QUESTION: Thank you for the interesting update on Crude & Natural Gas previously. Since Feb was a Directional Change and March is a turning point, then the cycle inversion for a March high rather than a low looks still choppy with no breakout. Since electric car demand has peaked, the Fed seems determined to get inflation down to 2% if it kills the world economy. Then the decline in supply is not having the expected rise in prices as one would expect. Can you explain this paradox?
ANSWER: Yes the Directional Change in Crude for February warned that we would bounce rather than decline. There was a slight possibility of an early low in March and a swing up perhaps on geopolitical news. But that has not played out.
It appears that Ukraine is losing so there may be a bigger question of how the United States handles yet another loss – Vietnam, Afghanistan, and Iraq where removing Saddam led to religious wars. Note that the Fed began raising rates as soon as Russia invaded to protect the Donbas. Despite claiming it was for inflation, the Fed knows too well that inflation rises with war. They acted when Russia made its move understanding that this proxy war would accelerate inflation.
Crude took the nose-dive when Biden seized power as the general public believed he would end fossil fuels since that was what he said during his campaign. However, it soon became apparent that he was putting the cart before the horse and the shortages he set in motion led to to sharp price increases but this was part of the entire lockdown nonsense. The lockdowns led to a robust bounce in prices with the shortages only because everyone was artificially held in home imprisonment.
Post March 2022, we have the Fed raising interest rates, and the economy taking a real nose dive in the Democratic state with the most stringent COVID restrictions, so this time we have shortages with declining economic activity. The COVID lockdowns have substantially altered the economy and many are working virtually from home. Vacancies in office space in NYC have exceeded 15% and rising. Many stores are still boarded up.
The Paradox is that previously we were all in prison. So we rushed out and tried to do everything we were not allowed to do before. Post-March 2022, now we have a declining economic situation so we have declining demand combined with declining supply. At this point, the 2020 low should hold and we should be entering a bull market into 2033. However, I would expect the trend will become more robust with war where we also have a Panic Cycle in 2025.
The timing targets never change. What is produced be it a high or low is always subject to interpretation ahead of events. Still, the timing is fixed.