– Bitcoin’s historic halving event on Monday underscores that the “long-term future of cryptocurrencies is secure”, says the CEO and founder of one of the world’s largest independent financial advisory organizations.
The comments from deVere Group’s Nigel Green come as the world’s supply of Bitcoin was forever slashed on Monday. The highly anticipated halving event, occurring only every four years, means that less and less Bitcoin – which is limited to 21 million units – wiil now been mined.
Monday’s was only the third ever halving. In 2012, the number of new Bitcoins issued every 10 minutes fell from 50 to 25. In 2016, it went down from 25 to 12.5. Now, in the 2020 halving, it will drop from 12.5 to 6.25.
The halving happened on block 630,000.
Nigel Green says: “The historic Bitcoin halving event has demonstrated in two ways that digital assets’ long-term future is secure.
“First, the price had been rising steadily ahead of the highly anticipated event – almost three-fold in the last three months – and then dropped back just before and after it took place.
“This shows that there has been increasing retail demand for Bitcoin as investors see and understand the growing influence and huge opportunities of digital currencies in an increasingly tech-driven world.
“With this in mind, large cryptocurrency investors, known as ‘whales’, accumulate crypto at much lower prices then start a sell-off to capitalize on this sustained growing demand.”
He continues: “Second, history teaches us that after this post-halving drop in price, there is a subsequent bull run.
“Previous Bitcoin halving events have prompted impressive price climbs. The 2016 halving triggered a 300% jump in the value of Bitcoin.
“There is no reason to believe this time the market will not respond with a longer-term upward trajectory.
“Indeed, the rally which is likely on its way could potentially be even more dramatic because there is more mass awareness than ever before of the long-term use of and need for digital currencies.”
The deVere CEO adds that in these unusual times, central banks have increased monetary supply and this will further drive prices of cryptocurrencies such as Bitcoin.
“Traditional currencies are devalued and inflation fears rise on the back of the mass printing of money, the likes of which we have recently seen in the U.S., where the nation’s central bank has added trillions of dollars to the money supply,” he says.
“Such measures will inevitably encourage even more investors to consider decentralised, non-sovereign digital currencies.”
Mr Green concludes: “Looking ahead beyond the halving event, cryptocurrencies are increasingly becoming regarded as the future of money due to the real-world issues they address and growing mass adoption.”
About:
deVere Group is one of the world’s largest independent advisors of specialist global financial solutions to international, local mass affluent, and high-net-worth clients. It has a network of more than 70 offices across the world, over 80,000 clients and $12bn under advisement.
Existential crises that threaten one’s entire society have a way of forcing us to see the world as it truly is. The coronavirus pandemic is no exception. Canada, once mocked by South Park as “not even a real country anyway,” has come together in remarkable fashion. Canadians and their leaders, from every region and across the political spectrum, are all pushing in the same direction.
But while the pandemic has showcased the country’s inspiring cohesiveness, it has also revealed the tragic costs, measured in lives lost and economic opportunity squandered, of Canada’s continued adherence to a one-dimensional ideology that long ago passed its best-before date.
Since the 1990s, Canadian economic development policy has been anchored in two words: free trade. The previously widely accepted notion that countries should have an industrial policy — a strategy for encouraging strong and desirable economic growth — was cast aside in the single-minded pursuit of comprehensive trade agreements.
Economic security and prosperity, so the conventional wisdom held, was best ensured by lowering trade barriers and encouraging specialization. Production would be global, which wouldn’t pose any problems in a free-trade world.
There have long been two flaws in this policy. First, while Canada may be “a trading nation,” trade is merely a means to an end: securing markets for Canadian producers and ensuring Canadians’ access to foreign goods and services. At the end of the day, it’s production, not trade, that matters most for a country’s economic security and power.
Second, policy-makers failed to appreciate the extent to which the entire free-trade world was dependent on the actions and support of the United States given its global superpower status. After the Second World War, the U.S. decided to underwrite a liberal multilateral order that encouraged free trade, which it was able to reinforce in the 1990s after the end of the Cold War.
For a long while in the 1990s, Canada was able to get away with neglecting industrial policy and to imagine that free trade would be our economic salvation. This was because the world of open borders, ostensibly supported by U.S. power, hid the long-term costs of de-industrialization since we still had easy access to cheap production in other countries.
Unfortunately for Canada, that world hasn’t existed for almost 20 years. The multilateral free-trade world was only ever as resilient as the American commitment to it.
