Crude Oil: Expecting An Imminent Daily Cycle Low

Summary

  • Crude oil dropped alongside equities last week.
  • It is due a daily cycle low.
  • We continue to see higher prices in this broader intermediate cycle.
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Although crude oil and equities have traded in a highly correlated fashion over the past while, crude oil has yet to print its first daily cycle low in its broader intermediate cycle. Both crude oil and equities printed their intermediate cycle lows on the 24th of December last year. Monday, the 25th of March, will be the 59th trading day of this broader intermediate cycle in crude. Crude oil topped out at $60.39 per barrel on the 21st of March last. Considering how late we are in the daily cycle, last Thursday's top should mean the beginning of crude's daily cycling decline. It could be short and swift.

On the weekly chart, we can see that this crude oil is starting its 13th week of its intermediate cycle this week. Many long-term investors use the crossing of the 50- and 200-week moving averages or as shown the 10- and 200-week moving averages as either buying or selling signals. As we can see from the chart below, the steep decline we had in crude oil at the back end of last year actually resulted in a crossover of the weekly moving averages. However, the sheer thrust of the rally since then negated that crossover as we have the 10-week once again above the 200-week moving average (buying signal).

On the monthly chart, we have a monthly swing low and also at least a yearly cycle low also. Why? Because the last clear yearly cycle low in oil took place in June 2017. This means that the recent December low took place 18 months afterwards, which was a stretch to say the least. Therefore, considering the long timing band plus the sheer thrust of the rally out of the December low, we believe it will be only a matter of time before price takes out that 10-month moving average. When it

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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