There are a lot of things we could take into consideration when we analyze crude oil long-term:

  • I still see the US dollar index in a major (long-term) uptrend, a factor that would be presumably bearish for crude oil
  • The market is incredibly overbought with monthly stochastics running above 90%
    • But as the old saying goes, “A market can stay overbought (or oversold) longer than most of us can stay solvent.”
  • October saw the spot-month contract climb to a high of $85.41, its highest level since October 2014
  • If you squint your eyes just right. you can imagine the market is in the late stages of a 5-wave major uptrend
  • The latest CFTC Commitments of Traders report (legacy, futures only) showed noncommercial traders reducing their net-long futures position by almost 5,900 contracts.
  • The spot-month contract looks to have posted a bearish spike reversal on its weekly chart, indicating its secondary trend has turned down.

All of these are fine talking points, but as the legendary character Curly (played by Jack Palance) from the 1991 movie City Slickers taught us, the secret is one thing: In this case that one thing is Newsom’s Market Rule #1, “Don’t get crossways with the trend”, and for now the major trend remains up. However, I would not be adding to long positions given what I see on the market’s weekly chart. In fact, if holding longs, I’d be looking to pocket some profit (if applicable) or ratchet a sell-stop up below the previous 4-week low of $74.96. Initial major support is the previous 4-month low of $61.74, a long way down. I do think the market is going to change direction long-term, at some point, I’m just not going to be the first to step in front of the runaway train.