Elliott Wave 5.0 "Reboot"

Tuesday, February 2, 2016

WTI Crude Oil Price Decline Review

So far the decline in WTI has been rather orderly and we still may have one more move to the downside and then a potential counter rally, that should travel against the trend as well. Any potential correction has not been long enough or deep enough to see if a wave two bottom is going to form. 

This could still take all this week to play out with Friday being a potentially very violent day with the jobs report coming out.  Sometimes this report acts like a giant earthquake  as it can travel through many asset classes and cause terror among the citizens. ( Traders and investors) Wild swings in one direction can counter react, sending the markets in the opposite direction, and each time stops get hit hard if you are caught on the wrong side. 

At least for most of 2016 I will calculate the gold/oil ratio using the December 2016 months in gold and oil. This ratio today is at a bit over 28:1 which has dramatically changed, but still is, extremely cheap for oil when compared to the US dollar price of gold. 

If the ratio spread shrinks much faster than what I expect, then it may be time for a huge reversal or a big correction. There is no way of knowing for sure at what ratio oil will turn on but I am sure it would have to hit 17:1 first. After that it becomes expensive. Crude oil hit 12:1 just before it really started to plunge in mid 2014. 

There are many that believe the end of the oil era is near and yes, they can be right, as it sure seems like that in the short term.   After all, everybody is jumping on the electric car bandwagon, and oil is supposed to be non-renewable, so technically we would run out anyway.  Will running out of oil cause its price to skyrocket, or fall and flatline for what little is left? 

Once oil does start to run out it will flatline in price at about $10, never to rise again.  Just kidding folks as the real price would probably be $9.99! :)