UPDATE ON CRUDE OIL (8:00 pm EST)
Crude oil started a new medium-term cycle with its low of $34.04 on Nov. 2 (January contract chart). Prices rallied to a new high today above $47. That is exceeding the high of the last medium-term cycle ($44.60) and likely means this cycle is bullish. Today's high is in the center of our current reversal zone (Dec. 3 - 14) so a top and reversal could be imminent. We may want to buy the low of this first sub-cycle correction for a short-term rally back up. A good target range for a corrective low now would be around $41- $43. We will watch for that.
Despite being short-term bullish, crude oil's longer-term picture is looking quite bearish. Longer-term, crude oil most likely started a new 18 year cycle in February 2016, which means it is very early in this new cycle. Early cycle phases are usually bullish, but this one may be turning bearish as its first sub-cycle peak seems to be "rolling over" at a level considerably below the peak of the last 18 year cycle (which was around $140). Crude's dramatic price plunge below zero in April this year was another bearish sign. Unless something causes crude prices to take off in the first half of next year (e.g. geopolitical instability in the Middle East), it looks like crude could be in a long-term downtrend over the next decade. If this turns out to be true, our trading strategy will focus more on short-selling than buying.
On the sidelines of crude oil for now.
Crude oil started a new medium-term cycle with its low of $34.04 on Nov. 2 (January contract chart). Prices rallied to a new high today above $47. That is exceeding the high of the last medium-term cycle ($44.60) and likely means this cycle is bullish. Today's high is in the center of our current reversal zone (Dec. 3 - 14) so a top and reversal could be imminent. We may want to buy the low of this first sub-cycle correction for a short-term rally back up. A good target range for a corrective low now would be around $41- $43. We will watch for that.
Despite being short-term bullish, crude oil's longer-term picture is looking quite bearish. Longer-term, crude oil most likely started a new 18 year cycle in February 2016, which means it is very early in this new cycle. Early cycle phases are usually bullish, but this one may be turning bearish as its first sub-cycle peak seems to be "rolling over" at a level considerably below the peak of the last 18 year cycle (which was around $140). Crude's dramatic price plunge below zero in April this year was another bearish sign. Unless something causes crude prices to take off in the first half of next year (e.g. geopolitical instability in the Middle East), it looks like crude could be in a long-term downtrend over the next decade. If this turns out to be true, our trading strategy will focus more on short-selling than buying.
On the sidelines of crude oil for now.
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