Thursday, December 10, 2015 1:45 PM EDT
Crude oil still looks to be at a bigger picture crossroads to me. As I mentioned last month, 17 to 18 months is usually a pretty important litmus test for a trend, but especially so when the market in question has undergone the severe kind of liquidation that oil has come under over the past year and a half.
The S&P 500, for example, peaked out in October of 2007 and bottomed in March of 2009 falling just a few days shy of 17 months before reversing and embarking on an epic bull market. Crude is currently well into its 17th month. Now I want to be clear. I am not saying the same thing is about to happen in Crude. The whole point of this exercise is to highlight that Crude has reached a very important mile marker from a timing stand point. How it reacts here and over the course of the next few weeks should give us a tremendous amount of insight into what is next. The market has an opportunity here to try and reverse course, but will it take it? Positioning and sentiment suggests the market is susceptible to a counter trend recovery of some magnitude around this timing window, but stranger things have happened. Continued weakness past the middle of the month would signal Crude is vulnerable to another important leg down in 1Q16.
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