Best of the Week
Most Popular
1.The Brexit War! EU Fearing Collapse Set to Stoke Scottish Independence Proxy War - Nadeem_Walayat
2.London Terror Attack Red Herring, Real Issue is Age of Reason vs Religion - Nadeem_Walayat
3.The BrExit War, Game Theory Strategy for What UK Should Do to Win - Nadeem_Walayat
4.Goldman Sachs Backing A Copper Boom In 2017 - OilPrice_Com
5.Trump to Fire 50 US Cruise Missiles To Erase Syrian Chemical Attack Air Base, China Next? - Nadeem_Walayat
6.US Stock Market Consolidation Time - Rambus_Chartology
7.Stock Market Investors Stupid is as Stupid Goes - James_Quinn
8.Gold in Fed Interest Rate Hike Cycles- Zeal_LLC
9.The BrExit War - Britain Intelligence Super Power Covert War With the EU - Nadeem_Walayat
10.Marc Faber: Euro to Strengthen, Dollar to Weaken, Gold and Emerging Markets to Outperform - MoneyMetals
Last 7 days
Bifurcated US Stock Market - 29th Apr 17
Damn the Deficits, Huge Trump Tax Cuts Ahead! - 29th Apr 17
Gold Hostage to Stocks - 29th Apr 17
Warren Buffett Hates Gold… But Here’s Five Reasons You Need To Own It - 29th Apr 17
Stock Market Sentiment, Re-Fueled Along the Way - 28th Apr 17
Calling out the Central Bankers - 28th Apr 17
Fed's Third Inetrest Rate Hike and Gold - 28th Apr 17
USD/CAD - Invalidation of Breakout or Further Rally? - 28th Apr 17
What Happened to the Stock Market Crash Experts Were Predicting - 28th Apr 17
Earth Overshoot Day - Human Population Growth - 28th Apr 17
Misunderstanding GDXJ: Why It’s Actually Great News For Junior Miners - 28th Apr 17
What Makes Bitcoin Casinos So Remarkable? - 28th Apr 17
Financial Markets Improvised Explosives - 27th Apr 17
More Stock Market Short-Term Uncertainty As Stocks Get Close To Record High - 27th Apr 17
Elliott Wave Theory: Is Elliott’s Theory Enough? - 27th Apr 17
Billionaire Investor Paul Tudor Jones Says Stock Market Valuation Is “Terrifying” And He Is Right - 26th Apr 17
The Great BrExit Divides - Britain, USA and France - 26th Apr 17
10 Facts That Show Our Taxes Are Worse Than You Thought - 26th Apr 17
What Trump’s Next 100 Days Will Look Like - 26th Apr 17
G20: SURPASSING THE 2nd GLOBAL STEEL CRISIS - 26th Apr 17
What A War With North Korea Would Look Like - 25th Apr 17
Pensions Are On The Way Out But Retirement Funds Are Not Working Either - 25th Apr 17
Frank Holmes : Gold Could Hit $1,500 in 2017 Amid Imbalances & Weak Supply - 25th Apr 17
3 Reasons Why “Spring Forward, Fall Back” Also Applies To Gold - 25th Apr 17
SPX may be Aiming at the Cycle Top Resistance - 25th Apr 17
Walmart Stock Extending Higher - Elliott Wave Trend Forecast - 25th Apr 17
Google Panics and KILLS YouTube to Appease Mainstream Media and Corporate Advertisers - 25th Apr 17
Gold Price Is 1% Shy of Ripping Higher - 25th Apr 17
Exchange-Traded Funds Make Decisions Easy - 25th Apr 17
Trump Is Among The Institutionally Weakest National Leaders In The World - 25th Apr 17
3 Maps That Explain the Geopolitics of Nuclear Weapons - 25th Apr 17
Risk on Stock Market French Election Euphoria - 24th Apr 17
Fear Campaign Against Americans Continues Nuclear Attack Drills in New York City - 24th Apr 17
Is the Stock Market Bounce Over? - 24th Apr 17
This Could Be One Of the Biggest Winners Of The Electric Car Boom - 24th Apr 17
Le Pen Shifts Political Landscape- The Rise of New French Gaullism  - 24th Apr 17
IMF Says Austerity Is Over - Surplus or Stimulus - 24th Apr 17
EURUSD at a Critical Point in Wave Structure - 23rd Apr 17
Stock Market Grand Super Cycle Overview While SPX Correction Continues - 23rd Apr 17
Robert Prechter Talks About Elliott Waves and His New Book - 23rd Apr 17
Le Pen, Melenchon French Election Stock, Bond and Euro Markets Crash - 22nd Apr 17
Why You Are Not An Investor - 22nd Apr 17
Gold Price Upleg Momentum Building - 22nd Apr 17
Why Now Gold and Silver Precious Metals? - 22nd Apr 17
4 Maps That Signal Central Asia Is at Risk of War - 22nd Apr 17
5 Key Steps For A Comfortable Retirement From Former Wall Street Trader - 22nd Apr 17

