Best of the Week
Most Popular
1. Climate Change Mass Extinction - Birds, Bees and Bugs: Going Going Gone - Richard_Mills
2.A Purrrfect Gold Price Setup! - Peter_Degraaf
3.Who Finances America's Borrowing? Recession Indicator for Independent Thinkers Part 2 - F_F_Wiley
4.America’s One-sided Domestic Financial War - Raymond_Matison
5.Gold Price Summer Doldrums - Zeal_LLC
6.Two Key Events Will Unleash Gold - Jim_Willie_CB
7.Billionaire Schools Teacher in NAFTA Trade Talks - Richard_Mills
8.Get Out Of Crypto Cannabis Bubble Before It Pops and Move Into Bargain Basement Miners - Jeb_Handwerger
9.Stock Market Could Pullback for 1-2 weeks, But Medium Term Bullish - Troy_Bombardia
10.G7 Chaos, Central Banks and US Fed Will Drive Stock Prices This Week - Chris_Vermeulen
Last 7 days
Financial Markets Analysis and Trend Forecasts 2018 - A Message from Nadeem Walayat - 21st Jun 18
SPX Bouncing Above Support - 21st Jun 18
Things You Need To Know If You Want To Invest In Bitcoin Now - 21st Jun 18
The NASDAQ’s Outperformance vs. the Dow is Very Bullish - 21st Jun 18
Warning All Investors: Global Stock Market Are Shifting Away From US Price Correlation - 20th Jun 18
Gold GLD ETF Update… Breakdown ? - 20th Jun 18
Short-term Turnaround in Bitcoin Might Not Be What You Think - 19th Jun 18
Stock Market’s Short Term Downside Will be Limited - 19th Jun 18
Natural Gas Setup for 32% Move in UGAZ Fund - 19th Jun 18
Magnus Collective To Empower Automation And Artificial Intelligence - 19th Jun 18
Trump A Bull in a China Shop - 19th Jun 18
Minor Car Accident! What Happens After You Report Your Accident to Your Insurer - 19th Jun 18
US Majors Flush Out A Major Pivot Low and What’s Next - 18th Jun 18
Cocoa Commodities Trading Analysis - 18th Jun 18
Stock Market Consolidating in an Uptrend - 18th Jun 18
Russell Has Gone Up 7 Weeks in a Row. EXTREMELY Bullish for Stocks - 18th Jun 18
What Happens Next to Stocks when Tech Massively Outperforms Utilities and Consumer Staples - 18th Jun 18
The Trillion Dollar Market You’ve Never Heard Of - 18th Jun 18
The Corruption of Capitalism - 17th Jun 18
North Korea, Trade Wars, Precious Metals and Bitcoin - 17th Jun 18
Climate Change and Fish Stocks – Burning Oxygen! - 17th Jun 18
A $1,180 Ticket to NEW Trading Opportunities, FREE! - 16th Jun 18
Gold Bullish on Fed Interest Rate Hike - 16th Jun 18
Respite for Bitcoin Traders Might Be Deceptive - 16th Jun 18
The Euro Crashed Yesterday. Bearish for Euro and Bullish for USD - 15th Jun 18
Inflation Trade, in Progress Since Gold Kicked it Off - 15th Jun 18
Can Saudi Arabia Prevent The Next Oil Shock? - 15th Jun 18
The Biggest Online Gambling Companies - 15th Jun 18
Powell's Excess Reserve Change and Gold - 15th Jun 18
Is This a Big Sign of a Big Stock Market Turn? - 15th Jun 18
Will Italy Sink the EU and Boost Gold? - 15th Jun 18
Bumper Crash! Land Rover Discovery Sport vs Audi - 15th Jun 18
Stock Market Topping Pattern or Just Pause Before Going Higher? - 14th Jun 18
Is the ECB Ending QE a Good Thing? Markets Think So - 14th Jun 18
Yield Curve Continues to Flatten. A Bullish Sign for the Stock Market - 14th Jun 18
How Online Gambling has Impacted the Economy - 14th Jun 18
Crude Oil Price Targeting $58 ppb Before Finding Support - 14th Jun 18
Stock Market Near Another Top? - 14th Jun 18
Thorpe Park REAL Walking Dead Living Nightmare Zombie Car Park Ride Experience! - 14th Jun 18

Market Oracle FREE Newsletter

5 "Tells" that the Stock Markets Are About to Reverse

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

© 2005-2018 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

6 Critical Money Making Rules