Diesel, RBOB Teetering | RJO Futures

January 9, 2017 2:36AM CST

FEB RBOB

Overnight's break below last week's initial counter-trend support in the 1.6169-to-1.6120-range confirms a bearish divergence in momentum that exposes at least the intermediate-term trend as down. The important by-product of this developing weakness is the market's definition of Fri's 1.6583 high as the latest smaller-degree corrective high and new short-term risk parameter this market now needs to sustain losses below to maintain a more immediate bearish count.  Its failure to do so would render the sell-off attempt from 03-Jan's 1.7095 high a 3-wave and thus corrective affair consistent with a still-developing broader bullish count.  Former 1.6170-area support is considered new near-term resistance.

NY Gasoline 240 min

NY Gasoline Daily

From a longer-term perspective however this admittedly momentum failure is thus far of a scale insufficient to conclude the end of the rally from 14-Nov's 1.2865 low shown in the daily (above) and weekly (below) log scale charts.  Against the backdrop of 2016's major reversal higher, the market remains above a ton of former price action that can be looked at as new support, specifically the upper-1.52-handle area defined by 24-Oct's former 1.5279-area resistance and 15-Dec's larger-degree corrective low and key long-term risk parameter at 1.5292 .

The prospect that the rally from 14-Nov's 1.2865 low to last week's 1.7095 is a complete 5-wave Elliott sequence must be acknowledged, but only commensurately larger-degree weakness below 1.5292 will confirm it.  This area of former resistance-turned-support is also home to the Fibonacci minimum 38,2% retrace of Nov-Dec's rally at 1.5336.

The weekly log chart below shows that sentiment accorded this market has reached historically high levels that have warned of and accompanied broader peak/reversal threat environments.  Overnight's resumed weakness COULD be the early indication of another such peak/reversal environment.  But if something bigger is developing to the bear side, then it is now incumbent on the bear to SUSTAIN losses below 1.6583 AND maintain trendy, impulsive behavior lower that ultimately breaks 15-Dec's key 1.5292 larger-degree corrective low and key risk parameter.  In effect we believe the market has identified 1.5292 and 1.6583 as the key directional triggers heading forward.

In sum, shorter-term traders with tighter risk profiles are advised to move to a neutral-to-cautiously-bearish policy with strength above 1.6583 required to negate this call and re-expose 2016's major bull.  Longer-term players are advised to pare bullish exposure to more conservative levels and jettison the position altogether on a failure below 1.5292.

NY Gasoline Weekly

FEB HEATING OIL

03-Feb's short-term mo failure below 1.7099 has thus far been followed with a grudging, labored 50% retrace of that initial 1.7647 - 1.6650 plunge that would seem to reinforce at least the intermediate-term trend as down with at least one more round of new lows below last week's 1.6650 low.  But whether this peak/reversal threat will have the ability to continue through 22-Dec's larger-degree corrective low and key risk parameter at 1.6443 remains to be seem.

NY Gasoline 240 min

NY Gasoline Daily

The POTENTIAL for a bearish divergence in momentum is developing nicely on a daily log scale basis above, but proof of weakness below 22-Dec's larger-degree corrective low and key risk parameter at 1.6443 remains required to CONFIRM the divergence to the point of non-bullish action like long-covers and cautious bearish punts.  The combination of an arguably complete 5-wave Elliott sequence up from 14-Nov's 1.4043 low and return to historically frothy levels in our RJO Bullish Sentiment Index shown in the weekly log chart below contributes to a peak/reversal-threat environment.  But traders are reminded that sentiment is not an APPLICABLE technical tool in the absence of a confirmed bearish divergence in momentum of a scale sufficient to break the broader uptrend.  Herein lies the importance of 22-Dec's 1.6443 larger-degree corrective low and key risk parameter.

These issues considered, shorter-term traders with tighter risk profiles are advised to move to a neutral/sideline position with resumed weakness below last week's 1.6650 warranting a move to a cautious bearish policy.  Subsequent strength above Fri's 1.7146 high would then be required to negate that call.  Longer-term players are advised to pare bullish exposure to more conservative levels with a failure below 1.6443 required to jettison the position altogether.

NY Gasoline Weekly


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