Now that the oil bottom of the last contract has come and gone, here is where the top is going to likely be

So on 2/7 a few trader friends and I worked to locate the bottom of oil here that came on 2/11. The turnaround was 26.20 and was determined by an oversold condition and patterns in the OVX showing instability and exhaustion projections in the downtrend. I can explain further for anyone interested, just post a comment below.

We also used the same methods to locate the turnaround in the SPX by analyzing the VIX and other key indicators here. Don't laugh at the MS Paint drawing

The reason for the downtrend is that we are in a bear market, and the reason for the temporary turnaround was a weakening in open interest on puts and a stall on the down trend, not to mention both CL and the SPX bouncing off of key support levels.

There will certainly be more downward moves, but not for a bit. Things need to trade up first before shorting becomes less risky. The obvious tops to each will be as follows at minimum trading to resistance before a full reversal down for both the SPX and CL

It will first require a stall at those areas and a refusal to trade higher, of which we will see a sudden and drastic turnaround as quickly as we saw last week to the upside.

For those of you new to trading post-2008, this is what the start of a normal bear market looks like. If you need a point of reference start out at the "Climb of 99" and then the 2000-2003 bear market that followed. We are matching similar trading and fear patterns in the markets.

The reasoning for a bear market is obvious, there is a looming credit crisis where corporate debt is becoming overwhelmingly bad. Oil prices plunging to newer lows causing so many E&P's and majors to take major credit downgrades. There is also a rush to bonds with yields at all time lows.

Folks, don't let this bump up get your hopes for a bullish turnaround for the long hall. This is going to be short lived until fundamentals change. You usually see cycling like this on the way down, 2-3 very long cycles taking months to play out, and then the bear market usually ends with a final plunge.

My estimates for this would be a year out at least, and SPX near the 1600's. Unless something changes, brace for a long 2-3 bearish years. But in the meantime, long the hell out of oil until J6 contract taps 36.88.

The reason oil is trading up, despite what anyone tells you, trust traders who are in it every day. It's only trading up because the same algo's covering shorts on the other 93% of the SPX is covering oil shorts as low bond yields force money to move over into equities. And with an oversold oil condition and a massive liquidation of DWTI a few weeks back, the bounce was inevitable. Because shorts just cover if things stop falling. Nothing falls straight down. And if SPX fully corrects to the 2035 level, give or take 10-15 pts, oil will hit that 36.88 with ease. If there is a hang up there, I can see a 42.68 overshoot before shorting will resume.

Remember with oil that shorting will resume unless fundamentals in oil will change. And that doesn't look like that's happening. So we're back to the same ol' yearly cycling based on summer-winter-summer demand shifts.

Happy Trading you guys!

Submitted February 17, 2016 at 07:41PM by gabriel87120 http://ift.tt/1Lujfr7