As mentioned on 24th January 2017, Oil is approaching an intermediate top and will start to retrace soon. This is why we would remain prudent on the Energy sector. We are going to analyse the sector on a relative basis vs the S&P500 index as it has reached an important intermediate top and might be reaching new lows during Q2 2017.
Possible Targets & Timing: targets are shown by the Green, Red or Grey price projection beams. These possible Targets Zones define the potential left in terms of Price objectives and Timing (when the Ellipse at the end of the beam has entered entirely in the chart, potential timing to the objectives has been reached).
Risk assessment: defined by the blue oscillator, the ‘Risk Index’, fluctuating from Overbought to Oversold. When it enters these exaggeration zones and leaves them again, a potential top or bottom is confirmed.
1. ‘Weekly’ Left-hand chart, which is updated every week and gives the market perspective over the next few quarters:
Since early 2016, the Energy sector has been in a correction up vs the S&P500. In December 2016 it seems to have made an intermediate top. Indeed while the trend is still in a potential “Bull” (Potential Trend) , the possible Timing of this correction up is nearing completion, i.e. the Grey Ellipse has almost fully entered the chart ( Possible Timing, i.e. towards “the Grey Ellipse”) . During the correction up, our corrective targets up zone has never been reached, showing poor momentum. The Risk Index is now pointing down again.
We believe a Potential intermediate top has been made and that the Energy Sector is potentially heading down again vs S&P500.
2. ‘Daily’ Middle chart, which is updated every day and gives the market perspective over the next few months:
Since December, the Daily has been correcting down. It is has now reached the support of its corrective targets down and the timing for this correction is almost completed. Yet, the Risk index is in the middle of the range, still pointing lower and giving no important indication. We see little signs of exhaustion and substantial risk if the support of our corrective targets is taken out.
3. ‘Hourly’ Right-hand chart, which is updated 8 times a day and gives the market perspective over the next few weeks:
The Risk Index is getting Oversold. However on this Hourly chart, the “Bear” downtrend is probably still in place (Potential Trend), Impulsive Targets down could still lead us lower (Possible Impulsive Targets Down in ‘red’) and the Timing Ellipse of this impulsion, although it has entered the chart, is expressing a few more days or so to go (Possible Timing, i.e. “the red Ellipse”). We believe a continuation trade could potentially extend a bit longer.
Longer term, the Energy sector vs SPY seems to have made an intermediate top and is potentially heading down again.
Medium term, it has reached the support of its corrective targets down. Seeing little signs of exhaustion, a substantial risk exists if this support is taken out.
Short Term, the “Bear” downtrend shows little signs of exhaustion and could potentially extend a bit longer.