Saturday, March 8, 2014

Steve, Your triangle of Doom may be complete

Steve Ludlum has morphed his terrific Triangle of Doom model for energy and finance and Your Life into a trapezoid for now.

A symmetric triangle is considered a continuation pattern, a pause and midpoint between the start of a larger trend and more of it later.

Steve is drawing a trapezoid because I think his topline is too high.  If we move it a little lower ... Houston, we have got a problem.

/CL Triangle of Doom

This boundary for the triangle suggests that we have already completed it, had an initial breakout above it, and returned to test it one more time (a "kissback").  Now it's "support".

Expect much higher oil prices.  And blame Steve.


Bryan Franco said...

Can we reconcile higher oil with one more deflationary shock? Maybe we get the oil spike first, then demand destruction just like in the summer of 2008.

Christian Gustafson said...

Yes. Oil peaked after /ES in the last cycle down.

Permabear Doomster said...

Well, if Oil >147, then..I could just about be on the 'oh comes a real problem' train.

As it is, demand is kinda flat...the issue is supply.

Oil bulls need a geo-political issue to spike the market.

Bicycle said...

Yep. Absolutely agree with this and it is why the Fed is tapering right now. People are going to be blown away when they start raising rates (forced conservation on citizenry) next year (1-2 years ahead of plan). They'll have to. The United States is about to rapidly shift from forced consumption (ZIRP) to forced conservation.

Still believe we have one more blowoff to 2250 as this is happening however.

Permabear Doomster said...

Equities RISE when rates rise.

The market only peaked in late 2007, as the Fed started to reduce rates.

Soon as rates start rising, there is potential for hyper-wave.

Bicycle said...

You mean like how that happened in Greece?


Equities rise when rates rise because you have a surplus of oil.

If the termination of the triangle indicates that the US shale oil production boom is ending, ZIRP is obviously very dangerous in that environment. The Fed has to know this. The will raise rates to force conservation of energy.

Equities are going to rally in that environment??? How?

There will be no hyper-wave, not at least until Elon Musk comes up with a $20k mass produced electric vehicle, and nuke plants are being built everywhere, and oil begins to be tossed by the wayside as an energy source. A new, abundant energy source will absolutely trigger a hyperinflation.

This stops at 2250. No higher.

Bicycle said...

Rates rose in the US throughout the 70s until 1981 where OPEC was broken and a surplus of global oil was created.

Equities basically did not rise throughout the 70s.

We got a big hyper wave up in the 80s and 90s because of surplus global oil production.

ZIRP since 2008 is basically insanity and only possible because of increased US oil production. When YoY production growth stumbles we are FUBAR. Rates up treasuries down equities down dollar up food up spades and hoes and seeds and water up

Alexander Ac said...


why higher, why not lower prices? (debt deflation?)

Christian Gustafson said...

Hi Alex.

I'm just reading the tea leaves in that chart of oil futures prices and telling you what I see.

We have a sharp rise from the lows, a symmetric triangle that counts in 5-waves ABCDE, a breakout from the triangle, and a return back to test it for support from above. More rally is expected.

Oil can still peak after the equities markets, like it did in 2008. It probably won't make it back to $148, but $120-$130 oil will be just as devastating to what remains of our economy.

Don't fret -- serious debt deflation is on its way.