WTI Crude / CL - An Intervention: Saving Blind Bulls
Updated
When crude was trading at $120 a few months ago, all you would hear on Twitter from people like Javier Blas from Bloomberg and other propaganda pundits is about how the fundamentals of oil are so bullish, because OPEC production is maxed out, the Russian Federation's invasion of Ukraine, domestic demand because summer, the government donating the strategic reserves to Chinese Communist Party firms on the cheap, etc, etc.
There was all that chatter about Europe putting a price cap on Russian oil, and that causing the price to surge overnight to $350 in some kind of dystopian nightmare.
At the time, everyone wanted to get long. Everyone would only get long. I remember one day in July oil returned to $91 on like a 10% daily drop and one Twitter pundit thanked the market makers for their "delta squeezing put options" before expiry and that he was happy that he got to buy calls that cheap because it was never going to happen again.
This is the way bull runs are. They tend to end when the narrative flips entirely to "who would ever short this?!"
And that ending is easier for bulls when something gaps down and breaks the momentum than it is with the price pattern being employed by the WTI MMs where everything all the way up and all the way down is trading in an efficient pattern that seeks-and-destroys both ways on the shorter timeframe.
In terms of specific price action, as I pointed out in my early August call that oil was on its way to far lower double digit numbers:
WTI Crude Oil - Running and Gunning
That the August price action with a quiet sweep of the July ~$86 lows, followed by a bounce, followed by a quadruple bottom, was simply too naive to think would be support.
Now, we're at $81, and it once again sounds like a dip to buy. And while we're probably going to see a run back to $86~, this market is no longer in a dip to buy position.
A lot of things make sense when you look at the monthly:
All of this price action we just experienced in early 2021 was, ultimately, a clean up of the unfinished business from the 2008 bubble pop, which was never addressed during the 2010-2014 ranging.
And really, after oil hit... -$38 during Coronavirus Disease 2019 hysteria, you really have to call that the bottom.
If you can't call -$38 the bottom, what would a bottom ever be?
Now, for those who guffaw at the prospect of oil going back to $50, this is totally fair enough. As always, it sounds impossible, until it unfolds. Humans are only able to believe in what they see. Having even a modicum of faith is a real stretch for almost everyone.
But I would like to point out that there is a precedental fractal left behind in the run up to the 2008 bubble pop, which you can see on the left hand side of the monthly chart above.
Oil more or less traded in a miniature of this exact same 2022 pattern. When it broke its pivots before finally rocketing to $140, it amounted to a total 35% $28 downturn, which was an enormous number in those trading ranges.
Everything is highly inflated and much more volatile and interesting today.
The weekly chart shows just how dangerous the situation is for bulls.
The reality is, the only inefficiency during this current market structure is in this $81 range, which we are sitting in. It's not showing a lot of interest in bouncing, and it would have to get back into the 100s to really count as a reversal.
So if $80 isn't the target to make a bottom at, what is?
Well, looking at the daily we can see more clearly that there's something of a plan B in the $69 range that can count as maintaining market structure if a reversal occurs within it.
And there's also a chance to maintain the trendline at $66.
But in reality, there's a fat double bottom to blow away formed from the September and December 2021 lows.
And based on the weekly, there are inefficiencies left behind that were never readdressed at the unfortunate numbers around $50, and specifically right under the psychological $50 level.
In my opinion, before oil turns around and rips North to levels that will make living in this world nearly impossible for everyone who isn't a billionaire, the MMs will seek and destroy these levels. And they may stop being so polite about it.
It may start to come faster and faster.
At some point in the near term future, dumps may come with a quick and significant gap down, and this time, they won't fill.
Pundits, analysts, and all sorts of charlatans will all be stunned and bewildered by how it could happen under the macro conditions. And then they will all say "oh, of course, look at these data points. It was only natural that $120 was an inflated number."
The answer, they will say, is undoubtedly "something something mainland China 'Zero-COVID' economic demand," not understanding the real state of disaster being wrought in that country as Wuhan Pneumonia goes on a tear and the Chinese Communist Party is starting to be unable to cover it up for much longer.
But $125~ was not a top for WTI crude, and neither was $140. A much more painful number like $180 or $200 is coming, and it's not going to take years to get there.
I believe that natural gas, likewise, has a lot of downside left to go:
Natural Gas / NG - What, Truly, Is a Bull?
A lot of things are probably going to bounce for a bit longer and then start to very aggressively dump. You should be prepared for this.
Stop listening to talking heads, propaganda, and charlatans, and be rational. None of them want to help you survive financially and none of them want you to be rich. Most of them don't even trade. Trading is hard. Everyone who has ever traded with live funds knows how hard it is to get in at the right time, in the right direction, and hold through all the chaos and pain until something bears fruit.
Fronting and flexing on the Internet to a flock of 50 Cent Party bots and collecting a 6 figure salary from Bloomberg or a 6 figure donation from YouTube's profit sharing program, on the other hand, is just so, so easy.
Talk is cheap, and yet, mastery is not.
Rationality is, ultimately, linked to your level of morality and your values.
