Rambus’ Wed night report is a shocking eye opener. Commodities starting their second leg down, I am totally on board with this analysis. In fact I have been saying for quite some time that with the decline of oil we have been missing one thing. And that is the POR. We never had it. The collective sentiment of the oil market still remains “this too shall pass in relative short order”. We have not had that collective realization that this thing isn’t coming back so soon. No big drop accompanied with panic selling… or said another way a classic crash. Recall the POR and its crash come in the first half of a bear market. And its my judgement that oil is in a bear market. And you know what that means knights….take all of my bear market essays and replace the word gold with oil….Yikes!

Its my suspicion that oils market object lesson has now arrived. We could of course bounce from here first but I suspect not. Recall we started our breakdown last year in late July also. We are now violating some of the lows of the spring. The XLE already has. I have been short using the DUG etf.

This chart shows where I think we are. At the cusp of a severe break. We have seen the model and its now oils turn to follow it.