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Oil Prices Say "Watch Out" Print E-mail
Analysis | Elliott Wave | Written by Elliott Wave International | Tue Sep 30 08 18:12 ET

If ever there was a time for the cause-and-effect logic of conventional economic wisdom to play out in the real world, September 2008 was it. And Crude Oil was the market.

  • Right out of the gate, the bullish fundamentals came charging full steam ahead with Category Three Hurricane Ike roiling the oil-producing epicenter of the U.S. In the words of one September 15 Reuters: "Ike triggered the biggest disruption to U.S. energy supplies in at least three years," shutting down 25% of production and putting 14 major refineries out of service.

"This is like Katrina without the deaths," the article stresses. "It took 24 hours to destroy something that took decades to build."

  • Next to emerge from the oil bullpen: A three-week long (and counting) Gas Crisis in the southeastern United States. The upshot: Entire counties go without working filling stations. And, at those that remain open, hours-long lines form, police security keeps guard, and panic erupts. In the words of former Georgia representative Newt Gingrich: "It's like a third-world country."
  • Following closely behind: A three-week long "oil war" staged by Nigerian militants dead set on blowing up major pipelines and crippling production. Recent cease-fire remains unstable.
  • And finally: The category five financial storm that flattened every major banking institution on Wall Street -- AND -- subsequent freefall of the Dow Jones Industrial Average, which included the biggest one-day point drop (-777) EVER in the history of the index on September 29.

YET -- despite the most bullish OIL backdrop in recent memory, the energy market itself has plunged like the approval ratings of Congress after voting "NO" on the $700 billion bailout.

To wit: Last month saw a $20-per barrel DROP in oil to a six-month low on September 16. A brief rebound followed, only for the decline to resume on September 22.

(Why Are Oil Prices Falling? In the September 30 Energy Specialty Service, Elliott Wave International's chief energy expert presents in-depth analysis of Crude on every time frame: daily, intra-day, weekly, and monthly. Act Fast.)

There are no mixed messages here. This is every major bullish factor being handed over to black gold on a silver platter -- and oil refusing to eat. With odds like that, who needs enemies?

As for what we know to be tried and true: Crude oil has plunged more than 27% from its July 11 peak. And, one day prior to this critical turning point, the July 10 Energy Specialty Service forecast 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."

And right now, the latest, September 30 forecast inside Energy Specialty Service offers this breaking insight: "I'm anticipating a volatile, gut wrenching, fear-laden" move in crude's future.

The moment to act is right now. Personalize your own Specialty Service package today.

Elliott Wave International

 

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