Back on Oct 4 [see: The Most Important Chart], I noted that TPTB had an important decision to make regarding oil (CL.) Recall that we anticipated an impending top, which I officially declared on Oct 10 [see: Welcome to Peak Oil.] The choices, as I saw them then:
(1) let CL’s IH&S Patterns play out and drag stocks along to new highs, inflation be damned.
(2) let the patterns play out until mid-October or early November, long enough to keep stocks on the rise into the election.
(3) slam CL back down from current prices as occurred in mid-August, and let USDJPY take up the reins. It’s been itching to break out ever since Brexit, testing the falling red channel top eleventy billion times.
As we noted later that day, USDJPY did break out. Its spectacular 11.8% spike in the ensuing 7 weeks has been largely responsible for stocks pushing through to new, all-time highs — even as oil plummeted 18.2% following our top call.
Will the rally continue, or is it time for a reversal? We’ll take a look.
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