Crude Oil - 45 week cycle in play


#1

I’ve had fairly good success with a crude oil model that features these cycles as shown in the Cyclic Model Summary. This model is not much different than something Ray Tomes published years ago. I’ve been working with these shorter cycles since the 2009 lows.

The thing is crude oil is range bound and fairly flat during this current 22 week cycle. The peaks and troughs have been coming in fairly close together, or so it seems. I have typically found that the troughs analysis is more reliable, but since oil started the big bear market in 2014, most of the cycles expanded in time. So right now I am looking for an important peak (which would be a 21 month high) and a 45 week trough. Crude rallied for 43 weeks so far off its February low which is expected for a very large cycle low (I find markets rally for almost an entire cycle period eg. 45 week cycle in a bull move) before heading into the same cycle low. So will we get a peak here in December and a sudden drop into January/February? Seasonally this would be typical. If crude slides into a 45 week cycle low, it is a buy. If it continues to rally from recent lows, it will be a tough trade to stay long. There have been some nice trading swings in crude this year, long and short.

I’ve shown the cycle waves for the 45 week cycle and the half cycle to that. These have been very consistent cycles to follow. If crude settles back here into January, one would expect the $SPX to pause at the very least. Would love to hear your thoughts.

cheers,
john


#2

Here is an excerpt from Ray Tomes original report back in 2005. He was not looking at the 2:1 harmonic up from the 5.5 year cycle, otherwise he probably would have projected 2008 as the major peak for oil, which did come in June 2008.


#3

My actual cycle lengths are nearly the same as yours, but from 10 day cycle down, mine tend to be shorter. I’m trying to understand why. Especially because I trade normally based on the one minute chart and there for example, the min cycles from 15 min up to 5 hr however, tend to be about 20% longer than the nominal length and even more in relation to the average length you might expect. Maybe it’s just snapshot right now and will lengths normalize again over time, but I wondered if a different harmonic ratio (in the shorter cycles) could make a difference. I haven’t figured it out yet.


#4

Hi Juriaan,

I had suggested above that crude oil cycles were shorter, however, I should have said longer as you’ve suggested. The 20 week nominal Hurst cycle is approximately 24 - 25 weeks right now for crude oil.

I had a further look at my analysis to try to gauge what is coming next. I’ve done some pinning (was not happy with the previous “look”) and the weekly analysis shown here projects a pause. One of the issues I find when looking at the composite model line (CML) is that it will tend to reflect the amplitude of previous waves, and so the projection and view can get skewed. So here we show crude projections as very bullish based on 30+ years of data. Price action may or may not follow the CML. However, personally I am skeptical for the moment that we’ll see much upside near term.

To try to better judge future price action, I’ve also taken this shorter term view which only includes ~2 years of data. So the initial big fall in oil 2 years ago is excluded. This is what I get.

So as OPEC ratifies a deal this weekend to cut production (which is at all time record levels), we will see a reaction. This second view is the one I favour, with an initial reaction slightly up perhaps, but a top next week before crude settles into an early winter low. A 20 day FLD signal would be a short entry point. I would rather just watch this market and see if we get a nice long entry point. TWT.

NB I don’t day trade markets so I can help you with really short term cycle work.


#5

Hello John,
My model is in agreement with short term outlook(down). 45 day cycle top is behind, so probably is 90 day cycle top.
This is my first attempt at Oil model ( do not trade Oil) and my model is still a bit shaky.
Regards


#6

Initiated a first short position this morning in crude. Sentient confirmed last week’s projected 24 week cycle high. Crude should now head down into a 47 week (actual ~48-50 weeks?) cycle low. Will add to position on a break of the 20 day FLD.


#7

Stepped out of the short. Not seeing real downside potential and failed to get a 20 day FLD signal for a sell. Will update Hurst look EOD.


#8

Can’t get a read on crude after watching it for two weeks now. Cycle peaks are not where I want them and Sentient won’t give me my preferred look. Which means my thinking is likely wrong. Hopefully it all clears up in the few days. Watch and wait.


#9

It took longer than I thought. But you have a sell today on crude ($WTIC) with a cross down through the 24 day FLD. Notice how price played nicely (ABCDE) with that FLD into the top last week.

Crude rallied for 47 weeks into last week’s top from last year’s Feb. low. That is a complete cycle period and often what I would expect for price coming out of larger cycle lows. Now I’d look for crude to make some type of low in the coming weeks, probably into Feb. before starting a rise into the next 22 month cycle peak later this year.

The alternative scenario is that we’ve already seen the important low (45 week - early), and crude simply is checking back here into the next 11 week cycle low before heading higher.


#10

This is a thread that I wanted to keep going (but failed to this year) because the fate of crude oil is a key component of my home market here in Canada. Clarity has come in the last several months and it has been a bearish outcome based on the 22 month cycle that I follow for the commodity. First the long view for perspective.

Crude peaked early in a major commodity blowoff in 2008. The next major lows for crude should be established within the next few years based on larger cycles. In the interim, the 22 month cycle I follow is running long on a trough basis, although on a peaks analysis it is closer to the nominal model I set and use. Note how price has been unable to meet the upside target of the 22 month cycle coming out of the 2016 winter low versus the previous two major lows in 2002 and 2009. We had been looking for this important low last year (discussed in one of David’s webinar’s Jan. 25th, 2016). Price attacked the $55 level but met a ceiling there. This is what got me active early this year as I could see time was running out potentially on this cycle and I am always trying to see what it leads to. So the price target for a major cycle was not met after an important low. Bearish.

The next cycle to follow down is the 45 week cycle. This cycle was the one that was topping out earlier this year. A price target of $40 was then generated with the 45 week cycle FLD recently out of this high.

And most recently, the last 45 week cycle low (Nov. 2016 trough) was taken out to a new low confirming again a bearish tilt to this commodity into the coming 22 month cycle low.

Price is now below the 22 month FLD and the price target with the recent cross down and signal targets $34 +/-1 USD/bbl. That is the target for the late year or winter low.

Canadian energy stocks were far out in front of this move and many have slide to new lows, undercutting last year’s troughs. The outlook for crude tells me the $TSX will not be able to make new highs this year and will head into a more significant correction into fall. I cannot see any new Point & Figure price targets for new highs here in the Canadian index and I will be sticking with a bearish posture there.

NB And for a final punctuation point of why I do this (all this cycle work etc.), here is a look at some Canadian energy names so far this year from Dec. highs …