Downwards movement was expected for the last week, which is exactly what has happened for US Oil.
Both Elliott wave counts remain valid.
Summary: Sideways and slightly lower movement is expected for next week.
Thereafter, the upwards trend should resume with strength.
Pullbacks may be used as opportunities to join the trend.
New updates to this analysis are in bold.
MAIN WAVE COUNT
MONTHLY CHART
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The bear market for US Oil looks to be over and a new bull market looks to be in its early stages. The prior bearish wave count has been invalidated, leaving only this very bullish wave count.
A huge zigzag down to the last low may be complete and is labelled here Super Cycle wave (II).
Cycle wave b must be seen as complete in August 2013 for this wave count to work. It cannot be seen as complete at the prior major swing high in May 2011.
Cycle wave b is seen as a zigzag, and within it primary wave B is seen as a running contracting triangle. These are fairly common structures, although nine wave triangles are uncommon. All subdivisions fit.
Primary wave C moves beyond the end of primary wave A, so it avoids a truncation. But it does not have to move above the price territory of primary wave B to avoid a truncation, which is an important distinction.
If cycle wave b begins there, then cycle wave c may be seen as a complete five wave impulse.
Super Cycle wave (III) must move beyond the end of Super Cycle wave (I). It must move far enough above that point to allow room for a subsequent Super Cycle wave (IV) to unfold and remain above Super Cycle wave (I) price territory.
Cycle wave I may be incomplete. It may be unfolding as an impulse and may have now moved through the middle portion. Commodities have a tendency to exhibit swift strong fifth waves, and this tendency is especially prevalent for third wave impulses. Intermediate wave (5) to end primary wave 3 may be very swift and strong, ending with a blow off top.
When cycle wave I is complete, then cycle wave II may be a deep correction that may not move beyond the start of cycle wave I below 26.06.
Data from FXCM for USOil does not go back to the beginning of Super Cycle wave (I). Without an accurate known length of Super Cycle wave (I) a target cannot be calculated for Super Cycle wave (III) to end using Fibonacci ratios. The target for Super Cycle wave (III) may be calculated when cycle waves I, II, III and IV within it are complete. That cannot be done for many years.
WEEKLY CHART
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Intermediate wave (3) is now complete. There is no Fibonacci ratio between intermediate waves (1) and (3), and intermediate wave (3) is longer than 1.618 the length of intermediate wave (1).
This wave count fits with classic technical analysis at the monthly and daily chart levels.
Intermediate wave (2) was a deep double zigzag. Given the guideline of alternation, intermediate wave (4) may be expected to most likely be a shallow flat, triangle or combination. It may be about even in duration with intermediate wave (2), or it may be a little longer because triangles and combinations are more time consuming structures.
Intermediate wave (4) may be a complete triangle; this looks most likely. If it continues further, then it may end within another very few weeks as a combination; this now looks less likely.
TRIANGLE
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Intermediate wave (4) may be a complete triangle.
All triangle sub-waves subdivide into single or multiple zigzags, with only one sub-wave a more complicated multiple. The final wave of minor wave E ends reasonably short of the A-C trend line.
This triangle meets all Elliott wave rules, but it does come to a rather quick conclusion. This is possible, but it does not have a typical look. The probability is now slightly reduced.
If intermediate wave (4) is complete, then intermediate wave (5) has begun. Within intermediate wave (5), a pullback for minor wave 2 may now continue that may not move beyond the start of minor wave 1 below 66.86. Minor wave 2 may now end below the 0.618 Fibonacci ratio of minor wave 1.
While it is possible that minor wave 2 could be over at this week’s low, it would be very brief. Downwards movement has strong support from volume, so it looks like this pullback is not over.
COMBINATION
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Intermediate wave (4) may be unfolding as a double combination.
The first structure in a double combination may be a complete zigzag labelled minor wave W. There is a little disproportion within minute wave a between the corrections of minuette waves (ii) and (iv), but this is slight enough to be acceptable for this market.
The double is joined by a complete three in the opposite direction, a zigzag labelled minor wave X. X waves within combinations have no minimum nor maximum allowable length, and may make new price extremes beyond the start of wave W as this one does. The only guideline in terms of depth for X waves is that they are normally very deep.
The second structure in a double combination would most likely be a flat correction as the two most common structures in a double combination are one zigzag and one flat.
Within a possible flat correction for minor wave Y, minute wave a looks like a completed three. Minute wave b has now met the minimum 0.9 length of minute wave a, and it has moved beyond the start of minute wave a, indicating an expanded flat. Minute wave b is within the common range of 1 to 1.38 times the length of minute wave a. Expanded flats are very common structures.
Minute wave c would need to end at least slightly below the end of minute wave a at 64.43 to avoid a truncation and a very rare running flat.
The purpose of the second structure in a double combination is to take up time and move price sideways. To achieve this purpose minor wave Y would be most likely to end about the same level as minor wave W about 63.60.
Minute wave c must subdivide as a five wave structure, most likely an impulse. Within the impulse, so far minuette waves (i) and (ii) may be complete. Within minuette wave (iii), the correction for subminuette wave ii may not move beyond the start of subminuette wave i above 75.28.
TECHNICAL ANALYSIS
MONTHLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
The larger trend remains upwards.
The last three months have seen price move sideways. Three long and lower monthly wicks are bullish. Now September shows support from volume for upwards movement; the short term volume profile is now bullish.
On Balance Volume gives a bullish signal, breaking above resistance. On Balance Volume has also made a new high above the prior high of May 2011. As On Balance Volume should be read as a leading indicator, price may follow through with a new high above May 2011’s high.
WEEKLY CHART
Click chart to enlarge. Chart courtesy of StockCharts.com.
It is upwards weeks during the consolidation that have strongest support from volume. This looks like a continuation pattern. The breakout would most likely be upwards.
The Shooting Star candlestick pattern is now followed by a Bearish Engulfing pattern. This indicates more downwards movement is likely.
The short term volume profile is slightly bearish.
DAILY CHART
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Downwards movement has support from volume. The last upwards day does not. Downwards days have a larger range than the last upwards day. More downwards movement overall looks most likely.
Support below is about 69.40. Below that the 200 day moving average may provide support.
Published @ 10:46 p.m. EST.
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