WTI:

WTI at the peak of the 2008 crisis traded about 140.20 January 2008 then dropped to 41.68 lows by January 2009. WTI then corrected to 113.93 January 2011, 107.07 January 2012 and 107.65 January 2013. The last drop occurred again in January 2014 from 105.37 to roughly 33.78 lows. When long and short term monthly averages were last viewed, the situation was clear: the trading range and major break points were located between 42.00 to 47.00. The current trading range is the same today but the position of the longer term averages 20 – 30 years completely reversed. Monthly Cushing averages in the further analysis was viewed yearly from 1 – 30.3 years for a total of 31 averages.

When WTI corrected from the 41.68 lows, the multi year trading range occurred between 71.92 – 113.03 highs. The distribution of averages especially the longer term averages was correct and transparent: Longer term averages were found at the top while shorter term averages were located below. Because of the last drop from 105.37 to 33.78 lows and because of the length of time price remained on the floor, longer term averages from 20 – 30 years reversed. Longer term averages today are located between 2 – 10 years but most specifically at the 3 year at 74.85, 4 year at 79.13 then comes the 82.81 upper most average at the 6 year. Current 44.73 price is found by climbing the misaligned system of averages until the 30 year average is located.

The current price at 44.73 trades below every average from 1 – 28 years yet the trading range is found between the 24 – 30.3 averages from 42.79 at the 30.3 year – 48.91 at the 24 year. Why current price trades at 44.73 inside a 53.73 – 33.73 June contract range and the 30 year average is because price on a correction higher lacks another location to trade. The climb higher for WTI is massive as a higher price must clear many lower averages.

To target WTI 60 for example, hurdles must clear above beginning at the 27 year at 45.91, 26 year at 46.89, 25 year at 47.78, 24 year at 48.91, 23 year at 50.13, 22 year at 51.63, 21 year at 53.23, 20 year at 54.95, 19 year at 56.63 and 18 year at 58.73. To target WTI 70, previous averages must clear and the 17 year at 61.38, 2 year at 62.77, 16 year at 63.76, 15 year at 66.00 and 14 year at 68.98. The hurdles ahead may also explain why contract volume declined to 837,000 Friday from 1.6 million highs April 8th, April 12 and 1.4 April 13th.

To head higher, current 44.73 must clear the 1 and 28 year averages at 44.86 and 44.84 then the 27 year at 45.91, 26 year at 46.89, 25 year at 47.78, 24 year at 48.91, 23 year at 50.13 and 22 year at 51.63. To head lower, the 29 year must break at 43.96, 30 year at 43.00 and 30.3 year at 42.79. A 50% Fibo is located at 62.80. The averages driving prices higher are the distant averages found between 1 – 10 year beginning at the 6 year, 7 year, then the 5 year, 8 year, 9 and 10 year. As prices climb closer to averages, price becomes less oversold.

As prices rise closer to averages from current levels, ranges compress particularly between the 17 – 18 year averages at 61.38 and 58.73 then between the 7 and 8 year averages at 81.06 and 81.65. Total averages align as 1- 10 years are distant averages then 11- 20 begin the march to current prices and 20 – 30.3 are closest averages to current price.

Upper targets to align the distribution are found between the 3 – 13 year averages from 48.15 – 61.33. Lower targets range from 13.40 – 42.53 from averages 14 – 29 years. Of 31 averages, 10 averages target higher prices while 17 averages target lower and far lower prices. What assists the case for lower prices are significant peaks seen in 17 of 31 averages. As a spot check of lower prices from current 44.73, price reaches extreme oversold from 11.49 – 18.38.

Current WTI is in correction phases from the last 105.37 highs then 107.65, 107.07, 113.93 and overall from the 2008 highs at 140.20. The overall trend is down as further averages adjust over time to see far lower prices.

Brian Twomey, Inside the Currency Market, btwomey.com

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