The unilateral U.S. choice of security over prosperity following the 9/11 terrorist attacks was the beginning of the end of this multilateral economic order. The unsanctioned American invasion of Iraq hastened the system’s decline, as did its open embrace of torture in contravention of international conventions and basic human decency.
Less dramatically, U.S. economic policy, under Democrats and Republicans alike, turned trade agreements from potentially win-win tariff-lowering treaties into agreements designed to lock in the American advantage on issues of the future: intellectual property, data governance and internet governance. Free trade agreements are no longer about free trade.
COVID-19 exposes the cracks
All this happened before the pandemic exposed the physical vulnerability of countries lacking guaranteed access to producers of medical equipment. The current international scramble for medical equipment is not causing the world order to collapse: it’s a symptom of an order that has been falling apart in slow motion for a long while.
Countries have been tentatively, almost unconsciously, adjusting to this reality. These include forms of what I call digital economic nationalism, in which countries, including Canada, are pursuing national industrial policies in high-tech areas like artificial intelligence and are seriously considering the regulation of global, mostly American, online platforms.
Still, tentatively is the operative word. Policy continues to be marked by a failure to think through the consequences of these long-term trends, and by the hope that U.S. President Donald Trump’s eventual departure from the Oval Office will restore the multilateral order.
It won’t, for the simple reason that there is no longer a political bipartisan consensus on Capitol Hill that this order is worth saving. The liberal, multilateral world order that has been underwritten by the United States since the end of the Second World War cannot survive this degree of instability for very long.
Canada’s free-trade obsession has put us in a bind, making us overly reliant on global supply chains. That’s a huge unforced error given that 19 years ago, 9/11 showed us just how quickly border policy can change.
Policy-makers could well find that the USMCA, purpose-built for a world that no longer exists, severely restricts their ability to set a production-focused policy appropriate for 2020 and beyond.
Still, acknowledging reality is the first step in dealing with a crisis. The post-Second World War order is gone. Trade policy must be put in its proper place, a component — but not the entire game — of a comprehensive, government-led domestic industrial policy that involves actual, production-focused planning for a world in which the conventional wisdom of the past 70 years no longer holds.
Just signing trade agreements is no longer enough to ensure Canadian prosperity. We have to deal with the world as it is, not as we wish it would be.
EURUSD is falling towards 1.0801. Possibly, the pair may reach this level and then start a new correction towards 1.0840, thus forming a new consolidation range between these two levels. If later the price breaks this range to the downside, the market may resume trading downwards with the target at 1.0730; if to the upside – choose an alternative scenario to continue the correction to reach 1.0900, but may yet start plummeting at any moment.
GBPUSD, “Great Britain Pound vs US Dollar”
After completing the descending impulse along with the correction, GBPUSD is falling again to break 1.2393. After that, the instrument may continue trading downwards towards 1.2343. This movement may be considered as a part of the wave with the target at 1.2307.
USDRUB, “US Dollar vs Russian Ruble”
USDRUB is still falling towards 72.50. Later, the market may form one more ascending structure to test 74.00 from below and then resume trading inside the downtrend with the target at 71.30.
USDJPY, “US Dollar vs Japanese Yen”
USDJPY is moving upwards. Today, the pair may expand reach 107.10 and then start a new correction towards 106.73. After that, the instrument form one more ascending structure with the target at 107.26.
USDCHF, “US Dollar vs Swiss Franc”
USDCHF is consolidating around 0.9700. If later the price breaks this range to the upside at 0.9724, the market may resume trading upwards with the target at 0.9800; if to the downside at 0.9680 – continue the correction towards 0.9655.
AUDUSD, “Australian Dollar vs US Dollar”
AUDUSD is moving upwards. According to the main scenario, the price is expected to grow towards 0.6565 and then start another correction with the target at 0.6470.
BRENT
Brent is still consolidating around 30.70. The main scenario implies that the price may expand the range up to 32.40 and then fall towards 30.70. If later the price breaks this range to the upside, the market may resume trading upwards with the target at 36.03; if to the downside – start a new correction to reach 29.00 and then form one more ascending structure towards 38.20.
XAUUSD, “Gold vs US Dollar”
Gold has formed the consolidation range around 1709.58; right now, it is trading to expand it down to 1696.76. After that, the instrument may start another growth with the target at 1745.25.
