Oil (NYMEX:CLU13) is trading slightly lower after a recent reversal from the upper channel resistance line shown on the four-hour chart. However, we cannot ignore a three wave decline from the July high, which is clearly a contra-trend movement, called a zig-zag in Elliott Wave theory. With that in mind, we will continue to look for higher prices on crude oil as long as $102.15 support is in place. As such, we suspect that the current set-back is wave (ii) that may look for a support in the $104-$105 zone, in one of the Fibonacci support levels. Reversal from there, in impulsive fashion back to $108 will be nice indication for a bullish moves, but then toward the $110 level.
OIL 4h chart
On a daily chart, we can see that price broke sharply higher a few weeks back, which is looking impulsive; it’s a sharp move in a short period of time. Impulses are five-wave patterns and if we focus just on the latest rally from $91.20, we can see that move is not in five waves yet. As such, we think that latest pull-back from above $109 was wave four, so we are looking higher into wave five.
Oil Daily chart
The U.S. Dollar Index (NYBOT:DXU13) is trading lower for a few weeks now, but decline from 85.00 has a corrective look for now, so we suspect its part of a larger complex correction from May highs. We are tracking a W)-X)-Y) correction, so if we are correct the U.S. dollar should find a support somewhere around 80.30-81.00 level. An impulsive rally from here and back to 83.00 will put prices back in bullish mode. That's what is called a confirming price action. Let's see if we get one!
Dollar Index Daily: Elliott Wave Analysis Chart