S-T Nat Gas Failure Stems Suspected Correction

August 19, 2016 3:09AM CDT

The market's recovery yesterday above our short-term risk parameter defined by 10-Aug's 2.65 corrective high confirms a bullish divergence in short-term momentum that defines 12-Aug's 2.523 low as the END of at least the decline from 04-Aug's 2.885 high and possibly the end of a major bull market correction down from 01-Jul's 2.990 high.  As a result 2.523 becomes our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can now be objectively based and managed.  Further gains however above 03-Aug's 2.722 low are needed to really jeopardize the impulsive integrity of an alternate bearish count and reinforce the entire Jul-Aug sell-off attempt as a 3-wave and thus corrective affair consistent with a longer-term bullish count.

Natural Gas 240 min

Natural Gas Daily

TO THIS POINT the sell-off attempt from 01-Jul's 2.990 high is clearly only a 3-wave structure in the daily log scale chart above.  Within the context of the very impressive, impulsive rally from 07-Mar's 1.611 low shown in the weekly log chart below, it's easy to see the bull-flag potential of a CORRECTION within the still-developing uptrend.  And again, yesterday's short-term mo failure defines a 2.523 low from which a resumed bullish count can be objectively based.  But bulls should be aware that a bullish count is far from secure at this juncture as further strength above at least the 2.722-area is needed for reinforce ment. A subsequent relapse below 2.523 could leave this market particularly vulnerable to further and possibly steep losses given the steepness and fairly uninterrupted nature of May-Jun's component of this year's rally.

These issues considered, shorter-term traders with tighter risk profiles have been advised to move to a neutral position for the time being and to first approach a relapse to 2.585 OB as a corrective buying opportunity with a failure below 2.523 negating the call and warranting a move back to a neutral-to-cautiously-bearish position.  Longer-term players are advised to pare bearish exposure to a more conservative level on a setback to 2.585 and move to a cautious bullish policy on a recovery above yesterday's 2.697 high.

Natural Gas Active Weekly

RJO Futures | 222 South Riverside Plaza, Suite 1200 | Chicago, Illinois 60606 | United States
800.441.1616 | 312.373.5478

This material has been prepared by a sales or trading employee or agent of RJO Futures and is, or is in the nature of, a solicitation. This material is not a research report prepared by RJO Futures Research Department. By accepting this communication, you agree that you are an experienced user of the futures markets, capable of making independent trading decisions, and agree that you are not, and will not, rely solely on this communication in making trading decisions.