BTCUSD, “Bitcoin vs US Dollar”
After completing the correction at 8000.00, BTCUSD is growing to break 8888.00. Later, the market may continue trading upwards to reach 9500.00 and then correct to test 9000.00 from above. After that, the instrument may form one more ascending structure with the target at 9800.00.
S&P 500
After forming the consolidation range around 2900.0 and breaking it to the upside, the Index is expected to trade upwards and reach 2970.0. Later, the market may return to 2900.0 to test it from above and then resume trading upwards with the target at 3027.5.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
As we can see in the H4 chart, XAUUSD continues consolidating in the form of a Triangle pattern between the high at 1747.77 and 23.6% fibo. The main scenario implies a breakout of the high and further growth towards the post-correctional extension area between 138.2% and 161.8% fibo at 1798.90 and 1858.60 respectively. At the same time, there might be another scenario, according to which, the instrument may form a new descending wave with the targets at 38.2% and 50.0% fibo at 1634.40 and 1599.50 respectively.
In the H1 chart, the pair is stuck between 23.6% fibo and the high at 1677.77 and 1747.77 respectively. The MACD indicator is moving above 0 and it’s a signal in favor of a further growth.
USDCHF, “US Dollar vs Swiss Franc”
As we can see in the H4 chart, the long-running correction is transforming from the Triangle into the Flat. If the price breaks the current channel’s upside border, the pair may grow to reach the local high at 0.9901 and even mid-term 76.0% fibo at 0.9982. At the same time, one shouldn’t exclude the possibility that the par may yet resume falling with the downside target at 61.8% fibo (0.9453).
In the H1 chart, the divergence made the pair start a new correctional decline, which has already reached 50.0% fibo. The next downside targets may be 61.8% and 76.0% fibo at 0.9663 and 0.9635 respectively, as well as the low at 0.9588. In the case of further growth, the upside target will be the local high at 0.9784.
Attention! Forecasts presented in this section only reflect the author’s private opinion and should not be considered as guidance for trading. RoboForex LP bears no responsibility for trading results based on trading recommendations described in these analytical reviews.
On Friday, the US currency closed the trading session with a decline against a basket of currency majors. The US dollar index (#DX) closed in the negative zone (-0.14%). The United States published ambiguous statistics on the labor market for April. Currency majors have shown a multidirectional response to this report. The main indicators of the US labor market have deteriorated significantly. At the same time, published data exceeded market expectations. The number of people employed in the nonfarm sector of the country decreased by 20.5 million compared to the forecasted value of 22.0 million. The unemployment rate increased significantly and counted to 14.7%. Experts expected the figure at 16.0%.
The greenback is under pressure due to tension in relations between the US and China. So, on Friday, Donald Trump announced that he was not sure whether to complete the “phase one” trade deal with China. Executive Office of the President is considering punitive measures against Beijing because China could not prevent and control the outbreak of coronavirus. Trump said the trade deal would be terminated if China did not meet its purchase commitments.
The European Commission may initiate a sanction procedure against Germany, as it considers that the German Federal Constitutional Court violated the priority of EU law. It should be recalled that the German Court blamed the ECB for the issue that buying government bonds seemed to be an excess of the powers of the regulator and a violation of German law. The European Court of Justice in Luxembourg supports the European Commission in this matter. The President of the European Commission, Ursula von der Leyen, noted that the accusation of the German Constitutional Court raised two EU issues: the euro system and the European legal system.
The “black gold” prices have fallen again. At the moment, futures for the WTI crude oil are testing the $23.90 mark per barrel.
Market indicators
On Friday, there was the bullish sentiment in the US stock market: #SPY (+1.65%), #DIA (+1.97%), #QQQ (+1.37%).
The 10-year US government bonds yield is consolidating. At the moment, the indicator is at the level of 0.69-0.70%.
The news feed on 2020.05.11:
Today, the publication of economic reports is not expected.
– As advanced economies have failed to contain COVID-19, fattened epidemic curves could make the global pandemic longer and deadlier.
In my new report, The Tragedy of Missed Opportunities, I have examined the huge human costs and economic damage of COVID-19 [for the report, click https://www.differencegroup.net/coronavirus-briefs ].
Before advanced economies began to flatten the epidemic curve, they fattened it for 6-8 weeks. This could prolong the global pandemic and cause secondary waves of imported infections and new virus clusters worldwide.
