Elliott Wave 5.0 "Reboot"

Wednesday, January 6, 2016

Crude Oil 1990-2016 Review: Another Insane Gold/Oil Ratio On January, 6, 2016



Crude oil has made another leg down, but started to correct at the $32.80 price level. This has beaten the 2008 bottom, which was about $33.20. There is no doubt in my mind that a new low has been established, with a great looking spike to boot. Sooner or later the low of 2016 will be established and then oil will work its way up.  When a yearly low has been established it means, that any, newer, lower price, does not have enough time to go make a new record low.

For 2016, oil has reached a high of $38.40 before plunging down to $32.80. It would be extremely rare that the $38.40 price level will hold as the 2016 high! Not with the insane ratio we just hit today.  

In the last few days the gold price has been soaring while oil has been crashing, this causes the ratio to spread dramatically in a very short period of time. It makes my case that we cannot use oil to forecast where gold is going, but the ratio will come back to the mean over time.

This gold/oil ratio has hit close to 33.41:1 which is insanely cheap when compared to gold. Traders and investors still want to sell oil (bet short) even when it is extremely cheap and these greedy players deserve to be caught in a big bear trap. 

Flip this entire scenario over and the same thing happened to the gold/oil ratio before the price of oil started to crash in 2014. At that time the ratio was very normal and then suddenly the ratio, compressed and hit 12:1.  

I believe we can still be at a "D" wave bottom soon and if this is true, we need a three wave zigzag heading back up. It does not have to go to $200 as I am sure many will claim.  If oil beats any major move past the 2011 high would technically help in confirming an "E" wave rally. Also over time if oil was to cross the 2008 peak by so much as a dime, this would also help to confirm a potential "E" wave top. Above all it is that pattern that gets us there, that has to confirm a wave count, not the price.