Here are a couple of charts we had requests for.
Our call back in 2014 was for oil to collapse down towards the 2009 low. At the time, it seemed almost silly. But, it indeed came to pass. Now what?
Well, although there was a slight RSI divergence into the low, oil isn’t out of the woods, since it did register a Sustainable Bear reading. However, at the monthly close, RSI was right at 33, which means that it’s possible oil has bottomed.
From an Elliott standpoint, we can count five down, but with a non-existent wave (2), and the possible three wave nature of the decline from $65, we have to consider that wave (4) is still underway in an expanded flat. The good news is that both counts call for a five wave rally up from the low.
Here we can see a clear five wave rally for (i) and a decline for (ii). The action since is a bit choppy for a wave (iii), but that’s likely because it’s still underway. We also have a Sustainable Bull reading on the daily chart, even though it’s diverging slightly, so we should allow for the next downward move to be a correction in wave (iv). Prices should remain above the wave (i) high to keep this account intact. Can you imagine the calls for $100 oil once prices hit $50 in (v)? Then, we should see a multi-month decline under both the bull and bear counts.
Junk Bonds – JNK
A Junk Bond collapse has also been our call for well over a year now. Despite the big rally off the low, all that’s really happening is a correction of the wave (3) decline. In fact, after slightly exceeding both Head & Shoulders targets, a bounce was due. We can see prices pushing up towards the trendline, but lower is still our call. This doesn’t portend well for the global economy, and, perhaps, it also means oil (a GDP sensitive commodity) will also see new lows (or at least a test of the low).
The time zone we reference on our charts is Pacific Standard Time. Therefore, the U.S. cash market opens at 6:30 AM PST and closes at 1:00 PM PST.