready to fall of.

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Crude oil has been in a rally but this rally is so choppy that oil looks like it still is in a counter trend rally.  We may still have more upside but this rally should end and then resume its bigger bearish phase.  The December contract is still $1.21 lower than the June contract and over time I would expect that to change which could still take many months to switch.  The December contract is also very busy so I may switch to the December contract soon.

Panics happen when a small group sees the same thing at the same time, and any unexpected inventory number can do that.  Markets will always do the opposite of what ever trend the majority have established, as the majority can never win at this game. The majority never practice buying low and then selling high becuase they only love it when things go up. If not enough bulls keep buying then sooner or later this crude oil bullish phase will have a hardtime in staying with this northerly direction.

Those traders that can play both ways care little about fundamentals as they only care of what their TA is telling them. On a short scale we could also be facing an inverted wedge which is also very bearish.  Overall I remain bearish until a correction completes that will push oil into a new bull market phase.  So far this idea is pretty remote but by the fall the bearish phase will show itself to more participants.

I see the $40-$45 price level as a good resting spot but if any rally is still choppy, then even the $40 price level will not hold.

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Crude oil is on the verge of crashing through short term price support. The gloves are coming off, in the war on trade as they all try and fight back. All this trade war talk does it make you want to jump out and buy commodities?  My bearish stance on oil has not changed one bit even though there are many experts out that are still beating the bullish “oil drums”.  All the price forecasting in the world will not come true, if we don’t know the difference between a real bull market and a big bear market rally.

Recently they got worried that inventory levels have decreased , and then no sooner did they post the news, another report comes out saying the exact opposite.  I’m not concerned about any crude oil inventory levels as the big crude oil traders will buy, build or rent more storage space that prying eyes cannot see.  Traders don’t make money storing high priced oil, they make money storing low priced oil waiting for a price rebound. In South Africa there is a big crude oil depot that has huge storage capacity by going  deep below ground. More daily oil flows around South Africa than what travels through the Suez Canal so Cape Town is a prime location for a major world storage hub.

Another oil storage trick is to rent large crude carriers and just float them until prices improve. Some of these VLCC (Very Large Crude Carriers ) can hold 2 million barrels. (About 2000 contracts)  I’m sure that floating storage will come into play again in the next few years, and when it does it will be all over the oil news blogs. When all the oil storage is used up then the price of oil will rally.  There is no real shortage in oil to justify lofty expert price claims, as they have failed every time. In 2008 they were calling for $200 oil but oil then crashed to $34! We may get a brief halt in the crashing oil price, but that may not happen until crude oil gets close to the $40-$45 price level.

When commodities crash they can do so, with amazing speed, and that famous excuse, “It’s Different this time” will not stop an oil crash.

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In the last 3-4 days crude oil has been in a small rally which sure has the pattern of a triangle. We are just finishing what looks like another zigzag “E” wave so anoterleg down should happen, followed by a bigger rally retracing any 5th wave we may get.  A triangle forces a degree change as well which could end up at a wave 1 in Minor degree.

All bullish oil news in a bear market will never turn a bear market into a bull market, as bear market rallies are all starts to a fake bull market. Many still believe that oil is going to $100 or even $300 as one biased expert claims.  Crazy bullish forecasts always get mentioned at the tips of bullish phases, after which the market crashes. It’s not any different this time, as the only thing that has changed, is we are in a different time period, after all were not in early 2008.  Any unexpected bearish move will force “all” bullish players to reconsider their positions.  They can do this by moving up their protective sell stops,  just below my wave 3 in Minute degree. Very few traders have the account to maintain a bullish position, besides the smart traders saw this oil crash coming.

The $66 price level will be a set-up for a downside breakout, with the potential for a diagonal 5th wave to develop. We have a long way to go, and it may take the rest of the year to play out.  All my commodity Cycle degree 4th waves are zigzags with a few triangles thrown in to keep us on our toes.

Figuring out where we are in this Cycle degree 4th wave is different between many commodities, and we are still far away for the “A” wave in Primary degree to arrive.

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                      “Is This the Most Bullish Oil Market of All Time?”

