UPDATE ON CRUDE OIL (3:30 pm EDST)
Crude oil made a new low at $19.27 (May contract chart) last Monday (March 30) right at the center of our reversal zone and then rallied strongly off that low. That could easily be the start of a new medium-term cycle (unless prices soon drop back below $19.27). This would normally be a good spot to buy as the early part of any cycle is unusually bullish. But we are not in "normal" financial times.
The recent plunge in crude prices triggered by a price war between Russia and Saudi Arabia has turned the longer-term trend of crude bearish. There is a 3 year cycle in crude that started with a $42.36 low in late Dec. 2018. We are only 15 months into that cycle and prices have already plunged far below that $42.36 start. That means the cycle has turned bearish and will continue to move lower until it bottoms (probably sometime in late 2021 or early 2022). That does not mean prices will move straight down over the next year and a half. As in all cycles, prices will rise and fall in (hopefully) predictable sub-cycle patterns.
If last week's low was the start of a new medium-term cycle then it is possible for prices to rally back up to the $40 level; HOWEVER, there is resistance at the $30 level, and there is especially strong resistance in the "gap down" space around $35 - $41. These resistance zones could significantly curb any potential profits in going long now so
I am going to stay on the sidelines of crude for now. (If prices do edge lower and redefine the start of the medium-term cycle below $19.27, I may change my mind and buy at the bottom). For now, I am going to anticipate the possibility of selling this market short when we get to the top (many weeks away) of a new medium-term cycle (that has either just begun or will begin shortly).
Crude oil made a new low at $19.27 (May contract chart) last Monday (March 30) right at the center of our reversal zone and then rallied strongly off that low. That could easily be the start of a new medium-term cycle (unless prices soon drop back below $19.27). This would normally be a good spot to buy as the early part of any cycle is unusually bullish. But we are not in "normal" financial times.
The recent plunge in crude prices triggered by a price war between Russia and Saudi Arabia has turned the longer-term trend of crude bearish. There is a 3 year cycle in crude that started with a $42.36 low in late Dec. 2018. We are only 15 months into that cycle and prices have already plunged far below that $42.36 start. That means the cycle has turned bearish and will continue to move lower until it bottoms (probably sometime in late 2021 or early 2022). That does not mean prices will move straight down over the next year and a half. As in all cycles, prices will rise and fall in (hopefully) predictable sub-cycle patterns.
If last week's low was the start of a new medium-term cycle then it is possible for prices to rally back up to the $40 level; HOWEVER, there is resistance at the $30 level, and there is especially strong resistance in the "gap down" space around $35 - $41. These resistance zones could significantly curb any potential profits in going long now so
I am going to stay on the sidelines of crude for now. (If prices do edge lower and redefine the start of the medium-term cycle below $19.27, I may change my mind and buy at the bottom). For now, I am going to anticipate the possibility of selling this market short when we get to the top (many weeks away) of a new medium-term cycle (that has either just begun or will begin shortly).
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