There was all that chatter about Europe putting a price cap on Russian oil, and that causing the price to surge overnight to $350 in some kind of dystopian nightmare.
At the time, everyone wanted to get long. Everyone would only get long. I remember one day in July oil returned to $91 on like a 10% daily drop and one Twitter pundit thanked the market makers for their "delta squeezing put options" before expiry and that he was happy that he got to buy calls that cheap because it was never going to happen again.
This is the way bull runs are. They tend to end when the narrative flips entirely to "who would ever short this?!"
And that ending is easier for bulls when something gaps down and breaks the momentum than it is with the price pattern being employed by the WTI MMs where everything all the way up and all the way down is trading in an efficient pattern that seeks-and-destroys both ways on the shorter timeframe.
In terms of specific price action, as I pointed out in my early August call that oil was on its way to far lower double digit numbers:
WTI Crude Oil - Running and Gunning
That the August price action with a quiet sweep of the July ~$86 lows, followed by a bounce, followed by a quadruple bottom, was simply too naive to think would be support.
Now, we're at $81, and it once again sounds like a dip to buy. And while we're probably going to see a run back to $86~, this market is no longer in a dip to buy position.
A lot of things make sense when you look at the monthly:
All of this price action we just experienced in early 2021 was, ultimately, a clean up of the unfinished business from the 2008 bubble pop, which was never addressed during the 2010-2014 ranging.
And really, after oil hit... -$38 during Coronavirus Disease 2019 hysteria, you really have to call that the bottom.
If you can't call -$38 the bottom, what would a bottom ever be?
Now, for those who guffaw at the prospect of oil going back to $50, this is totally fair enough. As always, it sounds impossible, until it unfolds. Humans are only able to believe in what they see. Having even a modicum of faith is a real stretch for almost everyone.
But I would like to point out that there is a precedental fractal left behind in the run up to the 2008 bubble pop, which you can see on the left hand side of the monthly chart above.
Oil more or less traded in a miniature of this exact same 2022 pattern. When it broke its pivots before finally rocketing to $140, it amounted to a total 35% $28 downturn, which was an enormous number in those trading ranges.
Everything is highly inflated and much more volatile and interesting today.
The weekly chart shows just how dangerous the situation is for bulls.
The reality is, the only inefficiency during this current market structure is in this $81 range, which we are sitting in. It's not showing a lot of interest in bouncing, and it would have to get back into the 100s to really count as a reversal.
So if $80 isn't the target to make a bottom at, what is?
Well, looking at the daily we can see more clearly that there's something of a plan B in the $69 range that can count as maintaining market structure if a reversal occurs within it.
And there's also a chance to maintain the trendline at $66.
But in reality, there's a fat double bottom to blow away formed from the September and December 2021 lows.
And based on the weekly, there are inefficiencies left behind that were never readdressed at the unfortunate numbers around $50, and specifically right under the psychological $50 level.
In my opinion, before oil turns around and rips North to levels that will make living in this world nearly impossible for everyone who isn't a billionaire, the MMs will seek and destroy these levels. And they may stop being so polite about it.
It may start to come faster and faster.
At some point in the near term future, dumps may come with a quick and significant gap down, and this time, they won't fill.
Pundits, analysts, and all sorts of charlatans will all be stunned and bewildered by how it could happen under the macro conditions. And then they will all say "oh, of course, look at these data points. It was only natural that $120 was an inflated number."
The answer, they will say, is undoubtedly "something something mainland China 'Zero-COVID' economic demand," not understanding the real state of disaster being wrought in that country as Wuhan Pneumonia goes on a tear and the Chinese Communist Party is starting to be unable to cover it up for much longer.
But $125~ was not a top for WTI crude, and neither was $140. A much more painful number like $180 or $200 is coming, and it's not going to take years to get there.
I believe that natural gas, likewise, has a lot of downside left to go:
Natural Gas / NG - What, Truly, Is a Bull?
A lot of things are probably going to bounce for a bit longer and then start to very aggressively dump. You should be prepared for this.
Stop listening to talking heads, propaganda, and charlatans, and be rational. None of them want to help you survive financially and none of them want you to be rich. Most of them don't even trade. Trading is hard. Everyone who has ever traded with live funds knows how hard it is to get in at the right time, in the right direction, and hold through all the chaos and pain until something bears fruit.
Fronting and flexing on the Internet to a flock of 50 Cent Party bots and collecting a 6 figure salary from Bloomberg or a 6 figure donation from YouTube's profit sharing program, on the other hand, is just so, so easy.
Talk is cheap, and yet, mastery is not.
Rationality is, ultimately, linked to your level of morality and your values.
Note
Rumor has it that OPEC+ is set to make a huge cut to production tomorrow, posited by some as a type of economic warfare from the rest.If this happens, I believe you'll see stocks dump because the narrative will be "Oil going up so gas going up so inflation going up so the Fed won't pivot!"
When it comes to oil, we may see a spike over the $91 September double top. However, I think this will be a "sell the news" event.
If I were the United States and OPEC wanted to cut production to increase inflation in my country, I would have my producers crash the market. That way, less production = less revenue for the Russian side.
This may produce the ideal short entry for oil on its way to $50.
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