McClellan Chart in Focus: Crude Oil Swooping Up On Schedule “..you can see the script for what oil prices are going to do.” – By Tom McClellan

 

The movements of gold prices lead similar movements in crude oil about 20 months later.  So if you watch what gold has already done, you can see the script for what oil prices are going to do.

Chart In Focus

It does not work perfectly; it is merely amazing, not perfect.

Crude oil prices had a brief swoon, dipping to $59/barrel in early February.  That matched a brief dip in gold prices 20 months earlier in May 2016.  Now oil prices are recovering, just as gold recovered to its July 2016 top.  But the recovery in oil prices should only be a brief one, as gold’s chart plot shows a big decline ahead for oil prices.

There is agreement in this next chart for that thesis that oil prices are headed lower.

crude oil backwardation

Right now, the near month contract is around $64, but if we look out a year then we see distant month contracts at $59.  That’s the crude oil futures market saying that the near month prices are too high, a condition known as “backwardation”.  And it tends to lead to lower oil prices in the months which follow, just like gold says should happen.

Tom McClellan
Editor, The McClellan Market Report

March 22, 2018

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Crude Oil Backwardation
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About the author

Sherman and Marian's son Tom McClellan has done extensive analytical spreadsheet development for the stock and commodities markets, including the synthesizing of the four-year Presidential Cycle Pattern. He has fine tuned the rules for interrelationships between financial markets to provide leading indications for important market and economic data. Tom is a graduate of the U.S. Military Academy at West Point where he studied aerospace engineering, and he served as an Army helicopter pilot for 11 years. He began his own study of market technical analysis while still in the Army, and discovered ways to expand the use of his parents' indicators to forecast future market turning points. Tom views the movements of prices in the financial market through the eyes of an engineer, which allows him to focus on what the data really say rather than interpreting events according to the same "conventional wisdom" used by other analysts. In 1993, he left the Army to join his father in pursuing a new career doing this type of analysis. Tom and Sherman spent the next 2 years refining their analysis techniques and laying groundwork. In April 1995 they launched their newsletter, The McClellan Market Report, an 8 page report covering the stock, bond, and gold markets, which is published twice a month. They utilize the unique indicators they have developed to present their view of the market's structure as well as their forecasts for future trend direction and the timing of turning points. A Daily Edition was added in February 1998 to give subscribers daily updates on their indicators and also provide market position indications for stocks, bonds and gold. Their subscribers range from individual investors to professional fund managers. Tom serves as editor of both publications, and runs the newsletter business from its location in Lakewood, WA.