Analysis Summary

The recent move up from the low on the 26th of September was proposed to be a trough of at least 40 day magnitude back in our last report into WTI crude. The strength of the move, which easily surpassed our target of 85-90 and found resistance at the 80 day FLD, has been considered too strong for a 40 day nominal low alone.

We noted in the last report that the 18 month FLD was likely to offer support, prior to price establishing a target to the downside for the 18 month nominal low, due late 2022:

From 27th September Report:
It is interesting to note that price is also sitting on the level of the 18 month FLD (yellow on long term chart). The target for the 18 month component trough would be significantly lower if price were to make the weekly cross here so a bounce may well be forthcoming.

The support, shown below on on the long term chart, helped push price to the 20 week and 80 day FLD resistance early October at around 93.

This has prompted a slight re-phase in our analysis, placing the 20 week nominal low on the 26th of September and offsetting the 40 week component placement by one 40 day component. Such is the robust nature of Hurst cycles (as we have said many times!) that an analyst can be mistaken on magnitude of a low but rarely on the direction, such was the case here.

Longer term phasing remains unchanged, with price likely to track the 18 month FLD somewhat higher, prior to moving down sharply later in the year to the 18 month nominal low. The 54 month FLD looms below at around 60, projecting forward to the nest of lows at that time.

We are expecting a 40 day nominal low imminently, price is likely to then form an 80 day nominal peak early-mid November. This will likely also be a peak of 20 week magnitude and, if the long term phasing is accurate, an excellent shorting opportunity into the end of the year.

Phasing Analysis

Long Term

Components greater than and including the 18 month nominal cycle

Medium Term

Components less than and including the 18 month nominal cycle

Short Term

Components around the 80 day nominal cycle

Time Frequency

Wavelet convolution output targeting 80 day component

The 80 day nominal component, running at around 73 days from this sample has emerged to a prominent degree since the 18 month nominal low last year. Frequency modulation is relatively low at +- 14 days or so.

Trading Strategy

Interaction Status

Interactions and price in the FLD Trading Strategy (Advanced). This looks at an idealised 40 week cycle and an array of 3 FLD signal cycles. We apply the instrument’s phasing to the model and arrive at an overall summary for the interactions with the 20 day FLD, current and forthcoming.

Sigma-L recommendation: Risk Buy
Entry: Level > 86.68 / 20 day FLD
Stop: Below formed 40 day nominal low
Target: ~ 95 (20 week FLD resistance)
Reference 20 Day FLD Interaction: E2
Underlying 40 Day FLD Status: B2-C2
Underlying 80 Day FLD Status: E

Price has been generally tracking the 80 day FLD down to what is likely the 40 day nominal low forming over the last few days. Price is currently sitting on the 20 day FLD.

The proposed move up should form the 20 week nominal peak early to mid November with likely resistance at the 20 week FLD (green on short term chart).

The current 80 day FLD cross target is 97.92.

FLD Settings

If you do not have the use of Sentient Trader use these settings to plot FLDs in your trading software (daily scale) to more easily follow trading signals and strategy from Sigma-L.
Make sure to account for non-trading days if your broker omits them in the data feed (weekends, for example). The below offsets are given with no added calculation for non-trading days.
80 day nominal: 70 days | 35 day FLD offset
40 day nominal: 32.5 days | 16 day FLD offset
20 day nominal: 16.5 days | 8 day FLD offset
10 day nominal: 8.5 days | 4 day FLD offset

Correlated Exposure Options

A non exhaustive list of correlated instruments for consideration

United States Oil Fund LP $USO Energy Select Sector SPDR Fund
ProShares Ultra Bloomberg Crude Oil
Invesco DB Oil Fund
United States 12 Month Oil Fund LP
ProShares K-1 Free Crude Oil Strategy ETF
MicroSectors Oil & Gas Exp. & Prod. 3x Leveraged ETN
MicroSectors Oil & Gas Exp. & Prod. -3x Inverse Leveraged ETN
United States Brent Oil Fund
iPath Pure Beta Crude Oil ETN

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DISCLAIMER: This website/newsletter and the charts/projections contained within it are intended for educational purposes only. Results and projections are hypothetical. We accept no liability for any losses incurred as a result of assertions made due to the information contained within Sigma-L. This report is not intended to instruct investment or purchase of any financial instrument, derivative or asset connected to the information conveyed in the report. Trade and invest at your own risk.

Oil: Hurst Cycles - 26th October 2022