In last month’s post [see: Update on Oil, Jan 6] I noted that CL had dropped to 34.17, the target we posted in mid-December (the yellow arrow below.) I then donned my tin foil hat and added:
In an unrigged market, it would suggest a possible bounce to the purple midline and .618 Fib at around 42.78 — a very playable 25% move. But, the noose of USDJPY is still hanging around CL’s neck, and could easily drag it lower.
USDJPY can’t move higher (yen lower) unless TPTB accommodate Japan with lower oil prices to compensate for the hit of higher imports (chiefly oil — which is priced in USD.)
And, if USDJPY doesn’t start moving higher soon, we’re going to see a lot more days like today, with sub-2000 SPX [see: Yen Carry Trade.]
Over the next two weeks, with USDJPY dropping through major support, SPX shed 9.9%. CL plummeted 21%. But, it wasn’t done.
When I finally called a bottom on Feb 11 [see: USDJPY Finally Relents] CL had plunged 28% (totaling -75% since last June.) It had also nailed the lowest of the targets I had identified in January.
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