Wednesday, January 5, 2011

Crude Oil Outlook

WTI has spent the last 6 mo.s overcoming repeated sell offs to gain new highs at 92.58 , retracing 52% of the 2008 plunge of  $114 . That  move up very likely completes the -C- of B, or the entire correction up from 32.40.
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Using the actual spot month low of 32.40 as the pivot point; -C- = .62 of -A- at 92.58. It also was roughly equivalent in time; 7 mo.s vs. 6 mo.s. 
If the above count is correct and the B wave is complete, the outlook is for the C wave down to be underway. That will be a major decline that has some relationship in price and time to the A wave.
The A wave was a Fib. 78% PULLBACK from the 147 high. An equal move in PERCENT targets 20.37.
If the C wave = .62 of the A in nominal terms it targets 21.90.  And the C= 50% of the A at 35.58 roughly a double bottom. So 35 or 20.
The A wave down was very very abrupt taking only 5 mo.s vs the 24 months up of the B wave. My guess is the C wave takes something in between...splitting the difference wiill be 13 mo.s, also 2.6 x the 5 mo. A wave.
How will it look?
This market struggled to clear the April 87.15 high and it took over a month to gain $5 above that point. 
That was accompanied by record spec long O.I  climbing right into the highs. My gut is that a break below the 87 number will get the momentum going pretty dramatically.
 Daily
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Note the .382 and 50% retrace points lining up horizontally with prior tops and bottoms. Taking out the 50% retrace will be the final call. Most likely the biggest downside gains will be early on given the O.I.
15 min.
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The initial move down sure looks like a 5 count. There will almost  certainly be another leg down and very likely that will take out the 87 level.  If it is a "3" , and that is likely, it should be some Fib multiple of the first  $4.48 move down; and even an equivalent leg down from say 90, takes out that 87 level. There is a high risk of an acceleration to the downside from whatever point this mornings bounce reaches.









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