Everyone knows by now that I'm a commodity bull. That being said I can still spot when commodities have gotten ahead of themselves. This has been the case in oil for a while now. Parabolic moves are rarely justified by the fundamentals. We repeatedly hear that emerging markets are driving demand despite the fact that the US is in recession. Baloney! There is always a lag effect and decoupling is a myth. There's just no way the emerging markets are going to hold up without the US. According to the WSJ we are already seeing some gulf states storing oil in tankers in the gulf because they can't find buyers for it. The IMF's forecast for global demand has plummeted this year. Every recession in history has cut demand and this one will be no different.
We are now at an interesting juncture on the oil chart. The first down day will complete a 4 day Corollary possible trend change. All that means is that long intermediate trends often end when optimism gets extreme enough to put in 4 or more rally days in a row. The first down day will often mark the intermediate top. As always nothing is 100% but since this is occurring right at the top of the T1 pattern this may be a signal we want to watch.