In 2008, if you told most mainstream financial experts that crude oil prices would be circling the drain of a one-year low in October 2011, they'd say you were sniffing wood glue.
The summer of '08 saw everyone from Goldman Sachs to OPEC forecasting an "Oil Super Spike" against the backdrop of "political unrest and economic uncertainty." Said one Goldman chief in May 2008,
"We believe the current energy crisis may be coming to a head. The possibility of $200 per barrel seems increasingly likely over the next six to 24 months."
YET -- after hitting an all-time high at $147 in July 2008, oil prices endured a precipitous decline to a low-$30-a-barrel bottom in mid 2009.
What was the fatal flaw of the widely bullish call for crude in 2008?
Same as with most forecasts based on market "fundamentals": They simply take the previous and existing trends -- and boldly extrapolate them into the future. As a result, you end up completely unprepared for trend reversals.
Elliott wave analysis, on the other hand, examines the market's internal picture: Elliott wave structure, momentum, relative strength, sentiment, and more.
It was by
NOT relying on crude's "fundamentals" that EWI's
Energy Specialty Service was able to foresee crude oil's peak in 2008.
One day prior to its all-time high -- on
July 10, 2008 -- the
Energy Specialty Service went on high alert to a new, downward orientation in the market 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."
Most recently,
Energy Specialty Service stayed well ahead of crude's September 12 selloff to a one-year low with this September 12 insight:
"Assuming the [overall Elliott wave count] is on target, the market should trend down at this point. Trade below 83.20 should strengthen the idea that [an impulsive] decline is indeed underway."
Now that crude has fallen as low as $76.85 a barrel, find out how oil's decline fits into the bigger Elliott wave picture via EWI's
Energy Specialty Service.
EWI's intensive Energy Specialty Service brings you timely, actionable forecasts for crude oil, nat gas and other global energy markets. Editor and 30-year energy market veteran Steven Craig lives and breathes these markets all day, every day; let him show you what he knows.
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