Wednesday (May 21) was another worrisome day in the markets. Crude oil futures closed above $133 for the first time in history – an event that was said to be responsible for another big decline in the DJIA.
The spike in crude price was blamed on an "unexpected drop in U.S. stockpiles" and the move by banks to raise "price forecasts…on expectations supply constraints and demand growth will persist." (Bloomberg)
That's a perfectly plausible explanation – after the fact. But what if we told you that one analyst foresaw this week's rally in crude and brent several days before it began – and without relying on the supply/demand fundamentals?
At the end of every week, Steve Craig, Elliott Wave International's Chief energy Analyst, records a weekly wrap-up for subscribers of his Energy Specialty Service.
Learn why oil prices change: Collective mood of energy traders changes them. EWI's Energy Specialty Service can show you now where oil is likely to go next.
What you are about to see is a clip from Steve Craig's May 15 weekly wrap-up, where he makes a forecast for a third-wave rally in crude and brent oil. How did he do it? Elliott wave patterns in crude's charts were predicting another push higher, which showed Steve that oil traders, collectively, were still in a bullish mood. That's it.
Free Video Clip – Oil: A Third Wave Advance Is Likely (Released May 15)
OK, but what about supply, demand and "geopolitical instabilities," you may ask? Don't they have any effect on the price of oil? Sometimes they do – in the short term, and many times they don’t. But our analysis suggests the news is rarely – if ever – a factor in the long-term trend in oil prices.