Crude Oil Could Fall Another 50%

Crude oil prices dropped 38% since October 3. The June 20, 2018 Profit Radar Report published the following analysis and projections:

The two charts below show two possible longer-term Elliott Wave Theory counts:

  • The first one implies that a major top is in.
  • The second one implies that we’ll see another high before a major top.”

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The November 25 Profit Radar Report stated that trade may bounce from the descending green support trend line, but warned that:

The 2008 and 2014 decline caution that failure to bounce despite being over-sold can lead to continued losses. In fact, the chart below shows that the chart pattern of 2018 looks similar (perhaps a smaller fractal) to the chart pattern of 2011 – 2015 (blue boxes).”

Oil prices did bounce from the green support line, but it failed to get above 55, which according to the December 9 Profit Radar Report was needed for a bigger snap back rally.

Price is once again nearing over-sold, and a bullish divergence exists, but betting on bounces in a bear market takes impeccable timing.

Continued updates are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s evaluation of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF e-Newsletter to get actionable ETF trade ideas delivered for free.

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Crude Oil Update

As crude oil has been nearing the top of its trend channel, we’ve been looking for low-risk opportunities to short oil.

The proximity to trend channel resistance is not the only reason for our bearish disposition however.

Investors have become increasingly more bullish on oil, and trade seems to be nearing the end of a wave 4 rally (according to Elliott Wave Theory).

Waves 4 are choppy and unpredictable. In fact, this wave 4 has gone on further than we expected.

In an attempt to provide some clarity, the Profit Radar Report published the chart below on June 24.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Business Daily says: “When Simon says, the market listens.” Find out why Barron’s and IBD endorse Simon Maierhofer’s Profit Radar Report.

Based on this interpretation of the wave structure, oil needed one more rally above 75 before a massive decline.

The July 1 Profit Radar Report stated that:

“This is another window of opportunity for oil to turn lower, however, another strong close would likely erase the short-term RSI-35 and on balance volume divergence. A quick spike to 75 followed by an intraday reversal would be a picture perfect beginning of a reversal with significant down side potential (see June 20 PRR).

Not all signals are alligned for a good sell signal, but it’s worth taking a stab.

We will short crude oil if it moves above 75 on Monday or Tuesday or short the United States Oil Fund (USO) if it moves above 15.20 on Monday or Tuesday.”

On Tuesday, July 3, crude oil briefly spiked above 75 (USO above 15.20) before reversing lower.

As seen on the weekly chart, there’s another strong resistance cluster just below 80. We can’t yet rule out a move to this level.

For now we got an excellent low-risk entry point to go short, and as long as trade remains below Fibonacci resistance at 72.55, we are looking for lower prices (next support: 69.50). Continued updates for oil, gold, silver, US dollar and stocks are available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, 24.52% in 2015, 52.26% in 2016, and 23.39% in 2017.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

US Dollar Chokes Gold, Silver and Oil Movement

Gold, silver and oil haven’t gone anywhere in 2018. Why?

The chart below plots gold, silver and crude oil against the US Dollar Index.

The US dollar has been in a tight trading range for most of 2018. Although asset correlations come and go, commodities are traded in US dollars, and the US dollar inactivity likely contributed to the lack of direction in the commodities market.

I assume a dollar breakout will awaken commodities.

The November 29 US dollar update featured the chart below, which projects a more significant low in early 2018.

The US dollar is right in the down side target range, but the process of carving out a low is taking longer than projected. We are still looking for a significant dollar bottom (perhaps after one more new low).

If the correlation between US dollar (strong dollar = weak commodities) persists, the US dollar should soon begin to put pressure on commodity prices.

The first chart highlights some basic support/resistance levels and patterns to watch:

Gold:

Potential triangle with resistance at 1,365 (Fibonacci resistance at 1,382). Support around 1,310.

Silver:

Two potential triangles. A break of the shorter-term triangle should lead to a test of the longer-term triangle boundaries.

Crude Oil:

The January high could be a significant top. The short-term triangle (if it breaks higher) could cause a re-test of the January top and an excellent opportunity to short crude oil via the United States Oil Fund (USO). A break below triangle support may have 55 (long-term trend channel support) as next target.

We will look at technicals, seasonality and sentiment to assess the direction and scope of the next move. Continuous updates will be available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

2017 Oil Forecast

Although volatile, 2016 was a good year for crude oil. The January 10, 2016 Profit Radar Report printed this outlook for 2016:

Sentiment is bearish (which should be positive for oil), but seasonality has a minor weak spot until early February. The overall setup for oil in 2016 looks positive, with a potential buy signal early February.”

