Best of the Week
Most Popular
1.Crude Oil Price Trend Forecast 2016 Implications for Stock Market - Nadeem_Walayat
2.Odds of Winning Walkers Crisps Spell & Go olidays K, C and D Letters - Sami_Walayat
3.Massive Silver Price Rally During The Coming US Dollar Collapse - Hubert_Moolman
4.Pope Francis Calls For Worldwide Communist Government - Jeff_Berwick
5.EU Referendum Opinion Polls Neck and Neck Despite Operation Fear, Support BrExit Campaign - Nadeem_Walayat
6.David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - Mike Gleason
7.British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - Nadeem_Walayat
8.Gold Price Possible $200 Rally - Bob_Loukas
9.The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - Michael_Swanson
10.Silver Miners’ Q1’ 2016 Fundamentals - Zeal_LLC
Free Silver
Last 7 days
The Worst Urban Crisis in History Could be Upon Us - 24th May 16
Death Crosses Across The Board Are IRREFUTABLE Stock Market Sell Signals - 24th May 16
Bitcoin Trading Alert: Bitcoin Price Stays below $450 - 24th May 16
Stock Market Crash Death Cross Doom Prevails - 23rd May 16
Did AMAT Chirp? Implications for the Economy and Gold - 23rd May 16
Stocks Extended Their Rebound On Friday - Will They Continue Higher? - 23rd May 16
UK Treasury Propaganda Warns of 3.6% Brexit Recession, the £64 Billion Question? - 23rd May 16
Stock Market Support Breached, But Not Broken! - 23rd May 16
George Osborne Warns of 18% Cheaper House Prices - BrExit for First Time Buyers - 22nd May 16
Gold Bull-Phase I Continues to Confound (The Trek to “Known Values”) - 22nd May 16 r
Avoiding a War in Space - 22nd May 16
Will Venezuela Be Forced to Embrace the US Dollar? - 21st May 16
Danish Central Bank Stumbles with Its Currency Peg to the Euro - 21st May 16
SPX Downtrend Underway - 21st May 16
George Osborne Warns of More Affordable UK Housing Market if BrExit Happens - 21st May 16
Gold And Silver 11th Hour: Globalists 10 v People 0 - 21st May 16
David Morgan: There Will Soon Be a Run to Gold Like You've Never Seen Before - 21st May 16
Gold Stocks Following Bull Analogs - 20th May 16
The Gold Chart That Has Central Banks Extremely Worried - 20th May 16
Silver Miners’ Q1’ 2016 Fundamentals - 20th May 16
Stock Market Rally At the End of the Road? - 20th May 16
British Pound Soars on BrExit Hopes Despite Remain Establishment Fear Mongering - 20th May 16
NASDAQ 100, FTSE, and British Pound - When Rare Market Data Screams, Listen  - 20th May 16
Unintended Consequences, Part 1: Easy Money = Overcapacity = Deflation - 19th May 16
The Federal Reserve is Not Going To Raise Interest Rates and Destroy Gold - 19th May 16
Stock Market Final Supports Are Broken - 19th May 16
Gold - Pro-Inflation? Anti-USD? - 19th May 16
Further Stock Market Uncertainty As Indexes Gained On Friday, Will Uptrend Resume? - 19th May 16
What This U.S. Presidential Election Tells Us About Her Millennial Generation - 18th May 16
Stock Market Trendline Broken on Fed Announcement - 18th May 16
An Incredibly Simple, Rarely Used Way to Book 170% Investing Gains - 18th May 16
Statistically Significant Stock Market Death Cross? - 18th May 16
Precisely Wrong on US Dollar, Gold? - 18th May 16
What You Can Gain From One Tech CEO's $355 Million Loss - 18th May 16
The ‘Tide’ has turned… NEGATIVE For STOCKS!!! - 18th May 16
Goldman Sachs's - Regulatory Climate is Chilling Deals; Hatzius Not Worried About a Recession - 18th May 16
Bitcoin Price Remains above $450 - 18th May 16
Crude Oil Price Trend Forecast 2016 Implications for Stock Market - 17 May 16
Could the National Debt Really Grow as High as $31 Trillion by 2023? - 17 May 16
Gold Price Possible $200 Rally - 17 May 16
Crisis Investing - Jim Rogers on “Buying Panic” - 17 May 16

Free Instant Analysis

Free Instant Technical Analysis


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