I Would Like to Take Another Look at Oil

My main expectation for $OIL has been that it will continue to decline. That has so far been working, as it’s been weak here, and specifically, I expected the rally in May to fail, and it did, as we’ve fallen about 30%. I originally expected the initial decline off the 3/6 high (now labelled Pink “A” in the chart below) to be a Pink “1,” but I changed that to a corrective “A” because the rally that came after it did not fit the parameters of an impulse wave’s correction, nor did the subsequent decline look impulsive enough (i.e., the Pink A looked like a good impulse, the Pink C did not not, and Pink B did not look much like a “2”). And my most recent analysis of it on the other counts page involved the expectation that it would still move much lower despite not being an impulse wave (here).

However, it may not and I would like to discuss why. It just so happens that the recent decline came to a spot where Pink C now equals Pink A. And if it stops here, the decline may be over. Now, it’s under the 250-day EMA, but it can do that briefly and still begin to rally again (e.g., red arrow). In addition to the relationship between Pink A and Pink C, at this same spot there is also a relationship between Yellow C and Yellow A. It’s welcome to make a new relationship by finding additional fibs at lower prices, but momentum to the downside has waned, and it’s possible that it’s putting in a bottom here. If it is, and if it’s a low of pink, yellow and purple degrees, it may embark on quite the tear, heading (eventually) to $224 (or even higher).

OIL

I’m more or less agnostic about this regarding what it could mean for equities. Bears have a good case, regardless of in which direction it heads next: if it pukes, that often happens in risk off environments, but if it rallies, it just means inflation is here to stay and the Fed will not be our friend for the foreseeable future. So it may not really matter here. But if you want to trade energy and this starts to rally, it may become bullish for quite some time again.


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