OIL, update

oil dec 12 2016

See also a few earlier blogs on oil, 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


Can $ dec 2 2016oil dec 2 2016gold dec 2 2016

We have not examined the correlation between the Canadian $, Light Crude Oil  and Gold. However all three are obviously important to Canada or it’s economy and therefore it seems to be a reasonable proposition that the three move in tandem, if not all the time.

     Here we have the futures of all three, starting approximately at the same time and from deeply oversold levels. There then follows a sharp rebound after which there is a retracement of about 50 to 60%. All three qualify as A-B-C but in the case of Light Crude the B may not be over yet as it seems to be forming a triangle. The upshot is that the Can$ could go to about $0.83 to the US, Gold could rise to near $1500 and Oil might make it to the low 60-ties.

     The common element in all three is a lower US dollar. The result of Trumpenomics?

OIL, update

oil may 16 2016

This is the light crude oil future on the CME. Futures change all the time and when going backward, there is a lot of distortion as you are not necessarily looking at the same thing. Still ,even with that caveat it can be a good exercise (see our prescient previous blog).

Now that we are up close to 50% from the lows (of $26, on the then current contract) it is useful to have another look. Could this be an A-B-C correction, or part of a correction? If it is then we have a nice diagonal, C will equal A at about $48/49 and will terminate close to a 4th wave of previous degree. This may just be as good as it gets for a while.

Rumours have it that at the university of Delft (where the blue china comes from) they are working on a prototype engine that will be able to burn water which might have  a disruptive effect on the supply and demand balance. One of the few remaining technical issues is if this only works with Rhine water, or any water. Of course, the city of Rotterdam, the largest fuel transfer station in the world and  not that far away from Delft, is doing all it can to suppress word about this project getting out to the world at large, which is probable why you have not heard this before.

Oil , the stuff, again.

oil mar 7 2016 trioil mar 7 2016 new low

Just for greater clarity it might be useful to point out that oil could still go lower, albeit after perhaps a year of sideways to higher prices (see earlier blogs!).

There are two ways you can count oil. Both are essentially the standard A-B-C corrections. The first possibility has the B in that pattern as a triangle. It is a very compact one and a little distorted but a triangle nevertheless. That triangle then absorbs all the ups and downs between 2009 and 2014. The wave C, that must itself have 5 subdivisions, drops down like a stone in much the same way as it did during the great recession. The entire A-B-C pattern was complete early this year and from here on we are in the new bull market.

The second possibility is that the above is all wishful thinking. The C wave started much earlier in 2011 and does an initial 1-2 into 2013. From there wave 3 down takes us to the recent low of $26 or so depending what contract or spot price you are talking about. The roaring bull market the last few weeks is the start of wave 4 that could take as long as a year or more to complete. Then wave 5 takes oil down to about $10. I prefer this count.

The chart, long-term would look like this;

oil mar 7 2016 long term

What it means, if it is correct, that you have a whole year to profitable play with oil stocks, just do not get married to them.