Defective herd immunity
Like the United States, most of Europe initially relied on voluntary measures until the accelerated virus spread forced stricter measures, but only belatedly. In the UK, Prime Minister Boris Johnson tried to portray inadequate preparedness as a foresighted strategy: “We can turn the tide within the next 12 weeks.”
At first, Johnson, who eventually contracted the virus himself, advocated “herd immunity” as a new strategy, relying on the advice of a group of epidemiologists. The idea was to keep virus transmission at low levels until a vaccine was available. A long lockdown was deemed impractical, due to the negative economic impact.
One report from Oxford University even claimed that the UK had already achieved herd immunity. It presumed that more than half of the population had had the virus and recovered. So, there was no longer any need to trace the contacts of every suspected case. UK would only test people who were admitted to hospitals.
To avoid a second peak in the winter, Sir Patrick Vallance, the U.K.’s chief scientific adviser, said the UK would suppress the virus “but not get rid of it completely.” While it could protect vulnerable groups, such as the elderly, herd immunity would reduce transmission in the event of a winter resurgence. In effect, Vallance thought “60 percent” of people would need to be infected for herd immunity.
In reality, herd immunity is neither a new idea nor a strategy. The idea first evolved in the 1920s. It was recognized as a recurring phenomenon when, after a significant number of children had become immune to measles, new infections temporarily decreased. As a result, mass vaccination to induce herd immunity became common.
However, as of yet, there’s no vaccination against COVID-19. And access to adequate, available and safe vaccination or therapies may take until spring 2021, or longer. Moreover, no country should ever rely on a highly contagious and deadly infectious agent to create an immune population.
Without effective vaccine, risk groups – the elderly, those with chronic pulmonary conditions, hypertension, diabetes and asthma patients, and those without adequate access to affordable health care – would be condemned into a premature death. That’s the worst kind of eugenics in the 21st century.
Eventually, the idea of herd immunity was rejected in the UK as unrealistic as the government finally opted for stricter lockdown measures that China, Hong Kong and South Korea had opted for already in January. Meanwhile, the epidemic curve had been fattened – not flattened – for some 6-8 weeks (Figure).
FigureUK: From misguided theories to extended lockdown
Fattening the curve
In Wuhan and Hubei, a faster infection rate had resulted in a strained healthcare system, many daily hospital visits and many infected people being turned away. That’s why social distancing was adopted to contain the spread. The goal was to “flatten the curve” quickly to reduce the potential of the virus to spread exponentially.
Despite the rejection of the idea of herd immunity, most countries in Europe and North America have in fact adopted a (failed, partial) version of it. Since they resorted to social distancing only belatedly, their health care systems became overloaded, healthcare professionals were penalized and the virus got a free ride.
Due to the belated and ineffective responses, these countries – from the U.S. to the Euro area and the UK – effectively fattened the curve before more determined efforts to flatten it. And that has broad ramifications. First, the human costs – infection cases and fatalities – will prove far higher than initially expected.
Second, in a global, interconnected economy, it is the weakest links that determine the future of the whole, through flows of trade, investment and mobility. That’s why, when countries that failed to contain the virus exit from lockdowns, they may serve as reservoirs of future infections elsewhere.
Third, the rise of imported cases in China, Hong Kong, and South Korea in the past weeks are just a prelude for waves of potential imported infections later in 2020.
Fourth, since COVID-19 is a global pandemic, it has potential to become endemic, which means elevated long-term risks in emerging and developing countries that have relatively weaker healthcare systems.
Finally, since the de facto herd immunity in the West has caused the virus to multiply into millions of effective cases, the potential for new mutations will be heightened, which will add to uncertainty while complicating the hoped-for vaccine response.
The cost of complacency
As China and other countries that mobilized early and broadly against the virus have shown, effective containment can dramatically lower the number of cases and deaths and thus drastically minimize the economic damage.
In the UK, the tragedy of the missed opportunities is particularly painful. At the time of the herd immunity debate in mid-March, when Chinese and South Korean measures were still shunned as too “authoritarian” and “invasive,” there were some 1,400 recorded cases and 50 deaths in the UK. As in the US, inadequate testing virtually ensured that thousands more were not detected, while the opportunity window for containment was missed.
As a result, today, less than 2 months later, the pandemic has cost the UK some 220,000 cases and 32,000 deaths. In 8 weeks, the recorded cases have multiplied almost 160-fold and deaths by 640 times, respectively. Worse, the curve hasn’t been flattened yet.
