OIL, update

oil dec 12 2016

See also a few earlier blogs on , the commodity.

Not to long ago the narrative was that low oil prices, that is gasoline prices, were good for the consumer who would end up with lots of dollars in his pocket that would then stimulate retail sales, the backbone of the (US) economy. This was akin to a reduction in personal and corporate  taxes, that other- aside from low interest rates- way of stimulating an economy. This macro economic effect was quite obviously true at a time when the middle east was the main producer  and the reduction of camels being exchanged for Bentleys had very little direct impact on the US.

       But somewhere along the way Wall street learned that the US itself was now numero uno in the oil bizz thanks to shale oil and  Alberta,  that was fast becoming as formidable a player as Saudi Arabia used to be. The relief to the masses of consumers was quickly trumped by the excruciating pain felt in Texas and Alberta. The narrative was changed and now high oil prices are good for the economy. Better yet, high margins on oil are good for the economy which is why, oddly enough, the superficial success of OPEC to come out of a dormant slumber of 15 years is met with applause. This is part of the “art of the deal” where monopolies are always to be preferred over sweating it out in competitive behaviour. In any event, just to make sure all this works, the new president-elect has promised to all but shut down the EPA, deregulate oil and make sure that the next “scientific” studies show that earth warming is just a hoax. Perhaps even the state department will be drenched in oil. All this will lead to a gusher of new oil and, as we all know, increased supply leads to increased prices.

      As far as EW patterns are concerned we have always favoured the position that we are still in a 4th wave of wave C in a large (10-year?) A-B-C “flat”. We have not yet reached the level of the 4th wave of previous degree, nor have we seen a full retracement of the bubble into the 2008 high, both are normal events.  Also wave C will have travelled the same vertical distance as wave A at about $20 which also has not been reached. What we do have is a relatively clear wave 3, all of which suggests that the low is not THE low and that we are presently in a wave 4, wave c of an a-b-c to be precise. It should, just eyeballing the chart, reach about $60,  $65 or possible even $70 if it retraces about 40% of wave 3. It will take 2 to 6 months! See detail below;

oil dec 12 2016 s