OIL

2020-04-20 14_39_48-Crude Oil Futures Quotes - CME Group

Interesting that trading futures can be a very VERY risky business. Obviously this does not represent the price of oil, WTI, which is still around $20/b but it does illustrate the risk of playing with this stuff if you do not understand it. The first time I “did” oil futures I did not realize the contract was for 1000 barrels at a shot! Nor did my client. I ended up absorbing the trade in my own account (technically a no- no) but fortunately it did not cost me much..

Anyway if you were bullish on this stuff and bought your first 2 lot on Trumps advice, at say $25, you are now in the whole about $60, that is 2x $60,000 or $120,000.  thank you. I am sure few people contemplated this reality. More on futures later.

Oil

We show a chart from 4 years ago but warmly suggest you read the entire blog; (search for Oil)

oil repeat

It is not a pretty count but it seems to have worked in that oil did first rise above $60/b and now has dropped to about $12/b on it’s way to <$10/b, as per below;

oil apr 20 2020oil futures

This chart includes the overnight move of about $6. Clearly there is now a last 5 wave down sequence from around $65.  Where it stops exactly is hard to tell but the trend line suggest a price well under $10. The CME futures suggest perhaps $7 or $8 per barrel. It really is not that relevant but clearly it is time to throw away “the art of the deal” if you had not already done so. It may be good to wait a little before bottom fishing in the oil sector as this may take a while to sort out, in any, case stay away from the badly capitalized companies.

GE and Crude Oil

GE 2020Crude Oil 2020

EW is all about pattern recognition which is more or less the same as finding a correlation between two entities or between two different time periods. Sometimes finding some sort of correlation is easier than counting little waves. It is also easier to verify the correctness of the analysis as all you really need to have is an outcome that is pleasing to the eye!

Once upon a time these serious German analysts discovered that there was a near perfect correlation between the number of storks flying over Stuttgart and the number of Mercedes-Benzes sold a month later. We know, of course, that there is no causal relationship between the two but that points to the heart of the matter, which is that you do not need to know or understand the cause, all you need is to observe.

The charts above are not perfectly aligned in time simple because I don’t know how to manipulate the values on the x and y axis. Nevertheless there is a clear resemblance between the two. Moreover I have been consistently bearish on oil expecting it to drop to about $10/b., see for instance my take on Suncor, SU and many others. GE was a little different, as it looked to me as if the entire correction was over  at the 2009 low of, I believe, $5 (not shown in this chart!). But then I changed the outlook and started looking for another low, but still used the wrong count maybe.(see this blog).

Anyway if oil does go to $10/b, it already dropped just under $18/b despite Trump’s nth attempt at “the art of the deal”, then GE could easily drop proportionately by, say, 3 or more dollars. Ergo I think GE at $4 is a screaming buy! Apart from this “analysis” I also believe that GE cannot go bankrupt as a practical matter as it is an integral part of the US military industrial complex.  Together with Pratt and Whitney and Rolls Royce, GE is one of just three companies in the Western World capable of making these large turbines. With America First policies it is unimaginable that they would allow it to fail.

Despite all of the above it still remains possible that the original count, that of a large A-B-C correction from $55 to $5 was correct and was then followed by a wave 1 up of a new bull trend. The drop from $32 to the recent low of $6+ would then be a wave 2. Next would be wave 3 up.

By the way, you cannot make one of these in your proverbial garage by tinkering with old lawnmower parts and oil at $10/b will shut down oil production by 85% simple because it becomes uneconomical. The link between this engine and oil is that this thing burns 4kg/sec of jetfuel, about 240 liters per minute. You can easily drive your car for more than a month on that.

ge turbofan

OIL update

oil feb 3 2015

We have absolutely no idea how this should be counted, except that we are pretty certain that there is a triangle at about the $57 level, which is why we did not expect a drop substantially below $50 (this is the April contract so the numbers are not directly comparable). Also there was a clear wedge at the very bottom, a frequent sign that the whole thing is over- for the time being. This is a $56 drop so the first retracement should get us to the 4th wave of previous degree, that is the top of the triangle at about $60. Next a retracement of about 38% which would take it to almost $68. That should complete the rebound.

The shape it should take, in its simplest form, is an a-b-c. However, this will become a 4th wave of the much larger C wave (see earlier blogs, also ACQ), so a very large flat or triangle, with pretty big swings up or down , is a distinct possibility. Time will tell.