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Well, oil has run out of some steam, but it has not ground to a halt - yet. Let’s start by looking at a chart:
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This is a 90 day Elliott Wave which shows a range-trading ABC pattern and it suggests a lull. The more interesting aspect for me is the oscillator. When the oscillator goes well below zero and stays there for an extended time – now two months – then the next rise is rarely without some degree of difficulty.
Now let’s look at the weekly chart:
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Now two aspects catch my eye. Firstly, a wave five is potentially reachable in the next year or so. But I will be watching the oscillator very closely because if it was to follow a pattern similar to the daily chart, then we are more likely to see a very weak market in the weeks ahead. And all bets for a new wave five high are then off.
Generally, markets are at a cross- roads and I would not dismiss the prospect of a struggling wave five for oil. However, if oil hits US$120 or so, then we will see economies struggle. And, whilst this high would still be well below the US$150 high of three years ago, oil at these levels could scuttle an already tenuous and extended world recovery.
Enjoy the ride
Tom Scollon
Chief Analyst |