Crude oil is presenting an interesting picture right now. In terms of cycles, crude most likely started a new medium-term cycle with its low on Dec. 7, 2017 at $55.88 (Feb. contract chart). This is bullish because the early part of any cycle is usually bullish. It is also very early in crude's longer-term cycles (9 and 18 year cycles) that likely started with crude's low around $38 in early 2016 (Feb. contract chart ; this would be around $26 in the continuous contract chart). This further supports a bullish argument for crude. On top of this, an inverted "head and shoulders" chart pattern (a very bullish sign) had been forming in crude since early 2015 and was completed in late 2017 with crude prices surging up from the completed formation.
The bottom line here is that the medium and long-term picture for crude looks quite bullish with an initial price target projection to around $75 which could be attained this year. We are thus looking to buy any significant correction that holds above $55.88 (the start of the current medium-term cycle). What makes this a little tricky right now is the "wild card" factor that often affects the crude oil market, i.e. trouble in the Middle East. The Iranian people's rebellion against their theocratic regime has heated up recently, and this has most certainly contributed to the steep rise in crude oil prices over the last several weeks. In the news today Iran's supreme leader Ayatollah Ali Kahmenei lashed out at President Trump and Great Britain, accusing them of supporting the people's rebellion and attempting to overthrow the Islamic Republic. The Ayatollah also vowed to "respond" to U.S. interference in his country's affairs. Not surprisingly, crude oil prices shot up today to a high of $63.24 before closing around $62.88. Of course, all of this rhetoric from Trump and the Ayatollah could just be saber rattling, but it does make financial and commodity markets nervous.
There is currently a resistance line for crude prices from $60 - $63. Today's price surge was testing the upper level of that range. We are now in the dead center of a reversal zone specifically for crude (Jan. 3 - 15), and it is a good time for a sub-cycle corrective dip after a strong four week rally. The charts and cycle timing are telling us we should sell short now for a short-term correction, perhaps down to the $59 area, but increased price volatility from the Iranian rebellion is making this risky. It may be safer to just wait for a correction and then buy. As Iranian tension builds, I am much more comfortable with a long position than a short one. Staying on the sidelines of crude for now.