| To: John P (who wrote) | 12/15/2015 4:18:31 PM |
| From: ajtj99 |
|
Hi John,
I hope all is well with you in this holiday season.
I noticed the WTIC monthly chart you posted, and I wanted to mention a couple of things:
1. Price action off the 2011 highs seems to have taken a 5-wave drop, with the current from the $62.58 2015 highs the beginning of an Ending Diagonal 5th wave. It appears we are in the throes of the end of the 3rd wave of the E-D or the beginning of the 4th wave (up), with a $43.58 ceiling on a 4th wave up likely.
2. The implications of the E-D are that the falling wedge of the E-D will eventually resolve up, and likely quickly, to the start of the wave at $62.58.
3. The eventual bottom may be very close at hand. The $35.13 2009 low is a double bottom we've basically hit, so even if we get a 5th wave down, it may truncate in that area.
4. There is very little historical price action in the $35-$40 range, which accounts for the fluid movement in that zone once the $40 area was breached to the downside. However, the $30 area has a decent amount of price congestion, so I believe any absolute low below $35 would likely be stopped in that zone. Below that, $25 is a huge area of historic support.
5. Fundamentals appear to support the ending diagonal read, and the resulting rapid move up to the $62.58 area once a bottom is in.
Sentiment is extremely negative on oil and WTIC. It is far more negative than in the 2009 spike low time frame. That also supports the rapid recovery of an in-progress ending diagonal (that is also a falling wedge).
February / March is typically a time when the price of oil reverses back up due to seasonality. We might see price drag the lows into that time frame and possibly longer, but I think the risk / reward favors buys in the $35-$36 area by a factor of 4:1 over the next 12-24 months (17% downside risk to $30 versus 73% upside to $62.58).
Anyway, that's my 2-cents. You can share it if you want.
Best Regards,
ajtj9
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(editorial note by JJP..... AJ has some very powerful and thoughtful analysis.... I have had numerous times over the past number of years were as I read his analysis it helps me to crystalize in my mind analysis that I have been doing......... I just see Carl Quintana talking about people buying puts on crude at $25, $20, $15......
It seems like we are rapidly reaching a crescendo we are getting wide spread talk in the financial media of this massive capitulation trade in crude and it's making me think me have getting the major psychology of a major low in crude..... I get the feeling I can come up with a list of 10-15 firms and major players that are talking about blow out lows and or very low prices for years to come..... classic psychology bottoming action.....
Let's see what the first few weeks of 2016 look like in terms of a global macro basis)
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