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Crude Plunges Below $60: When Will Oil's Freefall End? Print E-mail
Analysis | Elliott Wave | Written by Elliott Wave International | Wed Nov 12 08 05:54 ET

As the autumn of falling gas prices unfolds, it's hard to envision the "Summer of Discontent" that came before.

Allow me to jog your memory. June-July 2008: The season of "Peak Oil" panic, when the mainstream experts saw the last drop of crude being sucked out of the earth's soil. Big Oil was on trial for windfall profits while the rest of the nation went broke. Protests erupted at petroleum plants. Hour-long lines formed at filling stations. A crippling Gas Shortage emerged in the Southern United States. AND, article after article declared a return of human civilization to the Ice Age as the runaway price of OIL showed no signs of stopping.

On this, the following news items from the time say plenty:

  • "Oil continues to gain momentum amid worries about the global economy… It is a reflection of a commodity that will still have value if the rest of the financial world comes crumbling down around us." (Couriermail.com.au)
  • "Investors bet on $300 oil." (Financial Times)
  • "Support for crude came… on speculation US mortgage losses will deepen, increasing the demand for commodities as a hedge against inflation. It would be a brave analyst to call the end of the upward momentum in prices." (Bloomberg)

One HUGE problem: The economic turmoil has only intensified. Every major engine of growth - from real estate to retail, employment to energy, and credit to commodities - has malfunctioned.

YET -- since hitting a historic high on July 11, crude oil has plunged more than 50%, right alongside a 40%-plus decline in the Dow Jones Industrial Average.

As for a "brave analyst" calling the end of the upward momentum in prices -- check it: In the June 2008 Elliott Wave Financial Forecast, our team revealed that the deeply entrenched panic surrounding crude oil bore the classic marks of a mania on its last legs. In the words of EWFF:

"If there is a fly in our forecast for an imminent break in the economy, it is crude oil prices. The oil chart offers a complete, or nearly complete, bull market pattern. The rally is reaching an end… after which a strong and sustained decline ensues."

Closely behind, the June 9 Elliott Wave Theorist set the stage for energy's coming slide and wrote:

"I am publishing this issue a bit early in order to alert you to an opportunity developing in the oil market. Oil is due to peak soon and join gold and silver on the downside. One of the greatest commodity tops of all time is due very soon."

And, finally: ONE day prior to the critical turning point in crude, the July 10 forecast by EWI's Energy Specialty Service acknowledged the downside potential in the market's near-term future and wrote:

"Two key topping indicators are still evident - extreme bullish sentiment and relentless media attention. Possible third and fourth signs - volatility and cries for more government regulation of commodity trading - are nearing their heads… It all points to a very mature uptrend."

From its July 11 peak, crude oil has plunged 58% to a 19-month low, RIGHT alongside a near 43% drop in the nationwide average cost of gasoline.

Panic whilst prices are soaring; complacency whilst prices are dropping - Don't be moved by the herd. Right now, the latest forecast inside Energy Specialty Service offers this breaking insight: "I'm anticipating a volatile, gut wrenching, fear-laden" move in crude's future.

Personalize your own Specialty Service package today.

Elliott Wave International

 

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