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LOOK REPORT #2 Background: Quick Look Reports will look at a possible dominant trend in an Index, Equity or Commodity and some possible long-term (yearly) trends which could emerge from the dominant cycle(s) (the datasets will be weekly or monthly with the shortest cycle about 15 weeks or months). Quick Look Report #2 looks at the monthly prices of West Texas Intermediate Crude Oil from 1946. The primary monthly (seven) cycles in this Index are at 9, 14, 22, 47, 87, 126 and 216-months. These cycles represent an approximate (within 25%) fit to the West Texas Intermediate Crude Oil Index from 1946 thru April 2005. The three longest monthly cycles from 1974 to April 2005 are shown in Chart 1. They are currently all headed downwards (shortest cycle is 9 months!?). This same situation last occurred in early 1981 and by early 1982 the prices of oil went into a five-year decline. It can happen again if Central Banks try and mitigate a coming full-blown, worldwide recession 2006-2008. In particular, FY 2006 looks like declining prices in terms of commodities and equities beyond April 2006. It may become deflationary in terms of M3 changes. The long-term dominant cycles in the West Texas Crude Oil Monthly Prices predicted from April 2005 thru 2008 are shown in Chart 2. It shows these cycles will bottom around Feb 2008 but due to the long period of these waves, the oil prices maybe slow to rise for the next nine months as the world comes out of the recession. Chart 3 shows the predicted waveform of oil prices from 2006 thru 2012. It shows that oil prices will start to rise significantly by (around) Jan 2009 and experience a sharp and (almost) continuous rise thru early 2012 (Mayan Bear Rally of all time). This would roughly correspond to the predicted timeframe of the coming Peak Oil Crisis. You may wish to consider the purchase of a Hybrid Vehicle in late 2008 or early 2009 as production ramps up and the reliability of the cars is established. Bottom Line: Within the next twelve months, oil prices are expected to break downward (maybe a sharp correction) and stabilize within a trading band until about Feb/March 2008. The period from roughly 2006-2008+ has some earmarks of a coming ugly recession (worldwide). We are looking at declining prices in commodities after April 2006 (if not sooner – possibly Nov 2005). The Fed may just have hooked a Great White and has a real coming fight because this one has a huge dorsal fin showing just underwater. What bait did you use – derivatives? I think the fight has already started in the backroom printing presses.
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