Crude

We've been using a 117 target to discount the horrific geopolitical climate, but for trading purposes let's focus on the 98.69 target of the pattern shown. It is affirmed by September's powerful thrust past the 80.85 midpoint resistance, but also by the difficulty crude has presented for anyone wanting to get long, even by way of last week's all-too-fleeting dip to a 'mechanical' buying trigger at p=80.85. Gasoline prices dipped as well, but they will be headed higher soon if December Crude is in fact on its way to at least 98.69.

Price movement in this vehicle, a proxy for the biggest, deepest commodity market in the world, is so squirrelly that the chart, stripped of its right-hand axis, could be mistaken for that of a Vancouver penny stock. Even so, there is no trouble discerning the 98.72 rally target, nor in sticking with it through the inevitable feints, swoons, kamikaze dives and bottle-rocket rallies. The target is a presumptive weigh-station enroute to the $117 target of a bigger pattern that was the subject of a recent commentary.

The last push wasn't strong enough to get the futures to the 98.72 target (a presumptive weigh-station enroute to the $117 target of a larger pattern featured in last week's commentary). However, the thrust in early September that impaled a midpoint resistance at 81.42 was sufficiently powerful to suggest November crude will head up to the target once this correction has run its course. To get a precise handle on trend strength, I'll suggest tracking a red-line 'mechanical' buy at 81.42 that would take a 75.65 stop-loss. If the trade makes (hypothetical) money with a move to at least p2, it would shorten the odds of a further move to D=98.72. If not, I'll need to adjust the odds for a blowoff to $117.

November Crude has pulled back sharply after topping last week a hair from the 94.76 Hidden Pivot target billboarded here.  The weekly chart not only allows for another burst higher, most immediately to the 98.65 target shown here; it can also be used to project a blowoff to as high as 117.22. Indeed, there is nothing unreasonable or illogical about this interpretation. Moreover, one could reasonably infer that the decisive penetration this month of p=90.67 has already made a move up to 117.22 no worse than an even bet. _______ UPDATE (Oct 2, 10:56 p.m.): The correction targets 87.20 most immediately, but an easy breach of this Hidden Pivot support (90-min, A= 95.02 on 9/27; B= (90.35 on 9/29) would imply the correction has farther to go.

Crude turned sluggish last week, but not before generating a bullish impulse leg on Friday that will likely hold positive consequences for the near term. I say 'positive' while acknowledging that another turn of the screw could send the world's fragile economy into a tailspin. Pump prices are already above $4/gallon and will become headline news when it looks as though $5 is coming. To get in step with that eventuality, I've lowered the point 'A' low of the chart we've been using to produce a somewhat higher target at 94.76.  A swoon to the green line (x=87.69) would generate an attractive 'mechanical' buy signal, but we'll wait until it is close to happening before we hatch a strategy to trade it. _______ UPDATE (Sep 28, 1:54 p.m. EDT): November Crude has plunged after topping a hair from the 94.76 target billboarded in the current tout. This adds to the evidence that The Big Picture may have changed, since the dollar and Treasury rates have also reversed sharply after achieving important Hidden Pivot targets precisely. 

Quotes rose sharply again last week, threatening consumers around the world with yet more bad news and higher prices for everything. If the October contract were to pop through the secondary Hidden Pivot at 90.99 where it came to rest on Friday, that would likely spell more upside to at least D=99.84 (with a possible 'local' stop at 93.72, using A=7.26 on the '60' from 8/29). It would also push the price of a gallon of regular gas toward $5 and quite a bit higher in California. It is fortunate that the stock market, Wall Street, pension funds, insurance companies, and private and public investors have gone full-on 'mental' at the moment, since any sane reflection on the economic implications of oil priced at $100/barrel would produce a panic out of stocks. It's coming anyway, but don't be surprised if investors awaken one morning to an avalanche of cognition that kicks off the bear market with unmistakable force. _______ UPDATE (Sep 19, 9:25 p.m.): The 'local stop' at 93.72 flagged above caught the top of a so-far $2.67 plunge within two pennies. No one mentioned it in the chat room, however, so I haven't established a tracking position. If anyone still trades this vehicle or even remotely cares about it, it is time once again to declare your interest in the chat room.

Crude spent the week head-butting the 88.11 target shown. I'm not a big believer in rallies driven by artificial constraints on supply, but our enemies have shown enough persistence and cohesiveness to suggest they can hurt America economically. Pump price are pushing above $4 for regular gas, amounting to another stab in the eye for Wall Street shills who as recently as two weeks ago were talking about, not a soft landing, but about no landing. So much for bullish spin, even if Americans seem to have an inexhaustible supply of surplus dollars to foot the bill for rising energy costs that will push up prices for nearly everything Above 88.11, this pattern, with a 98.84 target will be well in play.

Talk of production cuts by OPEC and Russia sent crude quotes screaming last week toward the 87.40 target shown. It is all but certain to be achieved, given the easy with which buyers drove the future through the 82.51 midpoint HP resistance. If it's exceeded, the new target would be at 88.14. Considering that soaring pump prices are already threatening to choke off a U.S. economy already headed into certain recession, the energy producers' actions could be construed as hostile. The rally will make a juicy short at some point because lasting rallies are driven by global increases in demand, not by reductions in supply in a punk world economy. _______ UPDATE (Sep 5,  3:20 p.m.):  No one mentioned it in the chat room, but the October contract topped today 7 cents from the 88.14 target boldfaced above. The joke was on me, though, since the actual target would have been 88.11 -- four cents from my target --if I had used the correct point 'C' low. The subsequent sharp pullback could have been worth as much as $1600 per contract, and virtually any reverse-trigger in any time frame would have worked with no problems. _______ UPDATE (Sep 6, 6:55 p.m.): Anyone paying attention?

I seldom give a second thought to head-and-shoulders patterns, since they are everywhere one seeks them.  The one shown is so well-formed, however, that it's worth pondering. Putting the pattern aside and looking at the chart intuitively, there is obviously a lot of weight sitting on bulls from distribution that took a month to carve the ominous picture shown. With the average price of a gallon of regular gas threatening to push above $4, we should cross our fingers and hope the pattern works its magic, sending crude down to the low $70s and denying refiners a windfall blowoff to $5/gal.