The longs to shorts ratio in the six major petroleum contracts rose to record highs last week—a sign that hedge funds and other portfolio managers are certain that the direction for oil prices in the coming weeks is up.
In addition, over the past two weeks, options traders have boosted their bets on Brent rising to 80 U.S. dollars a barrel, and calls on Brent at 80 is the most crowded options trade on the ICE Futures Europe exchange, followed by call options on Brent at 70 a distant second.
Options traders hold nearly 137 million barrels worth of 80 Brent call options, a 37-percent jump from two weeks ago, Bloomberg reports.
In the six most important petroleum contracts, money managers held long to short positions in a ratio of nearly 14:1 last week, compared to a 12:1 ratio at January 23, [2018,] when portfolio managers held the record net long position in oil — 1.484 billion barrels, according to regulators and exchanges data compiled by Reuters market analyst John Kemp.
For the week to April 20, [2018,] money managers held a net long position of 1.411 billion barrels of Brent, NYMEX and ICE WTI, U.S. gasoline, U.S. heating oil, and European gasoil—close to the record net long position from January.
In Brent and WTI only, money managers held last week the most lopsided position ever, with 15 longs for every short.
Hedge funds’ ratio of long to short positions in Brent and WTI jumped to 15:1 from 13.2:1 the prior week, Kemp has calculated using exchanges and regulators data.
–Tsvetana Paraskova, “Is This the Most Bullish Oil Market of All Time?”, OilPrice.com, April 24, 2018.

The above research is priceless as it has nothing to do with ordinary crude oil fundamentals that the majority constantly use. Forecasting with fundamentals didn’t work at the peak in 2008 and it sure will not work at the peak in 2018! Sounds like a 10 year cycle between peaks to me.

Usually when the majority are all thinking the same then chances are good they are also wrong.

Oil has had a great run and right now all the experts/investors/traders are bullish. From the 2016 bottom crude oil started to rally, but it was in a very choppy pattern which is a clue that the rally is going against a bigger trend of at least one degree higher. I show a falling wedge with the two starting points starting from Primary degree points.  The bottom trend line does not need a degree in rocket science to see, as any kid with a ruler can connect them together, if they have the minimum skills of conventional technical analysis.

Fundamentals will always give us the wrong information at the extremes, and oil is a prime example of this. My wave count shows a 4th wave rally very close to completing, or already completed, on Friday.  The correction in this zigzag run was an expanded running flat which is a pretty popular pattern. No triangle   happened in this correction, but zigzags can contain triangles in the last “B” wave before the end.

In 2015 as oil was crashing the Gold/Oil ratio peaked at 17:1. We are presently hitting 19.41:1 which is one of 4 readings under 20:1 since the start of 2018!

The Gold/Oil ratio has been going nowhere fast, as it seems to have hit a ratio price brick wall. When crude oil starts to crash, this Gold/Oil ratio will start to spread again. When it hits the bearish, Gold/Oil Ratio brick wall, then that will be an early signal that crude oil may have bottomed.

How long do you think an oil decline will last without the Gold/Oil ratio getting all bent out of shape? Gold soaring and oil crashing is going to put a huge strain on the ratio. If we use the Fridays expensive ratio of 20:1 then the price of gold should be closer to $1600 with an $80 crude oil forecast.

Only time will tell what is going to happen next, but I will remain bearish until all these oil bulls stop spreading their bullshit everywhere they go. A good surprise bear attack will force the oil bulls to finally think twice, but by that time it’s too late already.

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When we look at the Intraday oil chart, we can see violent moves in both directions.  If fundamentals make oil go up and down, then we should know exactly what news story created which move. The fact it’s next to impossible to forecast the price of oil with fundamental analysis. Even the experts couldn’t see an oil crash coming back in 2008 and they all used fundamentals to justify any price move. It is also very rare that you will find any oil bulls scream “sell” at a major top!  When markets are down, analysts give us a reason why it went down, and when this market goes up, they post all the good news about oil.

In a bearish trend any bullish news will have little impact on the overall bearish move, until one day bearish news keeps oil from going deeper, then we know that a reversal will be coming.  In 2015 massive news about the world oil glut, no longer had impact, after which oil turned and soared again.

Bull traps and bear traps happen all the time, but if we’re not looking for these traps, we will step in the trap ourselves. Raw human emotions drive the markets and leverage compounds our emotions.

