Cycle Trading

The status of Oil’s yearly cycle was not clear in November.

Oil formed a lower low in March, which was month 14. That placed oil well within its timing band to print a yearly cycle low. The subsequent rally failed to break above the declining monthly trend line to confirm the new yearly cycle.

Oil then printed a lower low in August. Once again the status of the yearly cycle remained obscured since we were not sure if August was month 5 of a new yearly cycle or month 19 of a stretched yearly cycle.

Oil broke below the August low today. While our trend line tool did not signal that March hosted a yearly cycle low, the use of oil’s yearly timing band along with a bullish crossover on the monthly True Strength Indicator does support a 14 month yearly low forming back in March. With oil printing a lower low today, that makes December month 9 for the current yearly cycle. Also placing Oil in its timing band to print a yearly cycle low. Oil is also deep in its timing band to print a 3 year cycle low as we will see below.

Over the past 30 years oil has formed multi year cycles printing a multi year low on the average of every 38 months. Oil is currently at 53 months into this multi year cycle and is overdue to print a multi year low.

Also notice that oil has breached the multi decade support/resistance level. It is worth noting that Oil also breached this level when it printed its 3 year low back in 2009.

Oil printed an early, 14 day daily cycle low back on November 14th. I was not comfortable with labeling this as a daily cycle low because it was well short of the normal timing band for a DCL. But there were some signals such as a bullish TSI crossover and a close above the lower daily cycle band that supported a 14 day DCL.

Fourteen days has since elapsed and the bullish TSI divergence is making me suspicious that this is a continuation. That would make this day 28, placing oil in its timing band for a daily cycle low. Which means that a swing low could mark the daily cycle low. And could also trigger the yearly cycle low and the 3 year cycle low.