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  • Oil, What Happened Today? What Next? 1 comment
    Sep 17, 2012 10:32 PM | about stocks: USO, OIL

    By Chris Diodato

    So called "experts" on the major business news stations scrambled this afternoon to explain oil's sudden decline of 4% at 2 P.M. EST. Attempting to find some sort of causality, news anchors rationalized the decline by suggesting that there may have been rumors of the government considering a release of oil from the Strategic Petroleum Reserve (NYSE:SPR). Frankly, I believe that Democrats in office, seeking to maximize their appearance of doing "good will" for extra votes, would not use the SPR this far away from the election.

    Watching the price movement today in an Elliott Wave and Gann framework, there is not enough information to confirm a new down trend yet. Below is what I consider the most probable wave count for oil, using USO. The chart for crude is very similar, but much more difficult to see.

    (click to enlarge)

    This is not a line chart of the data. It is a study called the "Zig-Zag" which only shows price swings resulting in a 1% move or greater. It makes analyzing waves much easier. From this scenario we arrive at three different scenarios, which I'll phrase in "if/then" statements.

    • If USO declines below $34.70, we are in wave 4, which means that USO must not move lower than $33 for the bull trend to stay intact.
    • If USO breaks $33, that means that a larger bear trend is active, and that USO could break down to around $22.50 (unlikely).
    • If USO does not decline below $34.70, but still corrects, then it is a wave "4", which means we get another weak upward push before correcting.

    Either way, two of our three scenarios result in a wave four correction. Fours are characterized by "surprising disappointment." I believe that an SPR rumor appearing from smoke is a surprise enough. With wave 2 (July) taking the form of a quick decline, I expect the corrective wave four to be some sort of triangle or rectangle.

    Which levels are acting as strong support for oil? For this, I will use the actual chart for crude oil futures. This chart looks very cluttered, so definitely open the larger chart.

    (click to enlarge)

    Notice the two rectangles, filled in with pink and gray. Each of these levels are confluence zones, or major support areas. The pink level around $93.75 would correspond to an overall wave "4." For those not familiar with the implications, that means that oil is still in a fierce up trend, and will not be ending soon.

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

    Stocks: USO, OIL
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  • Stan Muse_
    , contributor
    Comments (134) | Send Message
    This is what is happening. Benjamin Netanyahu requested a meeting with Obama, but Obama was too busy and did not meet with him. Right. So... What was so important that Old Ben needed to tell Barry face to face? And, why was Barry too busy?


    You guessed it, with all the Arab nations in disarray it is the perfect time to strike Iran. The longer Israel waits, the bigger the nuclear mess they will make. Everyone knows Iran will continue to thumb their noses at sanctions. Barry just couldn't meet with Ben, I mean how would that look if they met and then Israel struck. The Arabs might not like us any more.


    Kidding aside, Israel will strike before the end of September. Then oil will go to $150 per barrel. That's what all this talk of more Saudi oil and releasing the strategic reserves is about. We are being prepped for the Israeli imminent strike on Iran's nuclear facilities.


    Be long oil my friend.
    20 Sep 2012, 08:16 AM Reply Like
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