So far,  this short term bearish move has not completed like what I would like to see, as oil is in a bit of a rally. If the bigger trend is real then oil has much further to fall if the 4th wave scenario holds true.

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Last week, crude oil created a double top with the secondary peak being a bit lower. I show a starting 1-2, 1-2 count and a third 1-2 wave count might become visible due to the fact they are very small waves.  I show a “C” wave bullish move which I counted as a diagonal “C” wave. The Gold/Oil ratio has not changed that much, but this ratio at about 21:1 is running into a brick wall as it has been stuck around this ratio for some time.

There is a very good chance that crude oil will dip along with stocks, and when that becomes more obvious, then the Gold/Oil ratio should expand or get cheaper.

Commercials are net short WTI crude oil, but they are also net short the Europe Oil ICE futures. The speculators are in the exact opposite positions as they are the trend chasers and always get themselves in a trap. In this case speculators are caught in a bull trap. Until some of these numbers change I can’t see any extreme bullish oil scenario at this time.

The commercial traders deal much closer to the oil industry than any speculators do, so they carry a lot less risk than the speculators. Commercial traders are not going to store high price oil, because they make no money, but when the oil price crashes it is very profitable to store oil. They will pull out all the stops to make this happen when the price of oil crashes again. In one world oil glut, (2008) they had 25 tankers floating around the Mideast gulf region at that time. Low and behold all those tankers eventually disappeared. The same thing happened at the 2016 low, as they were stacking up oil carriers to deliver oil to China.

Not until I see that a huge corrective pattern has taken place can I turn bullish on WTI oil again.

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Once I had a look at the intraday chart I had to bump it up to 3500 bars from my normal 500.  This allows us to go back further, but still keep Intraday settings.  At the $65.36 price level crude oil could be hitting a brick wall, at least in the shorter term. We have a double top and a big obvious Head. In true bull markets, these types of H&S setups can be very bullish,  But if we are ending a bullish phase, then this H&S pattern can be an ominous warning.

It sure looks like a bullish zigzag but I do have choices depending what oil will do next, if it crashes with another zigzag, then a triangle will work, but if any decline looks more like a 5 wave sequence, then an expanded flat could be completed.

We could roll around the $56 price level for a little while, before oil turns and soars again. I think if another zigzag develops heading down, then we should get a big “b” wave counter rally.  I will give crude oil until the $55 price range, but after that the wave counts could get trashed rather quickly.

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What the majority that called that crude oil was in a bull market didn’t pan out that well. The crash into the 2016 bottom made sure of that. Even now, many call this a bull market, but they are also waiting for a correction. With crude oil we have monthly contracts, but I always look ahead to see where the next busiest month is.

Without a shadow of doubt,  the June 2018 and December 2018 contracts are the two busiest months. This means when the June contract expires I will be going directly into the December 2018 contract month. There was a 25 cent difference between the April and June contracts which is nothing in the bigger scope of things which produced  little change in the Gold/Oil ratio. I will talk more about the Gold/Oil ratio at the bottom of this page.

The fact that I’m showing a Primary degree “B” wave top must make the July, 2008 peak a Cycle degree peak. At the early 2009 bottom, we have a bear market about 7-8  year’s long, plus another two years in our present rally. It would be something if crude oil ended up with a bear market lasting 13 years!  I don’t think we can get that lucky because the big question is if our present rally is a fake.

This could still take a few more years and we need something more solid to go on. During the 3 year, topping process oil created a classic wedge which gave us a clue that a down draft in the price of oil was coming. Flip this wedge in reverse and you would get an explosive rally, like what happened with the VIX.

 Analyzing Chart Patterns: The Wedge

The H&S pattern didn’t disappear or is no longer important, even with a higher right shoulder. The January 2018 peak finished at $65.52, but there is no guarantee it will hold in the short term.

Crude oil crashed along with stocks in 2008, but also recovered with the stock market in early 2009. What has happened once can happen again, so I sure don’t want to rule anything out.

Any 4th wave bullish phase should technically get completely retraced, which would be lower than $28 on a weekly crude oil chart.

America has become a giant oil exporting nation so they can pump as much as other countries are willing to buy. The supply may not be an issue, but demand could dry up and blow away. This is speculation based on a possible 4th wave scenario in Intermediate degree.

Why U.S. Oil Exports Are Surging | OilPrice.com

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