Oil Forms Bullish Reversal

Oil closed below the10 day MA on Tuesday then formed a swing high on Wednesday, breaking below the daily cycle trend line to signal the daily cycle decline. 

Oil formed a bullish reversal on Thursday, day 24, placing oil in the early part of its timing band for a DCL. Oil is currently in a daily uptrend. If oil forms a swing low above the lower daily cycle band, that would indicate a continuation of the daily uptrend and signal a cycle band buy signal – which we would then label day 24 as the DCL. A break above 115.73 will form a daily swing low.   

The dollar formed a bearish reversal on Wednesday followed by a swing high on Thursday.  

The dollar is in its timing band for an intermediate cycle decline. A peak on day 11 can still result in a left translated daily cycle formation. — which would allow the dollar to complete its intermediate cycle decline. Currently the dollar is in a daily uptrend. It will remain in its daily uptrend unless it closes below the lower daily cycle band.

Oil Delivers Bearish Follow Through

On Monday we discussed how oil gave a bearish signal. Oil delivered bearish follow through on Thursday.

Oil was rejected by the converging declining trend line and the 10 day MA on Thursday. Notice that prior to the day 72 DCL, oil had been in an intermediate cycle advance characterized by RSI 05 embedding in overbought and reversing quickly if oversold. That has changed. RSI 05 did not embed in overbought as oil rallied out of the day 72 DCL. With a peak on day 5, oil is setting up for a left translated daily cycle formation which indicates that oil is starting its intermediate cycle decline. If RSI 05 embeds in oversold that will signal that oil has entered its declining phase of its intermediate cycle.

Oil Delivers Bearish Signal

Oil delivered a bearish signal on Monday.

Oil closed below the 10 day MA on Monday.

Oil has been in an intermediate cycle advance characterized by RSI 05 embedding in overbought and reversing quickly if oversold. That has changed. RSI 05 did not embed in overbought as oil rallied out of the day 72 DCL. In fact, it quickly reversed once reading overbought. So this, along with closing below the 10 day MA has oil potentially setting up a left translated daily cycle that topped on day 5. If oil delivers bearish follow through and we see RSI 05 embed in oversold that will signal that oil has entered its declining phase of its intermediate cycle.

Gold & Oil Form Weekly Swing Highs

Both gold & oil formed weekly swing highs this week.

Gold formed a bearish weekly reversal last week. This week gold is delivering bearish follow through by forming a weekly swing high. A close below the breakout level will signal the intermediate cycle decline.

Oil also printed a bearish weekly reversal last week and is delivering bearish follow through this week. Not only has oil formed a weekly swing high, oil also broke below the weekly trend line to signal the intermediate cycle decline. Oil should go on to break below the 10 week MA and turn it lower in order to complete its intermediate cycle decline. Oil is currently in a weekly uptrend. Oil will remain in its weekly uptrend unless it closes below the lower weekly cycle band.

Oil Game Changer

Oil dropped over 13% on Friday to extend its daily cycle decline.

Oil printed its lowest point on Friday, day 67, placing oil very deep in its timing band for a DCL. At this late stage of the daily cycle, a swing low and close back above the 200 day MA will have good odds of marking the DCL.

 So, while oil could potentially begin a new daily cycle next week, Friday’s huge drop is a game changer that will likely send oil into an intermediate and yearly cycle decline. Which I further discuss in the Weekend Report.

Oil Loses The 10 Day MA

Oil was running into resistance at the 50 day MA for the past week before closing below the 10 day MA on Thursday.

The bigger picture shows that oil is a pattern of forming lower highs and lower lows. A break below the 67.00 support level will signal the daily cycle decline. The peak on day 8 indicates a left translated daily cycle formation that aligns with oil being in a daily downtrend. Oil will remain in its daily downtrend unless it closes above the upper daily cycle band.

Oil Downtrend

Oil peaked on day 8 then formed a lower swing high on Friday. The peak on day 8 sets oil up for a left translated daily cycle formation.

Friday’s swing high formed below the upper daily cycle band. Oil is in a daily downtrend. Forming a swing high below the upper daily cycle band signals a continuation of the daily downtrend and triggers a daily cycle band sell signal. Oil should go on to break below the day 14 low of 65.01 as it seeks out its DCL. Monday was only on day 19. Oil could trend lower for another 2 to 4 weeks to place the daily cycle in its timing band for a DCL.,

Oil Forms A Lower High

Oil lost the 10 day MA on Monday and then the 50 day MA on Tuesday.

Oil forming a lower high along with a peak on day 8 sets oil up for a left translated daily cycle formation which signals that the intermediate cycle decline has begun. RSI embedded in oversold during the day 39 DCL. RSI then reversed quickly once it became overbought. This change in behavior in RSI aligns with oil rolling over into an intermediate cycle decline. If RSI embeds once again in oversold that will signal the intermediate cycle decline. And with Tuesday was only day 10, oil can trend lower for another 3 – 4 weeks before printing its DCL.

Oil Breaks Out To A New Yearly High

Oil broke above the March high on Tuesday, establishing a new yearly cycle high.

After peaking in March, oil declined into a DCL. The ensuing daily cycle saw oil peak on day 39, which was below the March high. Oil printed a DCL on 5/21, which makes Tuesday — day 6 for the new daily cycle. After a 3 month consolidation, breaking out to a new high this early in the daily cycle should result in a bullish trending move. If oil delivers bullish follow through then the day 39 breakout level can be used as the stop.

However, there are some concerns.

  • This is month 14 for the yearly oil cycle, which places oil deep in its timing band for a yearly cycle decline.
  • There are bearish divergences developing on the oscillators.
  • Oil formed a bearish reversal on Tuesday.

If oil forms a swing high and closes back in the resistance zone that would jeopardize the breakout. A close below the resistance zone would set oil up for a left translated daily cycle formation.