Crude Oil Turn in the Pipeline?

2/13 – Crude Oil Weekly Nearest Future

Crude Oil Weekly 2-13-2016

Crude oil rallied over 10% on Friday but you can’t tell by looking at this chart. Keep the move in perspective; crude has declined 77.3% since the 2011 high (broad commodities top). That figure is interesting because the financial crisis decline measured 77.46%. ‘Equality’ between alternating legs in a market move is NOT uncommon. So, was that the low? No idea! Crude oil could still drop into a 25 handle to test a parallel (2011-2013 line, extended off of the 2009 low) before turning up.  I’ll be following shorter term charts (slope levels and a short term wave count) with members in the interim for indications of behavior changes that would suggest a more important turn is already underway.  The next few weeks should be exciting and the implications extend to FX of course.  USDCAD and especially USDNOK sport defined trading patterns at the moment and the crude oil story only adds to the intrigue.  The recent divergence between oil and CAD is interesting in its own right as well.

Also, the USD in general may be trying to form a top as crude oil comes into a significant long term level.  Keep in mind that the USD rally accelerated in September 2014 when crude broke down.  There hasn’t been much of a relationship between crude and the USD (DXY is shown below) since early 2015.  Market relationships (measured by correlation coefficients) strengthen and weaken.  The current relationship is weak.  In fact, the 13 week correlation coefficient is the highest in 19 months and nearing the upper boundary of its historical range (since this is an inverse relationship, a high reading indicates a weak inverse relationship) so be on the lookout for a strengthening inverse relationship.

Crude Oil and USD Index (DXY) Weekly

Crude Oil and DXY 2-13-2016

-JS