During the night crude oil started a reversal and the only question is, is it a simple bull market correction or will the entire move in June be retraced? Only time will tell but the rally does look like a zigzag so I will remain bearish but be vigilante if a bear trap is shaping up. Gold is still in a rally but oil crashing makes oil become cheaper or cause gold to crash, as any Gold/Oil ratio will adjust itself.
On the daily charts, the 200-day MA has just produced a very small death cross so oil would have to do some fancy footwork to avoid a full-blown death cross.
There are no daily limits in all of the futures contracts I follow which means violent swings can always happen, and if your short oil then you may see some “green” in your oil short positions.
I have a small Forex account where I trade 5-10 oil units depending on how much confidence I have to the downside.
The Gold/Oil ratio is about 24:1 and sooner or later this ratio has to shift making oil cheaper if oil keeps crashing in price. Sooner or later the Gold/Oil ratio will bring the gold price down as well.
If gold blasts up to say $1511, in a fit of panic, then the Gold/Oil ratio could hit a 62:1 ratio. Gold can move $100-$200 easily but I have never seen or recorded any ratio spread that a 62:1 ratio would bring.
Crude oil gave us a short bullish move before oil reversed and plunged to a new bearish low. Oil has completed 2 sets of zigzags and we need two more and maybe a third, which could turn into a flat.
Another $5-$6 drops would be nice and then oil would be ready for a wave 3-4 rally in Minor degree. These diagonal waves can make spectacular moves when there are no daily trading limits.
I would love to see another small 5 waves down in Minuette degree before another potential counter rally can kill the bears and send them running back into the forest!
They’ll be back and that should coincide with my 5th wave down in Minor degree.
The Gold/Oil ratio definitely got better but at 22.8:1, it’s still not enough to jump up and down about. I do have some WTI short positions and so far the trade is in the green.
All this can fall apart if the “B” wave in Intermediate degree is too far off base. It may take until November/December before this, “Run of Five” gets completed.
When the “B” wave disappears on this 90 min chart then the wave 2 in Minor degree will be the main position I’ll be counting from.
The problem is that any “E” wave bottom in Primary degree could be below the $26 price level which is about $30 away from today’s price low. For that to come true some serious extensions would have to help it otherwise oil could come to a grinding halt much earlier.
During this 90 min chart, we had a golden cross and then right back into a death cross. With the daily chart, it will not take long for the 50-day MA to slice through the 200-day MA.
This March 2019 contract created another spike to the upside which may not be finished just yet. Is the $54-$55 price level resistance. From the bottom, the bullish oil move looks more and more like a 5 wave run. A 5 wave run that could be part of an expanded pattern never lasts, and eventually, the entire 2019 run should get retraced. COT report is worthless information until the government shutdown is settled. I do have the Market Vane report still coming in every Tuesday, and it shows 40% bulls are present. 40% is not nearly enough to push a huge bull market, especially if the 24 month high was only 59% bulls. Now if yesterdays reading was just 20-30% bulls then, I would have to look for a bigger bullish wave count.
The Gold/Oil ratio got a bit more expensive around 24.12:1 but old records make a Gold/Ratio of 17:1 extremely expensive. Incidentally the 25:1 ratio has been hit about 2 times since the 1999 bottom and both times huge bull markets developed. We also have established a new ratio benchmark since then, as 44:1 showed that crude oil was extremely cheap.
Demand for oil also changes with the seasons but any fundamental supply and demand readings are not trustworthy. It’s too easy for any oil player to manipulate, cheat and lie about numbers especially when the oil or gas is still in the ground. Opec is trying to pump up its take on oil because of the Aramco IPO slated for this year.
In Canada, we have the federal government trying to block all pipeline construction because our smiling Photo Bomb leader is trying to turn Canada into a European country. Canada has wasted its oil opportunity blocking First Nations who want the jobs and economic benefits from higher paying jobs. What you don’t hear or read about in the media is there are far more First Nations that want to work with oil and mining companies, rather than against them. Native controlled energy companies are out there and more are being formed.
