Some details have changed from last chart but not in the way that would make significant difference, therefore, I will not repeat the thinking behind my analysis, but rather focus on what I think appears to be clearer and will help in trading planning.
Media and commentators are now coming up with some extreme targets and based on some fundamentals, USD strength and geopolitical developments. Therefore, I suspect that the price action could frustrated both the Bulls and Bears before clearer directional move develops.
Here is the summary of observation from the chart:
1. The decline from 2008 high is evidently in 3 swings even though it looks very impulsive and dramatic.
2. The rally back up from the low in Jan 2009 to May 2011 is also in 3 swings retracing just over 61.8%.
3. Subsequent decline from May 2011 is also in 3 swings, a, b, c which is 5 wave from Aug 2013 still in progress but could be close to completion, ie it is in final stage, wave "v" of 5.
4. Wave "v" of 5 so far appears to be forming and ( ) though not yet confirmed.
5. The drop so far since May 2011 has reached approx 75% of the price and historically in 1990 and drop in 2008 both terminated at 75% & 77% (approx) respectively (see chart below)
6. If the above observations hold and in particular we have final wave "v" of 5 as , then the low could form between 25 - 27 or little lower but doubt it will hit 20 which is widely expected in the media.
7. Low in this region would make a total retracement of 88.6% of the move from 1998 low to 2008 high and is in proximity of other Fib projections.
Beyond that, since the price action has breach the 2009 low, the idea outlined previously of potential triangle is no longer in play. Instead what we might have (not confirmed) is a which has 5 waves consisting of 3 swings each, ie 3-3-3-3-3. OR some other combinations. Regardless then anticipated rally will be limited to 60 -70 zone before further weakness develops.
Under this scenario the 2008 high would not be surpassed for many year to come. May be even decade or more to come. However in the meantime the anticipated low will allow longer term trade to be considered directly on Oil or shorting the companies whose energy bills form significant part of operating cost such as airlines and transport.
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Thank you for taking the time to read my analysis.
Do you have a timeline for the completion of this bottom? Around June?
Also, are you implying the (iv) of 5 will complete in about a month @ around $38?
Your counts makes a lot of sense when viewed combined with the overall market. SPX is temporarily oversold and it's due for a small bounce. The crash of oil to $25 could really create some panic for the entire market.
Based on seasonality, http://charts.equityclock.com/crude-oil-futures-cl-seasonal-chart it seems significant bottom could be in February give and take month of so.
Based on some time symmetry on chart above we could see low in February at the earliest or cycle could stretch to April - May, but this is often most difficult to to be accurate. So it is only an estimate. However if you also combine that with the fact that we are just about completing wave iii of 5 and that wave iv and v are still due (assuming we get ending diagonal which is at present not confirmed) then at least few weeks for wave iv and little longer for wave v could mean that we would probably see low around April - May.
Regarding bounce on wave iv, it is hard to show this by labels or an outline exact path but again it it turns out to be an ending diagonal we would be limited to the upside. So my estimate is probably 35 - 38.
So as we progress and monitor the price action we should be able to narrow down both the actual time window and price target. How all of this will tie in with the SPX is puzzling as I think that we have limited upside if the major top is not already in place. So SPX could well decline of the next 12 months or so significantly but Oil could continue to bounce during that time. Similarly, beside oil being oversold over significant period, USD might have topped or go into extended sideways congestion, which might make it easier for oil and other USD denominated assets to experience at least relief rally.
Hope this helps.
Also, could it be that your (i) of 5 is actually (iii) already and your (iii) is (iv)? Which means the bottom is already in?
I say this because your (i) produced the sharpest decline and greatest divergence, consistent with the behavior of a 3rd wave drop. Your thought?
Thanks in advance.
This is the megaphone pattern I'm trading at the moment. So far it didn't put me down.
If we break this megaphone down, things will get ugly. The monthly channel could be next stop and that matches your 22.
At the moment I trade what I see and the monthly MACD-histogram shows me the big damage to the bulls is done already. The histogram is turning up, a gold cross followed by it would be awesome.
I agree with your observations on USDCAD and histogram divergence on oil. I anticipate a bounce before final drive to form the low in oil which is not possible to see in monthly chart, so the MACD divergence will continue to play out till price action confirms it to the upside.
The US Oil & UK Oil correlation chart is interesting. They broadly move in sync, but at important points one of them gives an early signal by few days to weeks, as seen with my notes highlighted this on this monthly chart. UK Oul made spikle low in Jan and US Oil made new low In Feb suggesting divergence and potential turning point
Similarly the UK oil appears to have completed falling wedge made up of entire decline as seen in this chart with other technicals lining up too and RSI is coiling which could break to the upside
The we have this coincide by record short position by Hedge Fund Managers Chart link from Bloomberg - http://assets.bwbx.io/images/i69Z9Dh2xtRc/v4/-1x-1.png
Finally the falling wedge on US Oil we noted on the original chart above also appear now complete and whilst it is safe to look for confirmation, taking in all of this together and the along with time symmetry suggesting possible low in February and Seasonal pattern supporting low around this part of the year, I am conclude that the significant low is formed and that we will not be seeing price anywhere near 20 in this cycle.
I see that gap, not particularity big one but it is there. These gap are not rare unless very significant ones and in close proximity, not sure if they all necessarily get filled. If however it does then it mean I have misinterpreted the wave counts somewhere. So I would not completely rule this out just yet. Either way a confirmation would help. So far it seem on Hourly that we have possible minor 5 wave impulse move up and are retracing this in abc zigzag. If this holds then we will see strong move up forming new HH in due course.