{"id":99147,"date":"2016-12-05T18:55:34","date_gmt":"2016-12-05T23:55:34","guid":{"rendered":"http:\/\/countingpips.com\/?p=99147"},"modified":"2016-12-05T18:55:34","modified_gmt":"2016-12-05T23:55:34","slug":"crude-oil-prices-random-hardly","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex\/2016\/12\/crude-oil-prices-random-hardly\/","title":{"rendered":"Crude Oil Prices: “Random”? Hardly."},"content":{"rendered":"
December 5, 2016<\/div>
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The more emotional the market, the more predictable it is. <\/span><\/h3>\n

By Elliott Wave International<\/span><\/h3>\n

Last week’s shocking spike in crude oil prices is +12% and counting, the biggest one-week gain in five years. Media stories blame one culprit: the November 30 OPEC agreement to cut production.<\/p>\n

In absolute terms, the agreed-to cut is small: 1.2 million barrels a day, less than 2% of daily global oil production. Given the existing supply glut, that’s a drop in the bucket (no pun intended). Yet, it was a bigger cut than the market expected; plus, the fact that OPEC members came to an agreement at all was enough to play a role in soaring prices.<\/p>\n

The weeks leading up to the meeting were filled with anticipation and emotion. Oil prices went all over the place — down 4% one day, 3% the next. Yet, those fluctuations weren’t random.<\/p>\n

The more emotional the markets get, the more influential the collective psychology of the market players becomes. That’s why Elliott wave price patterns often get particularly clear when volatility strikes.<\/p>\n

See for yourself. Below are excerpts from the forecasts our Energy Pro Service<\/em>, edited by the veteran oil market analyst Steve Craig, posted for subscribers starting in mid-November.<\/p>\n

November 15<\/strong><\/p>

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— Today’s pop above 45.95 leads me to believe that wave A ended at Monday’s 42.20 sell-off low. Trade below 45.28 would offer an aggressive hint that wave ((a)) is complete and I’ll be looking for downside<\/strong> follow through…<\/p>\n

November 18<\/strong><\/p>\n

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— Crude extended its slide from Thursday’s 46.58 rebound high down to 44.55 and is attempting to reverse. …trade above 46.58 should be a good sign that it marks an interim bottom<\/strong> and that the next leg of the advance is underway.<\/p>\n

November 22<\/strong><\/p>\n

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— Searching for a top (49.20?).<\/strong> Crude extended its advance up to 49.20. The price action gives wave ((c)) enough legs to count it and the countertrend advance as complete.<\/p>\n

November 25<\/strong><\/p>\n

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— A bearish stance<\/strong> seems warranted. Crude remains under selling pressure… The next big hurdle to cross is January’s 45.18 wave ((b)) low. Ideally, resistance at 48.26 will hold.<\/p>\n

November 28<\/strong><\/p>\n

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— Bearish against 49.20. WTI extended its decline to 45.14 … if wave B has ended, the rally from 45.14 will prove corrective and set the stage for further decline<\/strong>.<\/p>\n

The next day, November 29, oil prices indeed fell…<\/p>\n

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…and the day after, OPEC agreed to cut production. Oil prices soared, taking out the key resistance level at $47.65 you see circled in red<\/span> in the chart above — and, for the first time in weeks, negating our forecast.<\/p>\n

This brief history shows that, while crude oil price gyrations may seem random and unpredictable, they are anything but.<\/p>\n

It also shows you that even when an Elliott wave forecast doesn’t work out, you almost always have a “line in the sand” which, if breached, tells you it’s time to get out (e.g., $47.65 in the chart above).<\/p>\n

And here’s another interesting piece of information. Says CNBC:<\/p>\n

“Since 1998, OPEC has cut production 15 times.<\/p>\n

“A week later, U.S. crude rose 60 percent of the time…<\/p>\n

“…But a month after cuts, U.S. crude was down 53 percent of the time.”<\/p>\n

We’ll see in a few weeks if the second part of this<\/em> pattern plays out.<\/p>\n

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