This is just a quick crude oil update which has a lot to do with the fears of oil shortages due to the trade sanctions against Iran. Market moves based on fear never last that long if the real trend is still down. Most of the oil rhetoric we have witnessed has more to do with the midterm elections that any real fundamental reasoning. Some analysts also say that there is “no” fundamental reason why oil is heading down. I laughed when I read that as the “fundamentalists” have no fundamental reasoning for crude oils decline.
Maybe they should look at the Gold/Oil ratio as it was hitting a brick wall at 17:1. Today we are at over 19.53:1, which is a bit cheaper in recent weeks, but not near any extreme at this time. Commercials are not even close to becoming net long, any time soon. That doesn’t mean oil can’t rally, but chances are slim a new trend will develop from it.
Any real support is down at the $40-$45 price level but the Gold/Oil ratio also has to confirm it. The Gold/Oil ratio would be much better between 25 and 30:1, but not match that 2016 bottom of 44:1.
If the declining pattern starts to look like a zigzag then, yes I would turn into an oil bull. The weekly chart 200-day moving average is down at the $52 price level after which we hit a “Death Cross”.
On the daily charts, $65 would get us close to another Death Cross position. The 200-day MA can also give us support so it will be critical to watch once we get closer.
A beautifull counter rally is happening but due to its vertical move, this rally can’t be maintained and must correct or even end this inverted zigzag. If the bears are in control of oil, then this little zigzag will get completley retraced. If this is correct then we will still see many of these bearish rallies develop during the rest of this year.
The commercial traders are about as bearish as you will ever see, while the speculators are in the biggest bull trap that you will ever see. This makes it next to impossible for crude oil to charge into some bullish phase that many analysts are still forecasting. Fundamentals will “always” tell us the wrong things at the extremes, especially when the experts all are thinking alike! When they all sound or think alike, then chances are good it’s an instant short bet!
I also have what I call my “Ratio Pool” which contains about 20 Gold/Ratios in the ETFs I track. Nobody I know of keeps a ratio group of this size, and only with face to face meetings can this be explained in detail.
There is a mathematical connection in ratios that will never break, but they swing from one extreme to another. I sample the Gold/Oil ratio 2-3 times per month, and my latest gold/Oil ratio has been at 17:1. This is already at an extreme as the Gold/Oil ratio has been hitting a brick wall for months already.
Even the Market Vane Report doesn’t confirm a huge bullish phase to come, even with hurricanes forcing a spike in the oil price. As soon as any storm passes the oil price will start to crash again.
Since the early 2016 low oil has been in a bear market rally in Intermediate degree.Many are convinced that the world is running out of oil and that higher price could happen at any time.
Folks we have a big triple top, which created two fairly large H&S patterns. This is about as bearish of a signal that you can get as Blendstock gas is looking much the same. I checked for the Death Cross and it has not happened yet but is next inline to do so. That might not happen until crude falls below $60. On the monthly scale we have a different situation, where the Death Cross has already happened.
This is about as bearish of a technical signal you can get and fundamental analysts ignore them on most part. Fundamentals will always tell us the wrong things at the extremes, as commodities always go the opposite way of what the majority think.
The Gold/Oil ratio is as close to 17:1 as we can get and that was the same extreme ratio when oil crashed in 2014-2015. You can stretch and compress any ratio, but you can “never” break the mathematical connection. I keep a group of about 20 Gold/Ratios and it gives me feedback instantly. When someone forecasts a crazy gold price like $2225 then at 17:1 we should have $130 oil.
Oil will most likely go below $12 before we will ever see $130 crude oil. Gold investors that think that oil can imploded while gold soars are in living in a fantasy world. The world is going through a deflationary crash and bear market, that nobody expects.
Oil topped 3 years before gold, back in 2008 and what you can see so far is just a big zigzag crash in Cycle degree, which is still not finished. KOL is another Cycle degree zigzag crash, as well as the US dollar has done. All conditions that were before the 2008 crash are present now, and worse. You don’t want to be bullish on oil when it is sitting on a potential Death Cross.
Chances are good this world is going to get another oil glut and then when they all start to think alike, then the oil market will turn and soar once again. All commodities are connected with giant zigzags and oil is no different. Any SC degree wave 3 peak in oil should not peak until 2041, so that is a long wait if you are an investor.