Sand Spring Advisors LLC
Crude Fibonacci Fractals Updated
November 16, 2002
by, Barclay T. Leib
Consistent Sandspring.com readers will remember that we turned decidedly bearish crude oil back in late August just under $30 a barrel. The market then held up for longer than we thought it could, and went a bit higher after our prognostication. But alas, December Crude Oil futures finally declined to a $24.82 low last week.
Upon reaching that price level, Crude also finished a lovely 5-wave descent that any Elliotician can easily recognize on a daily chart (not shown). The question then becomes is this "impulsive" structure down truly in the direction of a new ongoing trend, or is it just the first leg of a corrective a-b-c pattern within a longer-term Crude oil price rise?
Looking at the entire structure of the weekly chart, the late December 1999 to September 2000 ascent was clearly an impulsive 5 waves. Then, because of some overlap that exists on the weekly Crude chart back in January 2001 within Crude's Sep-2000 to Nov-2001 downmove from $37.80 to $16.70, that entire decline is best labeled itself as an A-B-C corrective move. Then the ascent from $16.70 to $31.18 was once again a perfect 5-wave impulsive advance.
The probability thus becomes that the correct Elliott wave intepretation is that Crude completed a large Wave 1 up into September 2000, a large wave 2 down into November 2001, and a lesser degree wave i up into late September 2002. If these labels are correct, then the most recent decline in Crude is best viewed as just part of a corrective pattern within a larger ongoing ascent.
Specifically, we now see strong support for Crude between $24.14 and $24.84, but equally strong short-term overhead resistance between $27.31-$28.31. We would now expect a B-wave up toward this latter target, before another minor C-wave back down.
Thereafter, it will be D-Day (perhaps quite literally with the Iraq situtaion) for this chart pattern to either blast off in a 3-wave up, or somehow abrogate this longer-term bullish Elliott view.
Since this represents a substantial shift in our previous Crude commentary, and we are at least short-term bullish for a further bounce from here back toward $27.21-$28.31, we thought it important to post this update.
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