Crude oil bottomed on February 11 at 26.05.

Barron’s rates iSPYETF as “trader with a good track record” and Investor’s Bussines Daily says “When Simon says, the market listens.”

For the second half of 2016 our indicators never really lined up to point in the same direction. There was no clear signal, which helps explains the choppy performance since the June high.

What are key indicators projecting for 2017?

Investor Sentiment

Commercial hedgers (the smart money) are betting on lower oil prices. In fact, hedgers are holding a record amount of short exposure.

The chart below was published in the January 11, 2017 Profit Radar Report. At the time, hedgers were short to the tune of 465,400 futures contracts (this has increased to 509, 138).

Nevertheless, the January 11, 2017 Profit Radar Report stated that: “As long as trade stays above 48 – 50, we will allow for higher prices.” Why?

Seasonality

Oil is one of those commodities with a very distinct seasonal pattern. Seasonality turns strongly bullish in February.

Tiebreaker: Technical Analysis

Investor sentiment suggests risk is rising while seasonality should buoy prices.

How do we reconcile this conflict between sentiment and seasonality?

Such conflicts often cause stalemates or relative trading ranges.

Based on Elliott Wave Theory, oil appears to be in a wave 4 rally (which retraces part of the 2014 – 2016 drop from 107 to 26.

Ideally wave 4 will extend higher (towards 60) before falling towards and below 26 in wave 5.

Here are the most liquid oil ETPs (Exchange Traded Products):

United States Oil Fund (USO)
iPath S&P GSCI Crude Oil ETN (OIL)

ProShares UltraShort Bloomberg Crude Oil ETF (SCO)
VelocityShares 3x Inverse Crude Oil ETN (DWTI)

Continued updates and trade recommendations will be available via the Profit Radar Report.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

How Stocks Escaped from 3 ‘Unavoidable’ Bear Markets

This bull market has been counted out many times. Just over the past few years, stocks faced three – allegedly – unavoidable bear markets … and escaped all of them.

Here are the three ‘unavoidable’ bear markets, and why stocks escaped:

Unavoidable Rate Hike Bear Market

Starting in 2015, the Federal Reserve let it be known that interest rates will be rising.

According to the pros, rising rates would sink stocks. After all, that’s why the Fed kept them near zero for so long.

However, history simply doesn’t agree with this conclusion. The April 26, 2015 Profit Radar Report used the chart below to illustrated that rising rates are not bearish.

In fact, 9 of the 13 periods of falling rates (since 1954) saw stocks rally. That’s why the Profit Radar Report concluded that: “A rate hike disclosed at the April, June, July or even September or October FOMC meetings is unlikely to coincide with a major S&P 500 top.”

Barron’s rates iSPYETF as a “trader with a good track record.” Click here for Barron’s assessment of the Profit Radar Report.

Unavoidable Oil Slump Bear Market

Falling oil prices were the hot topic as prices dropped 50% from June – December 2014.

The general opinion was that falling oil prices would send stocks lower, like in 2008.

The December 14, 2014 Profit Radar Report ousted this bogus reasoning with the chart and commentary below:

This year’s oil price collapse differs from the 2008 collapse relative to the S&P 500. In 2008, the S&P 500 topped before oil did. In fact, the S&P 500 recorded its all-time high in October 2007 and was already down 21% by the time oil topped on July 11, 2008. In 2014, the S&P 500 recorded new all-time highs five months after oil started to decline.

The chart below plots oil against the S&P 500 and shows that falling oil prices are not consistently bearish for stocks. If history can be used as a guide, stocks are likely to hold up despite the oil meltdown.”

Unavoidable QE Bear Market

In 2008, the Federal Reserve unleashed it’s first round of Quantitative Easing (QE). A couple trillion dollars later, QE came to an end in October 2014.

Investors feared the withdrawal of QE would sink stocks (just like a junkie will crash without new fix).

The simplified logic (QE started this bull market, the end of QE will finish the bull market) seemed logical, but it wasn’t factual.

The October 5, 2015 Profit Radar Report plotted the QE money flow against the S&P 500 and concluded that: “We expect new bull market highs in 2015.”

Why?

The correlation between QE and stocks (at least in 2013/2014) did not support the notion of a bull market end. More importantly, our major market top indicator said the bull market is not over.

2016 Bear Market?

At the beginning of the year, when the S&P traded near 1,900, the media found countless of reasons why the bear market is finally here (many of them are listed here).

