Cycles analysis suggests that crude oil may reach “a low of historic proportions in late 2016”, according to Walter Zimmermann, Senior Technical Analyst at United-ICAP.
Zimmermann looks at the 15 year commodity cycle and argues that the greater the commodity sector boom, the more intense the ensuing commodity sector bust. Given that the this current cycle decline is proceeding from the largest commodity bubble since 300 AD, he says we can expect a commodity sector decline of historic proportions into a late 2016 cycle low.
The last two commodity cycle lows hit in 2001 and 1986. In relation to crude oil, Zimmermann points out that during the 15 year cycle decline into the 2001 low WTI fell from $41.15 to $10.35, and from $41.00 to $9.75 into the 1986 low.
Based on an Elliott Wave analysis of the price actions since late 2011, Zimmermann’s downside targets for WTI in late 2016 are $31.50 and $25.25: “It is way too early to be ruling out a downside target because it looks too low.”