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Crude Oil Humor


One more losing session would be sufficient to complete a Rubber Band setup


If we learned anything from MIM3 (and there was plenty to learn), it is that Tom ('don't call me a technical analyst') DeMark is one of the greatest technicians ever, if not one of the funniest.

As proof of the latter, the reader is referred to Tom's bio page in MIM3's program guide ("We prefer to call it a 'bible''" - Leah Burke), and to the last of Tom's Random Thoughts: "The lady walked into the bar and ordered a double entendre, so the bartender gave her one." His presentations last weekend didn't let up, either.

As proof of the former, I'll update my own analysis of the Crude Oil chart.

Last Friday's update ("Island-hopping with Crude Oil's Bears" - that's right, MIM3 wasn't all-play and no-work) noted that Crude Oil had fallen back to the level where a false break lower had occurred two weeks earlier. The interim rally had meanwhile produced two Island Reversals, the first of which was recovered by a gap up to its resistance. And while the first Island was a one-day occurrence, the second developed during three days before the market gapped down under the first Island's support.

The bounce's second Island filled an outstanding gap (the only outstanding gap) back to July 13's open. The second Island also Double-Topped with the first, a rare occurrence, and generally a very bearish one. The two-week old break - false or not - was required by the prior 7-day ranging. The complete retracement of the recovery was not required, unless the recovery itself had been false.

Crude Oil has dropped another 4 dollars since last week, in addition to last week's 3-1/2 dollar decline from the bounce's highs.

Now, DeMark, and specifically, DeMark's Sequential (tm) system. The reader is warned to seek out authority on this setup elsewhere. But essentially, a sell signal's setup occurs when nine consecutive daily price closes are higher than each of their closes four days earlier. The day prior to the first day must have closed lower than, or equal to, the close four days earlier. There is a count down that waits for thirteen closes that are higher than the close two days earlier, which appears to have been July 13's high, if not the prior session.

Thursday's low retested the Sequential's price origin as support. And in the process, the decline is bordering nearing completion of AvidTrader's "Rubber Band" setup.

As its name implies, the Rubber Band identifies when trending has stretched its sponsorship so thinly that either price will snap back, or else the rubber band will break as new and fresh sponsorship steps in to invigorate the prevailing trend. The Rubber Band's last high-profile occurrence was Gold's peak at May's high. The Rubber Band's entry setup predicted that the inflection point would produce a trend reversal, which meant a crash.

Crude Oil has now spent eight sessions in decline, closing with a gain on only two of those days, one being only a fractional gain and at the intraday range's lower-end. One more losing session would be sufficient to complete a Rubber Band setup, where an entry setup will be monitored to determine whether the pattern intends to snap back up, or else drop sharply lower.

One or two more losing sessions through Friday or Monday would easily put Crude Oil under June's lows. This is the interim low between May and July's highs that have been forming a massive Double Top. This Rubber Band might actually break instead of snapping. And since one or two more losing sessions would still be one or two sessions short of completing a Sequential, DeMark's system wouldn't be indicating a snap.

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