Crude oil tumbles – is the bull run over?

I have just posted a new video on crude oil and how I am going about analysing the bear market rally that has been in force since December. But first, here is the very long term monthly chart giving perspective to today’s rather puny waves

The standout feature is the solid wedge formed from 2009 to 2014 and the sharp break in September 2014 leading to the savage collapse in five waves down to the notorious $28 low in January 2016. This was a low that I caught and advised VIP Traders Club members to go long around $30 and rode much of the ensuing bull run.

But the rally was in a clear three to confirm the previous five down. The $76 top was put in in October last year. And it turned right at the Fibonacci 62% retrace. So from that high, the market has been in decline, reaching my wave 1 low at Christmas and we are currently in wave 2 up. When that tops – if it hasn’t already – we shall see a hard wave 3 down.

In the video, I show how my using my normal methods of analysis, I arrived at the various turns. Here is the short term chart I showed (recorded Wednesday 1 May)

On Wednesday, I had two near-term options and this is the outcome as of the Friday close.

Bingo! The sharp decline on Thursday confirmed my bearish scenario with new lows – and a clear five down. Remember, an impulsive five mini waves off a major high usually signals the trend has changed to down. So is this $5 swoon in a five marking a temporary low as a relief rally is mounted?

Of course, oil is a hot political potato these days with the UK government putting Saving the Planet high up on the agenda. Its aim is to be ‘carbon neutral’ by 2050. Leaving aside the thorny question of what these terms actually mean in practice, the fact remains that they are gung-ho on renewables and for electric (and/or hydrogen) vehicles. Banning petrol/diesel vehicles by 2030 is another serious proposal.

This raises an intriguing point. My long range analysis of the crude oil market points to the continuation of the overall bear trend for some time. And as the demand for oil – at least in the UK and many nations in the West – declines, will the price of energy from renewables far exceed that from oil (and natural gas) where prices could well be in the $10 range much earlier than 2050? What a delicious irony that would be!

And if so, what will be the attitude of the public (and companies) knowing they are paying way over the odds for their energy by government decree? They will not be happy bunnies (see the Gilets Jaunes in France who are violently demonstrating the degree of their acquiescence of higher fuel eco-taxes!). As global economies contract (especially after 2020), fuel costs may well become the modern equivalent of the Bread Riots in 1775 which lead to the French Revolution. The price of flour had become very expensive – more so than in other countries – also by government decree.

That’s what you get when the government knows best and forces the price of a staple out of reach of the plebs. However, that little episode was over 200 years ago so in that sense alone, we are due another revolution, surely.

My hero? It’s Sr Fibonacci by a country mile!

It’s truly astonishing how you can set highly accurate price targets in advance by using the Fibonacci retracement tool on your chart platform. And in all time frames. The latest example on the 1-hr chart shown in the crude oil charts is a case in point.

And here is another on the current daily time scale in the Dollar Index

Just last week, the rather tortuous post-Christmas rally with heavily overlapping waves finally struggled up to he precise Fibonacci 62% retrace of the entire move off the marked major high. Here is a close up of latest action on the 1-hr

We had a very slight overshoot on two occasions (in a typical re-test of the first high) but the Fibonacci 63% acted in typical fashion by being a brick wall to extended moves – and so it proved here when the market produced a Scalded Cat Bounce lower.

So a short trade near the high could have been set as a limit order days in advance with a tight stop giving an essential low risk entry. When the market retreated, a good short term profit could be taken.

Here is the most recent action to yesterday’s close

It rallied on the Friday spike to the Fibonacci 76% retrace and promptly was repelled in no uncertain terms. Note the momentum divergences that pointed to the rally and then decline. Friday was a day trader’s delight!

The latest Forex scam revealed

Sad to say but my industry in financial services has always attracted unscrupulous operators that prey on rubes and the generally unsophisticated public with their fraudulent get-rich-quick schemes.

Bloomberg has an article on just one such scam which promises returns on forex trading of “£1,000 a day from only a £200 deposit”.

Of course, you dear Reader would never fall for such outright lies – we real traders know how hard it is to make genuine profits from currency trading. Also, we know that returns are not like being paid per hour and returns can vary greatly from day to day. We are all subject to Mr Market’s whims – except the scammers, apparently..