About six months and a 15% rally later, it’s obvious that the bull market is alive and well.

Short-term, the S&P has reached the lower end of our up side target range, so a pullback becomes more likely (more details here). However, any pullback should serve as a buying opportunity.

If you are looking for common sense, out-of-the-box analysis, check out the Profit Radar Report. It may just make you the best-informed investor you know.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

Is the Crude Oil Rally Over?

Déjà vu. Crude oil prices dropped as much as 24% over the past two months. Does this mean the oil rally is over?

Here is a look at various timeframes and indicators to help answer this question.

Longer-term Analysis

The April 24 Profit Radar Report showed the long-term chart below, and stated:

Barron’s rates iSPYETF as a “trader with a good track record.” Click here for Barron’s assessment of the Profit Radar Report.

Based on long-term Elliott Wave Theory, a rally to 50+/- followed by a significant relapse (perhaps even below this year’s low) is a real possibility.”

Over the next six weeks oil tried to move above 50, but ultimately failed.

The July 7 Profit Radar Report noted that: “Seasonality shows a bearish window for the second half of July. Near-term as long as trade remains below 50, and if trade falls below 45.80, bears are in charge. It then remains to be seen whether short-term weakness will turn into a longer-term selloff.”

Shorter-term Analysis

Oil broke (and remains below) 45.80. To better assess the recent selloff, it helps to analyze the rally from the February 2016 low at 26.05.

On February 12, a few days after oil’s bottom at 26.05, the Profit Radar Report stated that: “Crude oil filled the massive gap left by Wednesday spike and is sitting right atop trend line support. Seasonality is strongly bullish until late April. For anyone interested in trading oil, this is a tempting setup to go long.”

At that time, sentiment, seasonality and technicals suggested a strong rally for oil. However, we did not know if this rally would be a new bull market or just a counter trend rally.

Unfortunately, we still don’t know for sure.

Based on Elliott Wave Theory, the rally from the February low is likely a corrective wave 4 rally. Once complete, all the wave 4 gains should be completely erased (which means new lows eventually).

However, a deeply bearish posture may be premature for a number of reasons:

  • Waves 4 are notoriously choppy and difficult to predict.
  • Oil seasonality is strong until late September.
  • The rally from the February low appears shallow (retracing less than 38.2% of the prior decline). The red lines show additional resistance levels.

Summary

Oil is likely to relapse to new lows eventually. The key word is eventually. Seasonality doesn’t turn bearish until the fourth quarter.

Near-term resistance is around 44. If trade can break above 44, it may continue to move higher, perhaps even to new recovery highs, before turning down for a multi-month decline.

Not every Profit Radar Report update features oil price analysis, but when indicators align, we try to point out some of the larger turning points.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.

 

How High Can Oil Go?

Crude oil prices almost doubled since the February low. How much higher can oil rally?

The February 21 Profit Radar Report stated that: “Seasonality is strongly bullish until late April. For anyone interested in trading oil, this is a tempting setup to go long.”

The April 24 Profit Radar Report added the following: “Based on EWT, more gains are likely, however bullish seasonality is starting to taper off. Sentiment is near neutral. Based on long-term EWT, a rally to 50+/- followed by a significant relapse (perhaps even below this year’s low) is a real possibility.”

The long-term chart shows why 50+ was the up side target given on April 24 (red long-term trend line + 20-month SMA).

The short-term chart provides some additional details:

  • Oil moved as high as 49.56 on Tuesday
  • Oil turned overbought on Tuesday (vertical red line)
  • Oil spiked above the shorter red trend line, but closed below it (bearish throw-over)
  • Oil was unable to overcome bold red trend line resistance

All of the above is at least near-term bearish. Although bullish seasonality will reassert itself in June, the trend is lower until double trend line resistance is broken, or bullish divergences emerge at support.

Simon Maierhofer is the founder of iSPYETF and the publisher of the Profit Radar Report. Barron’s rated iSPYETF as a “trader with a good track record” (click here for Barron’s profile of the Profit Radar Report). The Profit Radar Report presents complex market analysis (S&P 500, Dow Jones, gold, silver, euro and bonds) in an easy format. Technical analysis, sentiment indicators, seasonal patterns and common sense are all wrapped up into two or more easy-to-read weekly updates. All Profit Radar Report recommendations resulted in a 59.51% net gain in 2013, 17.59% in 2014, and 24.52% in 2015.

Follow Simon on Twitter @ iSPYETF or sign up for the FREE iSPYETF Newsletter to get actionable ETF trade ideas delivered for free.