S-T Nat Gas Failure Stems Suspected Correction

August 19, 2016 8:09AM 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.

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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 reinforcement.  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.

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