Of course, it is not only the public who are gullible – remember Bernie Madoff? He duped sophisticated investors such as major banks and hedge funds into his felonious Ponzi schemes. Yes, the dark emotion of greed affects us all to some degree even investment professionals.

But the latest scam is just one that is being promoted on Instgram. Here is an extract from the article:

The FCA did not accuse Ramm of being a fraudster, but police have noted an increase in the number of “get-rich-quick” investment scams that advertised on Instagram in recent months. Between October and February, there were 356 reports of fraud, mainly targeting people in their 20s, with the average person losing 8,900 pounds, the City of London police’s Action Fraud team said in February on its website.

The fraudsters are certainly smart at targeting wealthy wannabes in their 20s, most of whom have little understanding of how markets really work. I certainly didn’t at that age. Luckily for me, there was no Instagram back then! And to place an order, I had to phone my broker, stay on hold for ages and then ask for a quote with no reference to a chart shorter than a daily.

Is Fevertree still a hot prospect?

As ‘Mother’s Ruin’ has taken over the world, or so it seems with an explosion of gin distilleries starting up across the globe, the flavoured tonic producer Fevertree has cashed in on the craze big-time. As a true contrarian would, I have been watching for signs of a major top and signs the fad cooling.

And maybe the first signs of a gin top are already there with ever-more exotic flavours appearing from Yorkshire Tea to Lemon Drizzle Cake. The now defunct vodka boom also topped out when flavours from the more outer reaches of left field started appearing.

So what do the charts say? Here is my take:

The ATH of £42 was made in September and the decline off it is in a clear five with a large momentum divergence at the wave 5 low at £21 – a precise Fibonacci 50% decline off the ATH!

If you knew nothing about Elliott Waves or momentum divergences and only a little about Fibonacci, you would have been entirely correct in buying at the £21 low as a loss of 50% usually represents a buying opportunity.

And off that Christmas low, the shares have been rising in a spiky wave pattern that looks very much like a three – and has carried to the Fibonacci 50% retrace zone at £32 and on another momentum divergence.

This has all the hallmarks of a bear market rally that is about to reverse.

This market is in a position where you could place a low risk trade – the only kind I am interested in. I need to be able to set a close protective stop to limit any loss. That means I do not generally chase a trend if in full flight. For me, the best overall policy is to wait for a decent dip and then pounce.

I was not interested in placing a trade since Christmas because the target 50% and 62% retrace levels weer too far ahead. But now, I am.

My approach is the opposite of most traders/investors who have no system for attempting to find the optimum entry level at low risk. A bullish person would jump in with no regard to the wave structure. That applies to most institutions also. That’s why they often sit through big losing periods – and when the pain gets too much, they sell – right at the bottom.

Is Warren Buffett sending us a Sell Signal?

I see that Buffett has for the very first time bought Amazon shares. He had previously ignored this company as they were in a shunned tech sector. He was famous for sitting out the Dotcom boom in the 1990s saying: ‘I don’t understand them’.

And by avoiding Amazon, he missed out on a ten-fold gain since the millennium! Only now they have reached the stratosphere is he suddenly bullish! Is this an extreme case of FOMO? My question: Is the Sage of Omaha really human like the rest of us?

So is this a watershed and massive Sell Signal?

Bitcooin surges – again

In my 2 April blog, I noted that Bitcoin had just surged by $1,000 in a few hours in a stunning display of bullish fervour. I believed then that something important in crypto-land was afoot and this resurgence was no flash in the pan. Maybe an established mega tech company will adopt a blockchain payments system? (see below)

Recall last year was dreadful for the cryptos and by December, sentiment was truly on the floor with precious few bullish articles out there. As I wrote to VIP Traders Club members, these are ideal conditions for a major low to be set and the likely start of a significant rally phase. And so it was…

But one warning: I am seeing more published upper targets that reach into the skies! This is normal, of course. In a strongly bullish market, pundits come out of the woodwork and start claiming they were bullish all along and remind readers of their previous targets above $10k, $20k, even $50k!

Now, Facebook has confirmed they are testing its own crypto currency that promises to disrupt e-commerce payments systems. All of this bullish news has goosed only Bitcoin with the others lagging badly. It seems Bitcoin will become the Amazon of the cryptos – squashing all competitors.