Thursday, September 29, 2011

Crude Oil Short Covering and the Wave Count

Last Fridays (expected) short covering has continued well beyond the minimal, having exceeded 84.01 AND the 50% retrace of the entire move down from 90.61 at 83.87. The .618 retrace of that move down awaits overhead at 85.46
 Additionally the c= .764 of a @ 85.49.
 Hourly
 click to enlarge
This extended short covering in both time and price is characteristic of this market ( equities as well),
and it has been seen in all the Elliott degrees; the B wave up off the 32.40 low, and all the legs since the May 3 high.
Active Mo. Daily
 click to enlarge
Again note the cluster of resistance around 85.45, including the .382 retrace of the last leg down at 85.24....could this be a c wave in the consolidation beginning Aug.9?

This very difficult to count Elliott pattern is reflecting global central bank and government efforts to stimulate the economy and support markets worldwide, naturally. Nevertheless the overall action as seen above over the last 5 mo.s is lower.
Labeling the waves is difficult, the time spent moving up or sideways, and the overlaps of previous lows tends to take away from the easy counting of an impulse wave down as might be expected of a C wave of super cycle degree.
I am still going with that count ...WTI in C down...given the significance of the 114 B wave high.

An alternative COULD be that the 114 was -A- of B and WTI is chopping down in -B- of B (the time spent in B vs. the 4.5 mo.s of the A wave down argues against however.) .
Either way downside risk is extremely high.....a -B- of B could easily produce a double bottom around 32.40, as part of a "flat" correction.

Weekly
click to enlarge

The .618 retrace of  32.40 to 114 shows up around 64.50 as does an equal leg Fib. extension.
These measuring tools are now on everyone's desktop and simple to use. No doubt the 65 area is
begging to be tested.

As these area's of consolidation (buying) get taken out it is important to remember that there is huge spec LONG Open Interest...still. See below post. The short open interest is relatively light and the move up since last Thur. will have reduced those shorts further in this weeks COT report.







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