Has oil bottomed?

The new lunar red period has started with fresh selling pressure in stocks and the weekly reversal levels stay in bearish trend for most markets. It looks like our LT wave for September is panning out quite well, but there is still more than a week to go so we can’t take anything for granted. Let’s have a look at the Nasdaq chart (click image to enlarge it):

The Nasdaq has rebounded well from the August lows, but this was the easy part. The far more difficult hurdle on the way back up is the 4950-5150 zone, the area where many investors have bought in the last 6 months. Some investors are probably waiting for break even to do their selling, and all that selling will have to be absorbed before the market can go higher. I think we are getting to the point where that delayed selling is starting to show up.
Technically the slower Earl2 indicator (orange line) keeps going up from a major low, but the faster Earl (blue line) has turned down from a high level. This suggests we will first see some consolidation. A retest of the August lows is not impossible, but it is more likely that 4600 will offer major support if the Nasdaq heads down again.
The market has gone up nicely in the recent lunar green period, but the real test of underlying strength in the market will come now, in the red period. If the market holds up well, or even marks gains, then things will look pretty good heading into Q4. If the market drops sharply in the next few weeks, then we are probably in for several more months of pain. There is still plenty of reason to stay cautious as it is too early to declare the correction over.

As chart of the week I want to take a look at crude oil. This is a weekly chart for a longer term perspective (click image to enlarge it):

“Lava” marked a major top in August 2013. The subsequent massive drop has painted a period of “floating ice” and “open water”, and we now see the first signs of life with icy mountain appearing and going higher. This can still turn into an iceberg, which would be a bearish sign. But if some green grass appears it would be the first indication of longer term bullish energy in more than a year. A breakout above $55 would terminate the long term down trend channel, and then oil can rise to $60 and higher. I am looking for $75 to be reached in the most bullish scenario.
Note: more info about reading icebergs charts can be found in this article.

Danny