Oil Rally Retraces Over 50% of This Year’s Decline - ROSS CLARK - INSTITUTIONAL ADVISORS -July 28, 2017

Oil Rally Retraces Over 50% of This Year’s Decline

We’ve tracked the progress of the crude oil market since the Capitulation lows at the bear market bottom in 2016 as it pertained to previous bear markets recoveries. Initial rallies typically took twelve to fifteen months (Jan-Feb 2017) and were followed by a correction back to the important low that preceded the recovery high. This equated to a test of the November low at $42.05. It was achieved in June, but came shy of our secondary Keltner Band target of $41.00. The market has since recovered 53% of the decline in a period of five weeks. Such rallies generally take eight to ten weeks and test the upper Bollinger Band (50,2), now at $51. Once the band has been tested we should be on the lookout for a negative reversal and a minimum retracement of 60% of the rally from $42 back to the lower Keltner Band (20,2.5) 

We’ve looked at Exxon (XOM) and Chevron (CVX) during this rally phase. Other than 1987, both were buoyant into the final stages of the current rally. The juniors, that have been more beaten down, can be expected to continue their recoveries of the last five weeks.

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