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Oil Prices Plunge: What "Safe-Haven"? Print E-mail
Analysis | Elliott Wave | Written by Elliott Wave International | Wed Oct 08 08 18:17 ET

According to mainstream financial wisdom, when the plane of the U.S. economy runs out of fuel and starts hurtling toward the earth's surface, one of the few markets said to provide a parachute of safety is … Oil.

Case in point: Summer 2008. At the time, crude oil was enjoying a record-shattering winning streak to all-time highs above $140 per barrel. And, according to the usual suspects, the worse the news coming out of the U.S. financial sector, the greater the bullish prospects for black gold's future. On this, the following news items from June-July '08 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 40%, right alongside a 30%-plus decline in the Dow Jones Industrial Average.

(How Low Is Oil Set To Go? The October 8 Specialty Service Global Energy Outlook includes in-depth analysis and original price charts for OIL on every time frame: Daily, intra-day, weekly, and monthly. Learn More)

As for a "brave analyst" calling the end of the upward momentum in prices -- check it: ONE day prior to the critical turning point in crude, the July 10 forecast inside 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."

Crude's 40% sell-off to an eight-month low since then speaks for itself.

Don't get caught with a faulty parachute. Right now, the latest forecasts inside our Energy Specialty Service offer 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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