Next week, we’ll be celebrating the six-month anniversary of the September Crude Oil bottom at $32.85. This will come in on July 20. This week, we want to take a more detailed look at the trading action in terms of both price and time.
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Technically, the main trend is up according to the weekly swing chart. At this time, the trend is in no danger of turning down according to the swing chart. However, momentum has been to the downside since the week-ending June 10.
From January 20 to the week-ending July 15, the market has made two major up swings and two major down swings.
The first rally was from January 20 to March 18. This move lasted 41 trading days or 8 weeks. This was followed by a break from March 18 to April 5, or 11 market days or 3 weeks.
The second rally was from April 5 to June 9. This move lasted 46 trading days or 9 weeks. The current downswing started on June 9. At this week’s end it will have been in place for 25 market days or 5 weeks.
This information tells us that the market is in a weak position. The two rallies essentially balanced each other out, with 8 and 9 weeks respectively. I know the chart pattern is supposed to take into consideration all possible factors influencing price, however, we probably would’ve balanced each rally at 8 weeks if not for the Canadian wildfires and the Nigerian terrorist attacks – two extraordinary events.
Crude oil is in a weak position because the current down move has exceeded the previous down move in terms of time. And time turns the trend.
As far as price is concerned, the first leg up was $11.50. The second leg up was $14.06. If we had seen an $11.50 rally from $38.67, the top would have come in at $50.17. The two-highs the week-ending May 27 at $50.92 and the week-ending June 3 at $50.33 were in the ballpark for an exact balance of price, but again because of the two extraordinary events, it eventually made its top at $52.73.
The first break was from $44.35 to $38.67. This move was $5.68. A similar break from $52.73 would have targeted $47.05. However, the current break as of the week-ending July 15 is $7.53. So in addition to time, price has overbalanced the previous break.
Although the swing chart is showing an uptrend because of the higher-tops and the higher-bottoms, we are essentially in a downtrend because both price and time have exceeded their previous moves.