Market Oracle FREE Newsletter

Why 95% of Traders Fail

Crude Oil Price Bottoms and Blues

Commodities / Crude Oil Feb 05, 2016 - 04:52 PM GMT

By: DeviantInvestor

Commodities

Crude oil prices have dropped from about $106 in June of 2014 to briefly under $30 in January of 2016 – down about 74% peak to trough.  This appears to be an on-going disaster for oil companies, the banks who loaned money to frackers, oil exporting countries, global stock markets and others.

Conventional wisdom suggests that crude oil prices will stay low for a long time because of low demand (global recession), huge supply (Iran, fracking, etc.), decline in commodity prices globally, and at least ten more reasons.


Maybe!

But crude oil prices have crashed before and then rallied.  Examine the following chart and the 4 step sequences shown.

Note the following “1” to “2” down legs shown on the chart.  They are:

Date                      High (1)                Low (2)                 % Drop      

9/90 – 4/94            40.10                    13.90                    65%

10/00 – 11/01       36.90                    17.12                    54%

7/08 – 12/08          147.20                  35.35                    76%

6/14 – 1/16            106.83                  27.56                    74%

Note that crude oil has crashed before, and probably will again.  But it has also rallied after crashes and probably will again.  Note the following rallies:

Date                      Low                       High                      % Rally      

4/86 – 8/87           9.95                       22.03                       121%

6/90 – 9/90           16.57                    40.10                       142%

12/98 – 10/00       10.75                    36.90                       243%

1/07 – 7/08           51.00                    147.20                     188%

12/08 – 11/09       35.35                    89.90                       154%

1/16 – ?                 27.56                    ?                              ?

 

There have been several substantial rallies from deeply oversold conditions over the past 30 years.  At each of those lows I think there were many good reasons why crude oil had crashed and would stay low for years — just like now.  And yet crude oil prices rallied, in spite of those many good reasons.

What about Cycles in Crude Oil Prices?

Note that in the graph above the #2 bottoms have been circled with green ovals.  Examine the next graph with the 88 month cycle lows shown with green ovals.  The bars are compressed slightly more but the #2 bottoms are the same.

There have been six important crude oil bottoms in the last 30 years.  Five of those six important lows occurred close to the 88 month cycle bottoms indicated by green ovals and purple vertical lines.  The low in 1998 was mid-cycle.

The green ovals and vertical lines as drawn indicate a crude oil price low is due about now.  Given that the cycle is 88 months long – more or less – that probably means the low is due in anytime in 2016Q1 or 2016Q2, and perhaps it has already occurred.

What could cause a bottom to occur now and crude oil to rally or fall further from here?  Well, there are many possibilities.  Consider the reasons for and against a rally from here as listed in:  60 Reason Why Oil Investors Should Hang On from Zerohedge.

From Peter Schiff:

“The bust in commodities should only last as long as the Fed pretends that it is on course to continue raising rates.  When it finally admits the truth, after its hand is forced by continued market and economic turmoil, look for the dollar to sell off steeply and commodities and foreign currencies to finally move back up after years of declines.  The reality is fairly easy to see, and you don’t need an invitation to Davos to figure it out.”

My Opinion:  We will see more currency devaluations, based on 100 years of history, and we will see central banks “doing something” to levitate the stock and bond markets, based on decades of history, and we will see bankers taking care of themselves and the political elite, based on thousands of years of history.  Expect higher crude oil prices – eventually – and expect more currency devaluations and higher gold and silver prices in 2016 and 2017.

Expect bankers and politicians to do what they do, and expect gold and silver to protect us from their machinations.

Gary Christenson

GE Christenson aka Deviant Investor If you would like to be updated on new blog posts, please subscribe to my RSS Feed or e-mail

© 2016 Copyright Deviant Investor - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

Deviant Investor Archive

© 2005-2016 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Catching a Falling Financial Knife