A triangle pattern is the most likely scenario for WTI Crude. The most recent spike counts as a C-wave within the triangle. Price action from that high counts best as an impulse to the downside as the market remains within a choppy sideways trend. Sentiment remains well inside neutral territory as the global economy weakens. All in all, a perfect recipe for more downside.

One major issue with this scenario is the geopolitical situation in the middle-east. The strike on Saudi oil plants was very professional. Most likely, the attacker can launch another strike of similar or larger scale and escalate the situation. A rational game theory equilibrium probably ends with the conclusion that Iran (most likely paths lead there) would not want to start a war. However, a similar assumption of rational behavior might have led to the conclusion that Brexit could never happen and the Germans would never attack Russia. Logic reasoning does not apply to everybody, and sometimes it does not apply to influential leaders. Europe, including Britain, is unable to interfere on a standalone basis. The Trump administration has probably no interest to see live TV coverage of a sinking aircraft carrier while elections are nearing.

The bottom line is that crude is likely to target below the December 2018 lows during the next few months. However, a sustained break of the (C)-wave high that is triggered by another fundamental event turns the entire case upside down. It most likely hints to a meaningful low in early August.

Published on September 25th, 2019