Oil Confirms New Daily Cycle

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The daily oil cycle peaked on day 32, formed a swing high, and then began its daily cycle decline. Oil printed it lowest point last Thursday, day 41, placing oil in its timing band for a daily cycle low.

Oil formed a swing low on Friday. Then it closed above the 10 day MA and the declining trend line to confirm that Monday was day 2 for the new daily cycle. Oil also closed above the upper daily cycle band, continuing in its daily uptrend. And the correct strategy in an uptrend is to buy the dip.

However the longer term picture suggests to proceed with caution.

Oil has now entered the 4th daily cycle for the current intermediate cycle. This is week 25, which places oil in its timing band to seek out an intermediate cycle low. So while our expectation would be to see this new daily cycle form as a left translated, failed daily cycle oil could still rally for 2 to 3 weeks and still form as a left translated daily cycle.

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Oil Signals A New Daily Cycle

Oil printed its lowest point on Monday, which was day 25. That is 5 days shy of the normal timing band for a daily cycle low. However, oil is giving every indication that a daily cycle low has formed.

The decline into the day 25 low caused oil to deliver a 50% fib retracement, which we can see at a DCL. Oil then formed a swing low on Tuesday and delivered more bullish follow through on Wednesday causing oil has closed back above the 10 day MA. Oil also has closed above the upper daily cycle band to indicate that it continues in its daily uptrend. Oil will remain in its daily uptrend unless it closes below the lower daily cycle band.

Oil Delivers A Buy Signal

Oil delivered a buy signal on Thursday.

There is a little uncertainty if day 23 represents an early DCL or was it a half cycle low. However what is certain is that oil had been closing above the upper daily cycle band prior to this dip into the day 23 low. Oil formed a swing low and closed back above the upper daily cycle band on Thursday to indicate that oil remains in it its daily uptrend. And a swing low in a daily uptrend is a buy signal. Oil will remain in its daily uptrend until it closes below the lower daily cycle band.

Oil Confirms Daily Cycle Decline

On Thursday we discussed how the bearish reversal was setting oil up for a decline into its daily cycle low. On Monday oil confirmed that it has begun its daily cycle decline.

Oil formed a swing high on Monday that closed convincingly below the 10 day MA. Oil also pierced the daily cycle trend line. Both of these signals indicate that oil has begun its daily cycle decline. With Monday being only day 21 that will allow enough time for oil to drop further so as to turn the 10 day MA lower.

Oil still managed to close above the upper daily cycle band, indicating that oil is in a daily uptrend. Oil will remain in its daily uptrend unless it closes below the lower daily cycle band.

Oil Slips

Oil formed a bearish reversal on Thursday.

Thursday was day 19 for the daily oil cycle. The new high on day 19 does begin to shift the odds towards a right translated daily cycle formation. However, the bearish reversal has eased the parameters for forming a daily swing high. A break below 51.22 forms a swing high and then a break below the daily cycle trend line will confirm the daily cycle decline. Oil is in a daily uptrend and will remain so until it closes below the lower daily cycle band. A daily low forming above the lower daily cycle band would be a buy signal.

Oil Delivers Clear & Convincing Confirmation

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Oil formed a swing low and closed above the declining trend line to deliver a clear convincing confirmation of the new daily cycle.

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Monday was day 2 for the daily oil cycle. Oil will need to close above the upper daily cycle band in order to to re-establish its daily uptrend.

Stocks are currently in a daily uptrend.

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Monday was day 10 for the daily equity cycle. Stocks did break lower on Monday, back testing both the 10 day MA and the 50 day MA before recovering some into the close. Stocks will continue in their daily uptrend unless they close below the lower daily cycle band.

Oil About to Confirm New Uptrend

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After emerging form its yearly cycle low in June, oil tested and was rejected by the 50 day MA. But oil recovered and then continued to rally, peaking on day 27. Then oil began its daily cycle decline, printing its lowest point on Thursday, day 39.

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At day 39, that placed oil in its timing band to print a daily cycle low. Oil formed a swing low on Friday off of support from the 50 day MA to signal a new daily cycle.

Oil had began to close above the upper daily cycle band prior to declining into its 39 day DCL to establish a daily uptrend. Oil managed to close above the lower daily cycle band as it printed its DCL on Thursday. Once oil closes back above the upper daily cycle band that will confirm the new daily uptrend. Oil will then remain in its daily uptrend until it closes below the lower daily cycle band.

Possible Daily Cycle Low for Oil

Oil printed a bullish reversal on Tuesday.

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The daily oil cycle peaked on day 27. Oil did not form a daily swing high until Friday, day 35. Oil finally broke below the daily cycle trend line on Monday to confirm the daily cycle decline. Oil printed it lowest point on Tuesday. At 37 days, that places oil well within its timing band for a daily cycle low. Tuesday’s bullish reversal also eases the parameters for forming a swing low. A break above 47.92 forms a swing low. Then a close above the 10 day MA will signal a new daily cycle.

Oil had been closing above the upper daily cycle band prior to entering its daily cycle decline, which indicates that oil is in a daily uptrend. If oil forms a daily cycle low above the lower daily cycle band then oil will remain in its daily uptrend.

Daily Cycle Low

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Stocks formed a swing low on Monday.

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Stocks printed their lowest point on Thursday, day 29. After a narrow range day on Friday stocks rallied enough on Monday to recover all of Thursday’s drop. That and the fact that stocks also formed a daily swing low convinces me that the daily cycle low has been set. A close back above the upper daily cycle band will confirm the new daily cycle.

Oil confirmed its daily cycle decline on Monday.

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The daily oil cycle peaked on day 27. It did not manage to form a daily swing high until Friday, day 35. Oil broke below the daily cycle trend line on Monday to confirm that oil is in its daily cycle decline. Monday was day 36, placing oil in its timing band for a daily cycle low. If a swing low forms now, it has good odds of forming the daily cycle low. Oil is currently in a daily uptrend. If the daily cycle low forms above the lower daily cycle band then oil will remain in its daily uptrend.

Energy Bouncing Back

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Back on July 3rd we discussed how there were bullish developments beginning to emerge in the energy sector. Even though XLE managed to print a lower low there continue to be bullish developments that signal the low is nigh.

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XLE breached the declining 50 day MA on day 8. However XLE proceeded to break lower to undercut the day 33 low only to form a bullish reversal on Friday. XLE has since formed a swing low and delivered bullish follow through which signals that Friday hosted either a shortened 11 day, DCL or a stretched 44 day DCL. The bullish divergences on the oscillators align with a DCL printing on Friday. At this point we need to see a clear and convincing break above the declining 50 day MA to confirm that the undercut low hosted the daily cycle low.

Natgas also formed an undercut low last week.

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NATGAS broke below the previous DCL last Wednesday. In real time this looked as if Natgas formed a failed daily cycle. But Tuesday’s rally makes it look like last Wednesday hosted an undercut low and extended the daily cycle out to day 54. A clear and convincing close above the declining trend line will confirm that Natgas is in a new daily cycle.

While oil did not form an undercut low, it did look like it was in trouble last week.

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Oil was soundly rejected by the declining 50 day MA last Wednesday. Coupled that with oil closing below both the 10 day MA and the lower daily cycle band on Friday made it look as if oil was forming left translated daily cycle. However, oil printed a reversal on Monday and then delivered bullish follow through forming a swing low on Tuesday. That allows us to construct a daily cycle trend line. As long as oil remains above the daily cycle trend line then it will continue to develop bullishly.