RBOB Blinked First, Exposes Another Intra-Range Relapse

September 20, 2016 3:36AM CDT

In Fri's Technical Blog we discussed the recent disconnect between RBOB's Sep rally and crude oil's continued slide.  Knowing these typically positively correlated markets could not sustain trends in opposite directions for too long, something had to give.  And as a result of overnight's failure below our short-term corrective low and risk parameter at 1.4136, it is RBOB that blinked first, leaving Fri's 1.4788 high in its wake as the END of the rally from at least 14-Sep's 1.3374 low and possibly the end of broader rally from 29-Jul's 1.1921 low.  As a result, that 1.4788 now serves as our new short-term parameter from which the risk of all non-bullish decisions like long-covers and cautious bearish punts can now be objectively based and managed.

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The market's gross failure to sustain last week's gains above the past MONTH'S worth of 1.42-to-1.44-handle-area resistance-turned-support is obviously an indication of waning strength, and the fact that this relapse stems from the extreme upper recesses of the past quarter's range reinforces the entire 1.47-to-1.51-range as a considerable resistant cap and condition.

Yesterday and overnight's relapse also exposes the entire recovery from 29-Jul's 1.1921 low to last week's 1.4788 high as a 3-wave affair as labeled in the daily log scale chart below.  Left unaltered by a recovery above 1.4788 , we believe this recovery attempt to the B-Wave of a major ("flat") bull market correction down from 08-Jun's 1.5121 high that could expose a Jun-Jul-type assault on the extreme lower recesses of the 1.51 - 1.19-range in the month ahead.

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A break below 14-Sep's next larger-degree corrective low at 1.3374 remains required to break Sep's uptrend, but we believe the combination of this week's admittedly short-term mo failure from the extreme upper recesses of the past quarter's range is an overriding combination that warns of more considerable downside vulnerable that warns of an immediate move to a neutral-to-cautiously-bearish policy and exposure with strength above 1.4788 required to negate this call and resurrect a major bullish count.  In lieu of such 1.4788+ strength recovery attempts to the 1.4400-area OB are advised to first be approached as corrective selling opportunities ahead of further and possibly steep, if intra-range losses to levels below 1.3000 in the weeks ahead.

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