McClellan Chart In Focus: Crude Oil’s Drop Was Foretold by Gold. The movements of gold prices tend to show up again about 20 months later in the movements of oil prices. By Tom McClellan



February 13, 2020

Chart In Focus

The movements of gold prices tend to show up again about 20 months later in the movements of oil prices.  Crude oil futures have seen a big drop during 2020, exacerbated by falling demand from China because of the coronavirus outbreak there.  That has arguably made the magnitude of oil’s price drop bigger than it would have been, but the timing of the price drop in oil still matches gold’s message.

Gold’s leading indication does not always work perfectly.  The crude oil market got a little bit screwy in Q4 of 2018, and it dragged down the stock market in sympathy.  But after that exceptional period, oil prices got back on track and started echoing gold’s price movements once again in early 2019 and since then.

Gold prices bottomed in August 2018, so counting forward 20 months projects a bottom for crude oil prices due in April 2020.  The amplification of the decline due to the coronavirus worries means that the price damage associated with that upcoming bottom may all have been done already.

But the past behavior of this relationship says that any upturn for oil prices will have to wait until that April bottom arrives.

Tom McClellan

The McClellan Market Report

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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.