Energy Complex Gains Consistent With L-T Technical Counts

April 5, 2017 8:25AM CDT

MAY CRUDE OIL

Yesterday's break above Fri's 50.85 high reaffirms the developing uptrend and bullish count discussed in Fri's Technical Blog and leaves yesterday's 49.88 low in its wake as the latest smaller-degree corrective low the market is now required to fail below to arrest this rally and expose even an interim corrective setback, let alone Feb-Mar's broader slide.  In this regard 49.88 is considered 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 by shorter-term traders with tighter risk profiles.  Former 50.85-area resistance is considered new near-term support.

Crude Light 240 Chart

Crude Light Daily Chart

Both the daily chart above and weekly log chart below show the market's current engagement with the 51-handle that has been an outstanding toggle point for the past year.  IF this current rebound is merely a corrective spasm ahead of something broader to the bear side, then this 51-handle area would be expected to contain it.  And the first evidence of such a containment would be via a confirmed bearish divergence in short-term mo below a tight but objective corrective low and risk parameter like 49.88.  IF, alternatively, our long-term bullish count is poised to resume, then the current trendy, impulsive rally would be expected to levels into a 52-handle and ultimately to new highs above this year's 03-Jan high of 55.24.

The technical facts that reinforce a long-term bullish count are:

  • the longer-term uptrend from Feb'16's 26.05 low (threatened or negated ONLY by a failure below Nov's 42.20 corrective low)
  • historically bearish levels of late in the Bullish Consensus (marketvane.net)
  • a confirmed bullish divergence in momentum following Thur's recovery above 50.14
  • an arguable 3-wave and thus corrective sell-off attempt from Jan's 55.24 high to 22-Mar's 47.01 low as labeled in the daily chart above
  • Jan-Mar's 61.8% retrace of Nov-Jan's preceding 42.20 - 55.24 rally.

Crude Light Weekly Chart

Traders are reminded that from an even longer-term perspective shown in the monthly log scale chart below, early-2016's recovery BROKE the secular bear trend from May'11's 114.83 high.  As discussed at the time this exposes a major, multi-year correction or reversal higher.  As the market has yet to mitigate this long-term bullish count with a failure below 42.20, 3-wave corrective sell-off attempts such as Jan-Mar's 55.24 - 47.01 decline should not come as a surprise nor should a resumption of the past YEAR'S uptrend that preceded it.

These issues considered, a cautious bullish policy is advised from current 51.60-area prices with weakness below 49.88 required to defer or threaten a more immediate bullish call and expose another interim corrective dip that we'd expect to provide a preferred risk/reward condition from which to re-establish longs.  In lieu of such sub-49.88 weakness further and possibly surprising, accelerated gains are expected.

Crude Light Monthly Chart

 

MAY HEATING OIL

Not surprisingly the technical construct and expectations for diesel are virtually identical to those detailed above for crude oil given the extent and impulsiveness of the past couple weeks' recovery.  Yesterday and today's continuation of this rally leaves yesterday's 1.5527 low in its wake as the latest smaller-degree corrective low and new short-term risk parameter the market is now minimally required to fail below to defer or threaten a broader bullish count.

NY Gasoline 240 min Chart

This smaller-degree corrective low and risk parameter may come in handy as the market encroaches an area defined by the (1.6099) 61.8% retrace of Feb-Mar's 1.6839 - 1.4970 decline on a daily log close-only basis below and the pivotal upper-1.63-handle-area that supported this market for nearly two months before 01-Mar's breakdown that renders this former support and key new resistance candidate.  IF something broader to the bear side is still brewing and this past couple week's recovery is just a correction, we'd expect a bearish divergence in momentum (below 1.5527) to arrest this rally shy of 1.6400.  Further gains above 1.6400 would render Dec-Mar's sell-off attempt a 3-wave and thus corrective affair and expose a resumption of 2016's major uptrend that preceded it.

NY Gasoline Daily Chart

NY Gasoline Weekly Chart

The weekly log scale active-continuation chart above shows the 1.60-to-1.61-handle area as a key one around which this market has toggled for the past year.  A clear break back above this area would reinforce our long-term bullish count that contends this year's sell-off attempt is yet another corrective affair similar to Oct/Nov and Jun/Aug'16's sell-off attempts.  Indeed, the major UPtrend remains easy to see on a monthly log scale chart below that requires a failure below Nov's 1.3737 corrective low to negate.  Recent historically low/bearish levels in the Bullish Consensus measure of market sentiment would seem to reinforce a broader bullish count.

While the trend is clearly up and potentially on its way to new 2017 highs, we believe the risk/reward merits of entering bullish exposure "up here" in the middle of this year's 1.74 - 1.50-range and just below a key resistance candidate around 1.6375 are questionable.  Per such a neutral/sideline policy is advised for the time being.  We will look for another intra-range corrective setback and definition of a tighter risk parameter as prerequisites to a preferred risk/reward bullish opportunity.

NY Gasoline Monthly Chart

 

MAY RBOB

The technical condition in RBOB is the same as those discussed above with yesterday's 1.6839 considered our new short-term risk parameter to a cautious bullish play.

NY Gasoline 240 min Chart

NY Gasoline Daily Chart

And while the daily log scale chart above shows today's high in the immediate neighborhood of the (1.7369) 50% retrace of Jan-Mar's 1.9065 - 1.5824 decline, the market's recovery today above our long-term risk parameter at 1.7303 breaks the 1Q17 downtrend and renders it a 3-wave affair as labeled.  Left unaltered by a relapse below 14-Mar's 1.5824 low and key risk parameter, this 3-wave decline is considered a corrective/consolidative affair that warns of a resumption of last year's major uptrend that preceded it.  The Fibonacci fact that Jan-Mar's sell-off attempt stalled within a buck of the (1.5910) 50% retrace of 2016's entire 1.2755 - 1.9065 rally amidst a return to relatively low, pessimistic sentiment levels typical of previous base/reversal environments reinforce the prospect that Jan-Mar's setback is yet another corrective structure ahead of the long-term bull's resumption.

These issues considered, a cautious bullish policy remains advised with setback attempts to 1.7175 OB first approached as corrective buying opportunities with an admittedly short-term mo failure below 1.6839 required to negate this specific bullish count and warrant a return to the sidelines.  In lieu of such sub-1.6839 weakness further and possibly accelerated gains should not surprise.

NY Gasoline Weekly Chart

 


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