A Follow Up on the Oil Sector
Using the Cycle Turn and Trend Indicators
Back in July I told subscribers that my indicators were weakening in the oil sector. Soon following that my indicators triggered intermediate-term sell signals. In fact, on August 9th at $2.18 an intermediate-term sell signal was given on unleaded gasoline and the following week a sell signal was given on crude oil at $73.50. I then shared these signals with you here in mid August. Today, I want to follow up on this sector.
In recent weeks I have been saying that unleaded gasoline and oil were in the process of forming a low. That low is now in place and I want to share with you one of the reasons that I was looking for this low. First, I want to look at a weekly chart of unleaded gasoline, which can be found in the first chart below. The indicator in blue is my intermediate-term Cycle Turn Indicator. This indicator began turning up the week of October 6th. It was about this time that I began saying that oil and gasoline were trying to form a low and this is the reason for those comments. However, at that time no buy signal had been given because there are other parameters or filters not shown here that are required before a signal is triggered. Then, on October 24th the conditions were met to trigger both a short and intermediate term buy signal on unleaded gasoline.
In the next chart below I have a daily chart of unleaded along with my Trend Indicator. Note how this indicator began turning up back in late September and how it has diverged with price ever since. It was also in part because of this indicator that I knew a bounce in unleaded gasoline was coming.
Now the question is, how high will this bounce take the price of unleaded? In order to answer this question in part we have to look at the monthly chart, which is plotted below. Here I have included both the Trend and the Cycle Turn indicators. Note that at this level both of these indicators have turned down. So, for the time being at least, we have to assume the bounce that is now underway is a counter-trend bounce, meaning that it will not move back above the summer highs. Now having said that, the key is whether or not this advance can turn the monthly Trend and Cycle Turn indicators up. So, if this advance can bleed over into these longer-term indicators, then at that point we will know that another Primary move up has begun, meaning that new highs will then be possible. But, until such time this move has to be considered an intermediate-term counter-trend bounce. Also, in looking at the flip side of this coin I must add that if the weekly Cycle Turn Indicator turns back down before the summer highs are bettered and before the monthly indicators turn up, then even lower prices should be expected.
In the next chart below we have weekly crude oil and the weekly Cycle Turn Indicator. Here too, the weekly Cycle Turn Indicator has turned up and both short and intermediate-term buy signals were given this past week.
Below, I have included a monthly chart of crude and the Trend Indicator. As you can see, the decline out of the summer high has turned this indicator down below its trigger line. The last time this indicator turned up was at the 2003 low. So again, the key is whether or not this advance will be strong enough to turn the monthly Cycle Turn Indicator and monthly Trend Indicator back up before the intermediate-term indicators turn back down. For clarity let me state this again. If this advance fails prior to turning the monthly Trend and Cycle Turn indicators back up, then on a longer-term basis lower prices should then be expected. But, if this advance can turn the monthly indicators back up similar to what happened in late 2003 after that brief down turn, then much higher prices will be possible. So, this advance and these indicators are key.
For more details on the current technical conditions using Dow theory, trend quantification, statistical expectations and more, visit www.cyclesman.com. I cover the stock market, gold, the dollar, bonds and periodically report on unleaded gasoline and oil. The newsletter also includes short-term updates 3 nights a week. The November newsletter is now and in it I show hard core statistical facts surrounding the 4-year cycle and what is to follow. Hope to see you on board.