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Crude Oil Crashes: Temporary Glitch - or - Lasting Trend Change?
One of these things is not like the other one…
Carefully read the headlines below and choose the one that doesn’t belong:
- -- “US crude oil futures hit a record above $147 per barrel, with fears over the global economy gaining ground.” (Reuters, July 11)
- -- “US Economic woes drive price of crude higher.” (Globe & Mail, July 12)
- -- “The resurgence in crude prices reflects a deeper concern about the US economy’s future.” (AP, July 12)
- -- “Oil prices plummet over $6 amid economic fears.” (Yahoo! Finance, July 15)
The answer: D, as in, first, U.S. economic troubles sent crude oil prices up, up, up, and then “D”- own?
I’ll say it once, and I’ll say it again: Mainstream economic wisdom changes its tune more often than a mocking bird in an aviary. Listen and you’ll hear the usual experts "explaining" price action only AFTER it’s already been sung.
While we’re on the subject, aren’t oil and stocks "supposed" to move in opposite directions? "Oil up, stocks down" – isn't that how the mantra goes? Yet -- on Wednesday, July 15, crude plunged 4.4% in its biggest decline in dollar terms since the Gulf War (circa 1991) -- ALL the while, the Dow Jones Industrial Average also turned down to end below 11,000 for the first time in two years.
Talk about killing two “fundamental” birds with one stone.
Oil Down $10-plus In Two Days: In the Wednesday, July 16 Energy Specialty Service segment on Oil, Elliott Wave International’s Chief Energy Analyst Steve Craig goes live in an exclusive video to reveal how low crude is set to go. See the complete footage today.
In the end, fundamental analysis masks the true “sound” of a market’s underlying trend. In the case of oil: The most recent selloff in crude kicked off on July 11. One day earlier, on July 10, EWI's Energy Specialty Service acknowledged the downside potential in the market’s near-term future and wrote:
“Two key topping indicators are still evident – extreme bullish sentiment and relentless media attention. Possible third and fourth signs – volatility and cries for more government regulation of commodity trading – are nearing their heads… It all points to a very mature uptrend.”
In addition to supplying the above insight, on July 10 the Energy Specialty Service commentary also presented the following chart of Crude prices since the year 1859 -- when the first commercial oil well was drilled in the United States. (Some Elliott wave labels have been erased for this publication)
This historical close-up provides the most comprehensive and objective evaluation of crude’s long-term trend out there. You can see the picture in its entirety, along with a new live Video Update of Oil now, inside EWI's Energy Specialty Service. Click here for all the details.