Friday, July 8, 2011

Crude Oil Update

Geez, go away for a few days and the place goes crazy.
The relentless early July ramp during the holiday period reopens the possibility of alternative counts on the Crude. The move down since May has taken on the look of an abc structure, but that does not  necessarily mean new highs will be put in, even if that is the ultimate count. Additionally there is some evidence of continued 1,2 development.

WTI Active Mo. Daily
 click to enlarge
Of intermediate term importance is the  "c = a " structure of the move up off the 89.61 lows, labeled (2) or x.  That wave also retraces both .382 of the entire move down off the highs of 114.83, and  .78 of the wave labeled (1). If the recent high of 99.42 is a (2) we can expect an acceleration down for new lows, if it is an x wave, it will likely be a choppy abc type structure to new lows. Taking out 93.44 will be an important overlap lending weight to the above counts.

 There are 3 basic scenarios from here; the move down is done and Crude is headed to new highs after an abc type correction down to 89.65, or the move down is winding up to accelerate after significant  retracement of the 147 to 32.50 collapse, or the corrective retrace is itself only partly done, and the 114.65 high is the eventual "W" of a double or triple zig zag correction  (OMG). 
Two of these scenarios describe very serious downside risk.
And, all in all, the highs May 2  at 114.83 were important enough in the very long term, that the third scenario of higher highs is slightly less likely.

On a fundamental note the continued negative feedback loop of the macro economy on demand, and higher petroleum prices on the macro economy, makes the prospect of higher highs somewhat hard to picture, particularly in light of the absence of Fed QE 3.





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