But that’s not the end of the bad news. Like other contagious network effects, what has happened in the UK (and the US and other advanced economies that responded to the pandemic challenge too late) won’t stay within its borders. When the UK and other advanced economies exit their lockdowns in the coming weeks, the costs of their failures have potential to further spread worldwide.
Even when less prosperous economies, have tried to flatten the curve with stricter and longer quarantines, they will soon have to cope with inflows of people and goods from advanced economies where containment failed, proved partial and resulted in defectiveherd immunity.
The kind of imported infections that China, Hong Kong, South Korea and other relatively successful virus fighters have recently witnessed could then become a new norm around the world.
The time to prepare for these imported infections is now.
About the Author:
Dr. Dan Steinbock is an internationally recognized strategist of the multipolar world and the founder of Difference Group. He has served at the India, China and America Institute (USA), Shanghai Institutes for International Studies (China) and the EU Center (Singapore). For more, see https://www.differencegroup.net
The commentary is based on Dr Steinbock’s briefing on May 9 and report The Tragedy of Missed Opportunities: The COVID-19 Human Costs and Economic Damage (SIIS)
On Friday, the United States released ambiguous statistics on the labor market for April. Currency majors have shown a multidirectional response to this report. The main indicators of the US labor market have deteriorated significantly. At the same time, published data exceeded market expectations. The number of people employed in the nonfarm sector of the country decreased by 20.5 million compared to the forecasted value of 22.0 million. The unemployment rate increased significantly and counted to 14.7%. Experts expected the figure at 16.0%. The coronavirus epidemic is still in the focus of attention. The number of infected with COVID-19 virus in the world has approached the mark of 4 million. Currently, EUR/USD quotes are consolidating in the range of 1.0815-1.0855. Positions should be opened from these marks.
Today, the publication of important economic releases is not planned.
Indicators do not give accurate signals: the price has crossed 50 MA.
The MACD histogram is near the 0 mark.
Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which indicates the bearish sentiment.
Trading recommendations
Support levels: 1.0815, 1.0775, 1.0750
Resistance levels: 1.0855, 1.0885, 1.0925
If the price fixes above 1.0855, the EUR/USD currency pair is expected to recover. The movement is tending to 1.0885-1.0925.
An alternative could be a drop in EUR/USD quotes to 1.0780-1.0750.
The GBP/USD currency pair
Technical indicators of the currency pair:
Prev Open: 1.23508
Open: 1.23933
% chg. over the last day: +0.37
Day’s range: 1.23809 – 1.24377
52 wk range: 1.1466 – 1.3516
The technical pattern on the GBP/USD currency pair is still ambiguous. The British pound is in a sideways trend. Financial market participants assess a report on the US labor market for April. Today, London and Brussels will resume negotiations on relations after Brexit. At the moment, the key support and resistance levels are 1.2365 and 1.2435, respectively. We recommend opening positions from these marks.
The news feed on the UK economy is calm.
Indicators do not give accurate signals: the price has fixed between 50 MA and 100 MA.
The MACD histogram is in the positive zone, but below the signal line, which gives a weak signal to buy GBP/USD.
Stochastic Oscillator is in the neutral zone, the %K line is below the %D line, which indicates the bearish sentiment.
Trading recommendations
Support levels: 1.2365, 1.2310, 1.2270
Resistance levels: 1.2435, 1.2485, 1.2545
If the price fixes above 1.2435, GBP/USD quotes are expected to rise. The movement is tending to 1.2480-1.2520.
An alternative could be a decrease in the GBP/USD currency pair to 1.2320-1.2280.
The USD/CAD currency pair
Technical indicators of the currency pair:
Prev Open: 1.39758
Open: 1.39325
% chg. over the last day: -0.32
Day’s range: 1.39001 – 1.39463
52 wk range: 1.2949 – 1.4668
The USD/CAD currency pair has become stable after a significant drop at the end of last week. The loonie is currently consolidating. Investors assess labor market reports in the US and Canada. The key support and resistance levels are 1.3900 and 1.3955, respectively. A trading instrument has the potential for further decline. We recommend paying attention to the dynamics of oil quotes. Positions should be opened from key levels.
Today, the publication of important economic releases is not expected.
Indicators signal the power of sellers: the price has fixed below 50 MA and 100 MA.
The MACD histogram is in the negative zone, indicating the bearish sentiment.
Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which gives a signal to buy USD/CAD.
