Although I post CL charts almost every day in our daily updates, a reader pointed out that it’s been a while since we looked at the big picture. We called the March bottom very accurately [see: Mar 17 Update on Oil], but we were a few days early on last month’s lows [Aug 19 vs Aug 24, see: Oil Bottoms Out.]
Our upside target of the falling white channel midline, however, was right on the money.
Every channel midline tag raises the question of a reversal or breakout. In this case, it’s all up to the BoJ.
continued for members…
Note that CL hasn’t quite reached the white midline (42.51) we talked about last week. Beyond that, the August lows didn’t quite reach the red 1.618 — meaning another leg lower to 37.07 is still on the table.
The first upside target, should prices break through the midline, is the purple .618 at 54.45. The intersection with the white channel .786 is around Sep 21. Other targets: the purple .886 (61.7) intersects the white channel top around Sep 11, and the .786 58.99) intersects it around Oct 9.
The bigger picture remains quite bearish, with prices breaking below March’s Bat Pattern completion at the white .886. And, the bounce off the .886 never even reached the .618.
As I’ve written about extensively, CL is now in the hands of the central planners — who will lower the price of oil if Japan plays along and depresses the yen even further to keep the yen carry trade alive.
If, on the other hand, USDJPY is allowed to drop much below 120.11, look for the price of oil to increase — an incentive for the BoJ to do the right thing. This morning, for instance, oil sold off nicely with USDJPY’s rally to 120.11, and immediately started rallying when USDJPY fell back below.
So, like both stocks and bonds, CL is now subject to the whims of the central bankers and their efforts to keep QE-fueled prices on the rise. When it comes to the BoJ, it’s the most effective club TPTB have.
