Crude Oil (Not A Good Way To Start The Year)
The first week of the new year was not kind to commodities. First copper got hit, then crude oil then today it was gold. Gold closed down $19.
Above is a 3 year weekly chart of Crude Oil. This is a big spot for oil and we may see a small bounce but I'm still looking for crude to move down to $48 which is the next support level.
One of the many reasons why I was bearish on XLE last week was because of the above chart. Notice the amazing accuracy of the 5 month cycle of highs that has dominated the price action since May of 2004. Every 5 months there is a top. When you combine the cycle with the weekly bearish engulfment in the XLE, it was clear that we had to bearish. Based on my work, I still think there is more weakness ahead for oil. Look to short bounces..Do not short it here because there is some support and we may see a bit of short covering.
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5 comments:
Hey Kevin,
I like the way you keep tabs on multiple markets. Thanks for the excellent blog.
Brett
Kevin
Do you have any clue as to the underlying reason for the 5 month cycle? I think it's not sunspots, moon cycles, annual - but it must be something!
Jordan
I haven't a clue and to be honest with you I really don't care why. All I'm interested in is if the cycle is accurate and what kind of moves we are getting. I'm sure there is a reason but as of now I have no idea as to what it is because there are so many variables. Could be Opec, could be foreign money moving in and out of oil...who knows.
Kevin,
Whai is your opinon on OIH in relation to XLE weakness? Will OIH follow same pattern as XLE?
Raj
yes..I think OIH can go down to 120
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