Plotted on the chart are our SCMR Dynamic Levels™, which dynamically plot support / resistance zones and are accurate at finding targets. This indicator is available in the TradingView App store under Analysis Suite - SCMR Trends.
The BIG QUESTION: Is crude bottoming here?
Let's go over what this chart illustrates, and you tell me.
-----> The lower pane shows the rolling quarterly returns for Crude, and I colored the plot red whenever the quarterly decline is less than -25%. This current decline, at -39% this quarter, is the third worst in the past 25 years, only eclipsed by 2008 and 1991.
-----> Overlaid on the chart itself are red, vertical markers indicating where in a prior quarter the return was less than our -25% threshold, but then in next (current) quarter crossed up through -25%, in other words, *the mean reversion back up has started*. We are still waiting for this event to take place.
-----> Dynamic Level Support at $58. Through this level by $3, but may prove to stabilize near it.
\\\Conclusion:/// Based on the above, you can surmise that the low is *extremely likely within 1-2 months*. Some may balk at an analysis wherein the time to fruition is +/- 1-2 months, but that is the nature of a 24 yr chart :) .
Additional momentum can certainly take us lower than the current price. The 2008 decline took FIVE months before mean reversion started, and we are only on month two currently (which is how I've derived the 1-2 month timeframe for mean reversion to begin -- assuming this is as bad as 2008 for the oil markets). Also note it was the most extreme, and other declines began mean reversion after a scant one month after a 25% quarterly decline.
This is a guide not a call, if you catch the subtlety there. After we start the mean-reversion (the red vertical bars overlaid on price) is where I would come out and say a low is in place -- this is still front running that event.
Kind of reminds me why I am a trend follower at heart. Just much simpler to trade in the dominant direction.
Looking at the merits of the original idea, the thesis was based on past *large* declines, oil should bottom in 1-2 months from the original post. So far, that's timeline has been working, but not a lot of upside recovery. to accompany it. Time will tell.
Note that prior spikes marked 6-12 month lows. We'll see if this time sticks.
What is the red spike? It simply shows when the quarterly return was worse than 25%, and then crossed back through the threshold.