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More upwards movement was expected for the week for US Oil. Price has moved sideways, remaining above the invalidation point on the daily Elliott wave count.

Summary: Expect Oil now to continue higher to reach above 52.00. Use the pink base channel on the daily chart; if that is breached by downwards movement, expect a trend change and the next wave down has begun.

The bigger picture for Oil is still bearish, but it looks now like this bounce is not done.

New updates to this analysis are in bold.


US Oil Elliott Wave Chart Monthly 2017
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Within the bear market, cycle wave b is seen as ending in May 2011. Thereafter, a five wave structure downwards for cycle wave c begins.

Primary wave 1 is a short impulse lasting five months. Primary wave 2 is a very deep 0.94 zigzag lasting 22 months. Primary wave 3 is a complete impulse with no Fibonacci ratio to primary wave 1. It lasted 30 months.

There is alternation in depth with primary wave 2 very deep and primary wave 4 shallow. There is inadequate alternation in structure, both are of the zigzag family, but there is some alternation within structure. Primary wave 2 is a single zigzag and the triangle for intermediate wave (B) gives it a sideways look. Primary wave 4 is a sharper and quicker double zigzag.

If it continues, then primary wave 4 may not move into primary wave 1 price territory above 74.96.


US Oil Elliott Wave Chart Daily 2017
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The wave sees primary wave 5 beginning with a leading diagonal for intermediate wave (1), and now a deep expanded flat for intermediate wave (2). This has good proportion, and fits at the daily chart level.

Intermediate wave (2) may not move beyond the start of intermediate wave (1) above 55.24.

The only problem at this stage with this wave count is that it would require an overshoot of the maroon channel for minor wave C of intermediate wave (2) to avoid a truncation. If that trend line provides resistance, then it may force intermediate wave (2) to be a rare running flat.


US Oil Elliott Wave Chart Daily 2017
Click chart to enlarge.

The possible leading expanding diagonal for intermediate wave (1) meets all Elliott wave rules for this structure and has a good look. Minor wave 5 overshoots the 1-3 trend line.

Leading diagonals in first wave positions are often followed by very deep second wave corrections. At its end, if intermediate wave (2) is an expanded flat, it would fit the description of very deep.

Minor wave C must move above the end of minor wave A at 52.00 to avoid a truncation. If it does not manage to do this, then intermediate wave (2) may be a rare running flat. Running flats can occur before very strong movements. If intermediate wave (2) completes as a running flat, then expect intermediate wave (3) to be very strong indeed.

Price is now very close to the upper edge of the maroon best fit channel, copied over from monthly and weekly charts. This trend line may provide resistance.

Minor wave C must subdivide as a five wave structure. At this stage, it looks like an incomplete impulse. Within minor wave C, minute wave iv may not move into minute wave i price territory below 47.32.

The base channel about minute waves i and ii so far contains all pullbacks. Lower degree second wave corrections should find support or resistance at base channels drawn about first and second waves one or more degrees higher. A third wave should have the power to break through the other side of the base channel. So far minute wave iii has not done that.

Minute wave iii must subdivide as an impulse. Within minute wave iii, there may be some alternation between an expanded flat for minuette wave (ii) and now possibly a triangle for minuette wave (iv).



US Oil Chart Daily 2017
Click chart to enlarge. Chart courtesy of

For the short term, a small pennant pattern now looks like it may be forming. If the flag pole is taken from the last small swing low on the 24th of July, then a measured rule target would be about 54.70.

With volume declining slightly as price moves sideways and previously supporting some upwards movement, the volume profile for the short term is bullish.

Watch On Balance Volume carefully. A breakout of the small current range may precede a breakout from price.


OVX Chart Daily 2017
Click chart to enlarge. Chart courtesy of

Normally, volatility should decline as price rises and volatility should increase as price falls. Divergence from this normal can provide a bullish or bearish signal for Oil. However, it is noted that this signal occurs both in minor and major lows and it cannot be used to distinguish between them.

At this time, volatility and price are not correlated, so no conclusion may be drawn from any divergence between the two.

As price has moved sideways over the week, volatility has declined. This looks like a normal relationship between the two at this time.

Published @ 07:48 p.m. EST.