Friday, October 7, 2022

#CrudeOil Review $USO #CL_F

Crude Oil Review
Trading noise, the random movement of price over the short term, does not control trends, cycles, and profits. The majority, an emotionally driven group focused solely on price, often interprets it as meaningful information. This leads to confusion, frustration, missed opportunities, and leaves the majority as the bag holders of trend transitions. The Evolution of the Trade helps investors stand separate from the majority.

Crude Oil's overall trend, revealed by trends of price, leverage (futures & options), and time, are defined in The Matrix for subscribers.

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Watch the Commodities & Oil Report 11/05/21, a series of videos, discusses trends, cycles, and intermarket flows for further discussion about commodities and oil.

Today's open review discussed adhering to Evolution of the Trade (EOT) to remove self from decision-making.

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The EOT does not allow buying or selling against a primary downtrend or uptrend. Oil's recent setup provides yet another example of this setup. Oil's composite trend showed deep consolidation only a few days ago. Deep consolidation is defined down daily and weekly trends against the primary uptrend (see primary trend). Ag traders likely remember a similar setup in soybeans in 2021.

Primary Trend

The EOT is primary trend following trading discipline. The computer will not be short until the primary trend flips down. The Flip, the transition of the primary trend from down to up, or vice versa, establishes the core position. Oil's core long position was established 19 months ago, and has produced a gross profit of 69% (see Matrix Trends Tab). A short position against the primary trend was and will always be dangerous until the primary trend turns down.

Oil's relatively bullish energy build (DI & DI2) escalate the risk to the short (scalp against the primary trend) even further. WA, DI and DI2 as of Friday's close were 3%, 55% and 51% (see Oil DI).  DI2 = 51%, a trend for energy, is too high for a successful transition from up to down. In other words, the odds don't favor a bearish transition.

Oil DI

This setup and more was discussed in the recent Commodity & Oil update. The update that focus solely on oil remains relevant today. Some will choose to shoot the message rather than learn to listen to the invisible hand. This will lead to failure.

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The Matrix provides market-driven trend, cycles, and intermarket analysis.