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Tuesday, September 1, 2015

The Chart that Predicted the Bottom in Oil

This is a perfect example of what to expect at any major reversal, so I want to document it. Even if you don't trade commodities, you can learn a lot from the chart below.

The talking heads always say, "no one can call the bottom"? That's funny because I just called 2! First the bottom in oil, and not long after, the bottom in the broader market, and though I may not have been right the 1st time or even the 3rd; in hindsight it doesn't matter, because I caught the better part of this classic short squeeze.

Look, I don't start calling bottoms after a historic 30% move, I call them on weakness, and it can't be confirmed until much later.

This is exactly what you want to see at a major trend reversal in commodities. Slowing momentum in wave 5, a shake-out below support or above resistance, and continued bearishness/bullishness into the reversal into wave 1 (marked "i"). Wave 1 may continue as short covering continues into Labor Day, but Oil futures don't expire until Sept 20th, and that's plenty of time for this rally to give back most it's gains in wave 2.   

Tonight I caught the guys on Fast Money debating whether or not this is the bottom, and this the kind of disbelief you want to see in waves 1 and 2, but I think now that the retail short have learned their lesson, it's time to take profits, and I'm actually short Oil and Energy.

As far as broader market the $VIX seems to be consolidating above 24.50 support, and the SPX fails to break out.

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