While the S&P cash is not providing an 18-day (monthly trend) sell signal, this is not the case with Crude Oil. In fact my current trade is the first trade with a ‘normal’ size position since March.
Figure 1 is a monthly chart of crude going back to 1975 and is provided for perspective.
We see that the break from the July 08 high tested but did not accept below the previous Primary Sell Zone. The retracement was only a 60% retracement of the last Impulse move so it is possible that the move from 145 will form a zig-zag pattern. For the moment, I prefer to say that we should see the Primary Sell Zone in Figure 2.
(NB the data in Figure 1 is cash; the data in Figure 2 is CSI-data’s Perpetual)
Figure 3 is the 18-day (monthly trend) Crude Oil showing the setup and entry for the 18-day Upthrust (see Nature of Trends):
- The 13-week line was statistically overbought.
- We were at a Price & Time Window (not shown).
- We have an Upthrust setup pattern.
Normally I’d wait for a directional bearish close below the bottom of the Primary Sell Zone (71.73) but in this case I took an early 1/4 size position as shown in Figure 3. The rationale was as follows;
- On Thursday Crude had a strong buy bar that was followed by a Doji bar within the Primary Sell Zone. What I expected to see was a continuation of strength on Friday rather than the Doji. For this reason I decided to look for an opportunity to sell on Monday if I saw a sign of weakness.
- A less important reason was the fact that Crude and the S&P have been showing a strong correlation. Seasonally the S&P tops out in the last week of August to first week of September. As I said in the weekly video, I had cycle highs due Friday Aug 28 and Monday Aug 31 (+/- one day). I felt that the S&P was showing signs of a possible break.
Figure 4 is an intra-day chart of the actual entries. For the 1/2 size, because I took it during the Asian time zone, I did not wait for an entry bar.
I expect to see the market rally either today or tomorrow in line with the S&P as I expect to see some short covering ahead of Friday’s Non-Farm. We also have the FOMC minutes due out today at 2:00 PM EST. The minutes may initially have an effect on the ES but I doubt we’ll see any sustained moves as a result of it. Consequently, I don’t expect Crude to be affected.
Figure 1 Crude Oil Cash Monthly
Charts through the courtesy of The Chart Store
Figure 2 Crude Oil CSI Data Monthly
Figure 3 Crude Oil 18-day Swing
Figure 4 Crude Oil Intraday
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