Crude Oil Monthly (Log Scale)

There are some well know Wave Technicians who refuse to do wave counts on commodities
like oil, grains, or softs. The reason is that wave theory should only apply to markets that are
“alive,” or ones that cannot “expire.” For instance, the S&P, Gold, and Euro are examples of
markets that do not expire--they have “cash” values that can be charted everyday. WTI
Crude, on the other hand, is a series of futures contracts that “expire.” For instance, the
front month crude contract is currently the Dec 2010 futures. When the Dec ’10 futures
expire and deliveries are made against the contract, the oil actually goes away--it is
consumed by a refinery and will never be seen again. The same can be said of the grain
commodities--the Dec ’10 Corn contract will either be eaten or it will spoil.

All of the above is the reason that applying wave counts to commodities can be
EXTREMELY difficult and can render wave counts that are difficult to model. For instance,
the price action in the dashed blue box is “uncountable.” It fits no known wave pattern.

With all that stated, we will attempt to lay some wave counts on this chart anyway….

Andy’s Technical Commentary__________________________________________________________________________________________________

 Crude Oil Monthly (Log Scale)

The wave count begins with the December 1998 lows in Crude Oil at $10.35. This was the
point that the oil market and industry seemed completely “washed out.” This was a time of
hopelessness for the industry with the widespread belief that oil would never trade above
$20 bucks again. It was a period that triggered large scale consolidation/capitulation within <A>
the industry with ‘tech stocks” being “the place to be” for most investors. -V-
- III -
(V)
There are a few major “takeaways” from this chart from an Elliott Wave $147.27
perspective: The move from $10.35 to $147.27 was a “three wave”
move; and, the initial move down from $147.27 was so violent and short (B)
lived, it’s almost a certainty that it’s only the first wave of what will be a
longer enduring “correction.” (D)

Given those two major ideas, it leads to two basic wave counts. The first ( III )
is presented here and it predicts another 4 years of triangular congestion
which will be a Primary Wave -IV-, which when completed, will lead to a
( IV )
Primary Fifth Wave higher that will test the all-time highs.

(E)
-I- (I)
- IV -
(C) 2015

(A)
( II )

- II -

$10.35

Andy’s Technical Commentary__________________________________________________________________________________________________

 Crude Oil Monthly (Log Scale)

The other, equally possible, wave count is that a cycle <A> wave concluded into the
2008 highs. This would means that we’re into a grueling <B> wave that will consume <A>
a decade or more of time and will likely conclude in the $20-$30/bbl range. If this -C-
seems like a really long time to remain in congestion, just remember what the Gold (V)
bulls had to endure between 1980 and 2000. In 1980, Gold fell 66% in just two years-- $147.27
woe be the “gold bug” who thought that Gold bottomed in 1982! It’s easy to envision a
similar outcome for oil, which jives with some of our longer term S&P forecasts of a
Cycle Wave <IV> that should last until 2020.

( III )

( IV )

-A- (I)

( II )
<B>
2018-2024

-B-

$10.35

Andy’s Technical Commentary__________________________________________________________________________________________________

 Crude Oil Weekly (Log Scale)
<A>
-C- The manner in which the market has developed from the lows confirms that this is a “corrective” move
$147.27 higher--there is no possible way that this pattern higher can be interpreted as an impulse. The long-
enduring side-ways price congestion (blue dashed box) confirms this idea. An Intermediate (B) wave
following a corrective (A), SHOULD take back 60-80% of the previous move. Using the log-scale, which
seems appropriate in light of the enormous price range witnessed, a 60-80% retracement zone would be
$81.50-$109.55. Crude has already achieved the lower boundary of a minimum required retrace.