Trading recommendations
Support levels: 1.3900, 1.3850
Resistance levels: 1.3955, 1.4010, 1.4050
If the price fixes below the support level of 1.3900, a further drop in USD/CAD quotes is expected. The movement is tending to 1.3860-1.3840.
An alternative could be the growth of the USD/CAD currency pair to 1.3990-1.4020.
The USD/JPY currency pair
Technical indicators of the currency pair:
Prev Open: 106.275
Open: 106.515
% chg. over the last day: +0.26
Day’s range: 106.488 – 107.249
52 wk range: 101.19 – 112.41
The USD/JPY currency pair has been growing. The trading instrument has reached key extremes. At the moment, USD/JPY quotes are testing the resistance level of 107.25. The 106.90 mark is already a “mirror” support. The yen has the potential for further decline against the US currency. We recommend paying attention to the dynamics of US government bonds yield. Positions should be opened from key levels.
The news feed on Japan’s economy is calm.
Indicators signal the power of buyers: the price has fixed above 100 MA.
The MACD histogram is in the positive zone and continues to rise, indicating the bullish sentiment.
Stochastic Oscillator is in the neutral zone, the %K line is above the %D line, which gives a signal to buy USD/JPY.
Trading recommendations
Support levels: 106.90, 106.70, 106.45
Resistance levels: 107.25, 107.50
If the price fixes above 107.25, further growth of USD/JPY quotes is expected. The movement is tending to 107.50-107.70.
An alternative could be a decrease in the USD/JPY currency pair to 106.70-106.50.
The DAX30 shrugged off the initial shock of Tuesday’s German Constitutional Court’s ruling last Tuesday, deciding that some ECB actions in regards to asset purchases regarding the QE are unconstitutional and thus not valid in Germany since ECB decisions are not backed by the EU treaty, and brought the mark of 11,000 points into focus for the DAX30 into the last weekly close.
The driver probably came from not only increases in optimism in regards to the reopening efforts of the Corona lockdown, especially in the US.
But also that recent built trade tensions between the US and China eased a little. Beijing and Washington discussed their Phase 1 trade deal in a telephone call, with China agreed to improve the atmosphere for its implementation and the US promising both countries expected obligations to be met.
If the break above 10,800 points now proves sustainable, a test of the psychologically relevant region around 11,000 points seems likely, probably even a run as high as 11,250/300 points.
A solid support and potential long trigger can be found around 10,800 points, while a drop back below 10,800 and thus back into the neutral zone between 10,200 and 10,800, identifies the push back above 10,800 points as a fake out:
Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Hourly chart (between April 20, 2020, to May 8, 2020). Accessed: May 8, 2020, at 10:00pm GMT
Source: Admiral Markets MT5 with MT5-SE Add-on DAX30 CFD Daily chart (between January 23, 2019, to May 8, 2020). Accessed: May 8, 2020, at 10:00pm GMT – Please note: Past performance is not a reliable indicator of future results, or future performance.
In 2015, the value of the DAX30 CFD increased by 9.56%, in 2016, it increased by 6.87%, in 2017, it increased by 12.51%, in 2018, it fell by 18.26%, in 2019, it increased by 26.44% meaning that after five years, it was up by 34.2%.
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The battle between Elliott waves and supply/demand forecasting approach continues
By Elliott Wave International
In case you just landed on Earth via Martian spaceship, 2020 has seen the biggest crash in oil prices ever.
This chart captures crude’s three-month, 80%-plus nosedive to 3-decade lows. (Price data as of May 1, 2020 and does not reflect the unprecedented April 20 plunge into negative territory at -$40.32. Yes, minus $40.32).
Ask any economist with a few post-nominal letters what caused oil’s crash, and they wouldn’t think twice about the answer; namely, the largest supply surplus in modern history caused by the coronavirus-travel bans and subsequent contraction in fuel requirements. Says these headlines:
“Crude Oil Prices Slammed Again on Supply Glut” (April 22 Daily FX)
“Nowhere to Go: US oil prices fall back below zero as traders face supply glut.” (Apr. 21 aljazeera.com)
“Oil Sides with Rising Glut Spooking Investors” (Apr. 27 Wall Street Journal)
As a March 12 CNN Business surmised: “It’s a nightmare scenario for the oil market.”
