In yesterday's blog on crude oil I wrote:
"...crude oil may have ended an old medium-term cycle (and started a new one) with its deep low of $68.80 last Thursday as that was near the center of a reversal zone specifically for crude (Dec. 5- 13). But that reversal zone continues into Wednesday, and it is also overlapping with our strong general reversal zone for all markets (Dec. 12 - 21). This means that the old medium-term cycle may not be over yet, and prices could still fall lower."
Indeed, prices broke below that $68.80 (Jan. 2024 contract chart) low today, so the medium-term cycle bottom is still forming as we near the end of the reversal zone for crude tomorrow and enter a strong general reversal zone today (Dec. 12- 21). We may be looking for a good spot to buy this week or ideally next week at a price above $65, and preferably above a downward sloping trend-line that is now around $67.
Although not likely, it's still possible the current medium-term cycle began with the Oct. 6 low of $78.93. If that's the case, the final medium-term cycle bottom would not be due for at least another 4 weeks at lower prices. For now, we will assume an older medium-term cycle bottom and possibly a 4 year cycle bottom is forming inside our current reversal zones. We are on the sidelines as we wait for an ideal spot to buy.
The longer-term picture for crude oil is still bullish (although if prices start to break below $60, we may have to change that view). The "near-zero" low in crude prices in April 2020 was the deep bottom that marked the start of several longer-term cycles in crude (36 year cycle, 18 year cycle, 9 year cycle). The smallest "long-term" cycle we now observe is a 4 year cycle (previously thought to be a 3 year cycle).
All cycles are usually bullish in their early phase. We are only three years into the new 36 year cycle, and it is also early in the 18 year and even 9 year cycle, which is why we view the long-term trend in crude as bullish. We are, however, nearing the end of the first 4 year cycle (from that April 2020 bottom), and that would explain the current fall in crude prices towards the final 4 year bottom. That bottom should be a good spot to buy as long as prices don't go too low (i.e. below $60).
If crude oil's trend remains bullish, we expect prices to rise back and exceed $90 next year.