80% $109.55

(B)

60% $81.50

This move was a “complex”

correction that ended with a
triangle: abc-x-abcde There is no “predictable” limit on how long a (B) wave can last relative to an (A)
wave. In order for two waves to be “related,” a wave cannot be shorter than 25%
of time relative to the waves that precede it or come after it. Using that as a
guide, a (B) wave should not last much longer than 400% of an (A) wave. With
that as an “outter limit,” this (B) wave could last until the middle of 2011.
$33.55
(A)

Andy’s Technical Commentary__________________________________________________________________________________________________

 Crude Oil Daily
The move up from the lows is a real mess--this is one of the more complicated wave counts I’ve ever seen. This represents my
“preferred” counting of the price action. The initial move up appears to be a “diametric” (a mutated “double”), which was followed
by an expanding triangle “x”-wave. The powerful e-wave of the expanding triangle explains why the market has been struggling
to retrace that wave--it’s difficult for markets to fully retrace e-waves of expanding triangles.

d
“w” b -b- -1-?
g
a -d-
-2-?
c
e $73.58
-e-
-a-
-c- b
a c
f e
“x”
a
d

For medium term traders, $73.58 looks like a key technical support
level under this wave model.
b

Notice how the apex of a

$33.55
triangle broken tends to
(A) conclude the “thrust.”

Andy’s Technical Commentary__________________________________________________________________________________________________

 Crude Oil - 180 minute Chart
The move down from $84.43 smacks of a corrective move (triangular congestion) and it’s now approaching a critical juncture. If
this count is correct, we’re almost certainly looking at an “extended” wave -1- because of the longer enduring nature of the wave-
2. At this point, the Wave-2- seems to have run it’s course; so, crude needs to begin launching higher immediately. Short term
bulls might use $80.29 and $79.01 has first and second level support. Bears should probably use the [b]-[d] line as a “stop” for
new shorts. Above there, $83.25 seems like resistance.

-1- [b]

(x) [b]
$83.25
[d]

[e]
[c] [c]
[a]
(w) (y)
-2-?
[a]

Andy’s Technical Commentary__________________________________________________________________________________________________

 Crude Oil Daily - Channel Congestion
One of the most basic “charting” concepts is that when in a channel congestion eventually gets broken, either to the upside or
downside, it will extend higher or lower by the size of the channel it broke out from. With that in mind, there is a lot at stake
depending on which way this market decides to “resolve itself.” For instance, a “breakout” above $84.00-$87.09 zone targets
numbers between $100-$110. A “breakdown” below the $69.50-$64.24 zone targets $55 to $41.

$87.09
$84.00

$69.50

$64.24

Andy’s Technical Commentary__________________________________________________________________________________________________

 DISCLAIMER WARNING DISCLAIMER WARNING DISCLAIMER

This report should not be interpreted as investment advice of any

kind. This report is technical commentary only. The author is Wave Symbology
NOT representing himself as a CTA or CFA or Investment/Trading
Advisor of any kind. This merely reflects the author’s "I" or "A" = Grand Supercycle
interpretation of technical analysis. The author may or may not I  or A  = Supercycle
trade in the markets discussed. The author may hold positions <I>or <A> = Cycle
opposite of what may by inferred by this report. The information -I- or -A- = Primary
contained in this commentary is taken from sources the author (I) or (A) = Intermediate
believes to be reliable, but it is not guaranteed by the author as to "1“ or "a" = Minor
the accuracy or completeness thereof and is sent to you for 1  or a  = Minute
information purposes only. Commodity trading involves risk and -1- or -a- = Minuette
is not for everyone. (1) or (a) = Sub-minuette
[1] or [a] = Micro
Here is what the Commodity Futures Trading Commission (CFTC) [.1] or [.a] = Sub-Micro
has said about futures trading: Trading commodity futures and
options is not for everyone. IT IS A VOLATILE, COMPLEX AND
RISKY BUSINESS. Before you invest any money in futures or
options contracts, you should consider your financial experience,
goals and financial resources, and know how much you can afford
to lose above and beyond your initial payment to a broker. You
should understand commodity futures and options contracts and
your obligations in entering into those contracts. You should
understand your exposure to risk and other aspects of trading by
thoroughly reviewing the risk disclosure documents your broker is
required to give you.