Indeed, the news events pertaining to crude oil and the global economy are nightmarish. However, the idea that oil’s crash was a direct result of the supply glut is erroneous. Case in point: This chart of the week-over-week supply of US crude oil stocks shows that the historic glut we see today didn’t occur until months AFTER the collapse in oil prices was well underway. (Source: ycharts)
In fact, predicting oil’s 2020 crash was possible only by focusing on a leading indicator, the Elliott wave pattern underway on oil’s price chart.
Here, we go back to beginning of 2020, when oil prices were enjoying a 35% rally to 9-month highs.
Then, mainstream energy analysts were looking higher amidst a perfect bullish storm of escalating tensions between the U.S. and major oil producers in the Middle East (see: Soleimani assassination, retaliatory missile strike on U.S. military bases in Iraq, and the Strait of Hormuz closure)
— AND —
would you believe, a supply… deficit.
Yes, as recently as January all these factors had the pundits “preparing” for oil to be “sent back to $100” (Jan. 8 CNBC). See:
“JP Morgan Raises 2020 Oil Price Outlook” (Dec. 17 oilprice.com)
“Falling Supplies Support Crude Oil Rally” (Jan. 8 Seeking Alpha)
“Oil Surges 35% in 2019 and Hedge Funds are Betting on More” (Dec. 31 CNBC)
The largest oil crash in history occurred — instead.
That leaves standing the forecasting model of Elliott wave analysis. It started preparing investors for a massive turn in oil prices as early as December 16, 2019 — before the first coronavirus case was documented on December 31.
Here, we recover these forecasts from the Elliott wave vault:
December 16, 2019, Elliott Wave International’s Short Term Update cited the debut of the world’s largest, $2 trillion IPO, Saudi Arabia’s natural petroleum and natural gas company Aramco as proof that oil bullishness had reached a dangerous peak, warning the “onset of the next far more serious decline in the oil market.”
January 17, 2020 Elliott Wave International’s Monthly Commodity Junctures called for oil prices to be slashed in half from current levels and said:
“The big narrative when you start looking at the weekly and monthly crude oil charts is — any strength we see is going to fail.”
February 7 Elliott Wave International’s Daily Commodity Junctures showed this bearish projection and confirmed oil’s trend was now down: “The high of the year is in place in crude oil and we will fall to $33 a barrel — at minimum.”
March 6 Elliott Wave International’s Energy Pro Service: “The headlines are likely to cite the lack of a coordinated OPEC production cut as the driver for today’s 10% freefall… but it’s right in line with our forecast for the downward acceleration in wave 3 of (3). The market should trend on down in an impulsive manner.”
March 9 Elliott Wave International’s Short Term Update: “Crude oil is on its way to [its lowest level since 1999].”
Predicting negative $40 price per barrel for WTI wasn’t possible. It happened in part because CME allowed the contract to be priced below zero to stimulate demand.
The point is: Across several different publications, different Elliott Wave International’s analysts were able to maintain a bearish position and anticipate a massive sell-off in crude by using one single forecasting model: Elliott waves analysis.
In fact, Elliott Wave International’s President Robert Prechter addressed this very topic at the 2016 Social Mood Conference as part of his keynote presentation. There, Bob discussed the enduring “battle between Elliott waves and the supply/demand theorists” for the title of successful oil forecasts.
There, Bob engages his audience in a 30-minutes slide show of oil charts, newspaper clippings, Elliott wave analysis, and historic data that leads to one dramatic conclusion:
“In truth, the supply/demand model failed to predict any of the dramatic turns in oil prices since 1998.”
Remember the 2008 “Peak Oil” climate? That’s when a supposed record supply deficit was going to send oil prices to the moon. Instead, Bob Prechter published this bearish warning in his June 2008 Elliott Wave Theorist:
“One of the greatest commodity tops of all time is due very soon,” — a “pretty bold call in the middle of a freight train going up when the world is running out of oil.”
The crash from $147 to $32 a barrel in the following five months of 2008 shocked mainstream analysts.
In his presentation, Prechter shows that since 1998, the supply/demand model failed while the Elliott wave model succeeded to forecast 8 major turning points in oil prices. In his words:
“Why do supply/demand theorists fully embrace the trend at the perfectly wrong time, time and again? They do it because their model doesn’t work.”
And, as the oil crash of 2020 proves, the Elliott wave model still works.
The lessons from Bob Prechter’s 2016 presentation are as relevant today as ever. Fortunately, if you weren’t there to see it in person, our friends at Elliott Wave International are re-releasing the complete, 30-minute live video footage — FREE — to all free Club EWI members.
