Energy Complex Breakouts Reaffirm Reversals, Define New Bull Risk Levels

July 20, 2017 8:45AM CDT

SEP CRUDE OIL

Yesterday and overnight's break above the past couple weeks' resistance ranging from 46.88 to 47.32 confirms our bullish count discussed in last Fri's Technical Webcast and exposes the longer-term trend as up.  As a direct result of this continued strength the 240-min chart below shows that the market has identified Mon's 45.89 low and 10-Jul's 43.65 low as the latest smaller- and larger-degree corrective lows that now serve as our new short- and longer-term risk parameters to a continued bullish policy and exposure.

From an Elliott Wave perspective the rally from 10-Jul's 43.65 low is either the C-Wave of a broader bear market correction OR a 3rd-Wave of a much more dramatic move higher.  As always, we bias towards a wave count that is WITH the trend at hand (i.e. "The trend is your friend") as identifying the risk parameters the market needs to nullify such a count are always more objective and practical then fading the clear and present uptrend.

IF the market has something bigger to the upside in store for us, former 46.88-to-47.32-range resistance would be expected to hold as new support and the market would NOT be expected to now fail below 45.89.  Rather, the uptrend would be expected to continue and even accelerate higher.

Crude Light 240 min Chart

Crude Light Daily Chart

On a daily active-continuation chart above, this year's Jan-Jun decline has certainly been one of the more jiggity-jaggity ones we've seen in a while with the market failing to sustain each now low BUT also failing to recoup a prior corrective high, UNTIL THIS WEEK.  By recovering above 05-Jul's 47.32 initial counter-trend high the market has exposed the longer-term trend as up until negated by a relapse below 10-Jul's 43.65 larger-degree corrective low and new key risk parameter.  In lieu of such weakness further and possibly accelerated gains should not surprise.

Potentially reinforcing this bullish count is the Fibonacci fact that this year's decline from 03-Jan's 55.24 high spanned a length within $0.15-cents (i.e. 1.000 progression) of Jun-Aug'16's preceding sell-off attempt from 51.67 to 39.19 on a weekly log active-continuation chart5 basis below.  COMBINED with the late-Jun's return to the lower range of market sentiment levels that have warned of and accompanied all of the key base/reversal environments since Feb'16's major low, it's not hard to see the favorable risk/reward merits of a bullish policy.

In sum, a bullish policy and exposure remain advised with a failure below at least 45.89 and preferably 43.65 required to threaten or negate this call and warrant defensive measures commensurate with one's personal risk profile.  In lieu of such weakness further and possibly surprising gains are expected straight away with former 47.32-to-46.88-range resistance considered new near-term support.

Crude Light Weekly Chart

 

SEP HEATING OIL

The technical construct and expectations for the now-prompt Sep heating oil contract are virtually identical to those detailed above for crude oil with yesterday's bust-out above the past couple weeks' 1.5264-to-1.5315-range resistance even more blatant and thorough then that of crude oil's breakout.  This resumed strength above 04-Jul's 1.5315 initial counter-trend high leaves smaller- and larger-degree corrective lows in its wake at 1.4968 and 1.4334, respectively, that now serve as our new short- and longer-term parameters from which the risk of a still-advised bullish policy and exposure can be objectively rebased and managed.  Former 1.5315-to-1.5264-range resistance is expected to hold as new near-term support.

NY Harbor 240 min Chart

NY Harbor Daily Chart

Here too, for the first time this year, the market has recouped a prior/initial counter-trend high by recovering above 05-Jul's 1.5248 high shown in the daily log, active-continuation chart above.  This resumed strength obviously exposes the longer-term trend as up and requires the bear to break below at least 1.4923 and preferably 1.4267 to threaten or negate this call.  In lieu of such weakness the market's upside potential is considered indeterminable and perhaps even severe given the market's 2Q17 drubbing of our RJO Bullish Sentiment Index to pessimistic levels near those that warned of and accompanied Jan'16's major base/reversal environment shown in the weekly log active-continuation chart below.

NY Harbor Weekly Chart

Finally, on an even longer-term basis shown in the monthly log scale chart below, traders are reminded that 2016's rally was clearly enough to break the secular bear market from Apr'11's 3.3247 high (and possibly from Jul'08's 4.1500 all-time high) to Feb'16's 0.8538 low.  Such a major base/reversal count warns that relapse attempts such as Jan-Jun'17's decline from 1.7551 high to 21-Jun's 1.3609 low are actually CORRECTIVE events within the multi-quarter base/reversal PROCESS ahead of an eventual resumption of 2016's uptrend to new highs above 1.76.  Whether or not the past month's rally IS THAT major resumed bull remains to be seen.  But at the very least the market has defined clear and specific levels at 1.4923 and 1.4267 from which the risk of a bullish policy can be objectively based and managed.

In sum, a full and aggressive bullish policy and exposure remain advised with former 1.5315 - 1.5264-range resistance considered new near-term support and a failure below at least 1.4968 required to threaten this call.  In lieu of such weakness further and possibly accelerated gains should not surprise.

NY Harbor Monthly Chart

 

SEP RBOB

The technical construct and expectations of the now-prompt Sep RBOB contract are virtually identical to those detailed above for diesel with Tue's 1.5190 low and 07-Jul's 1.4589 low considered our new short- and longer-term risk parameters the market is now required to fail below to threaten or negate this call.  In lieu of such weakness further and possibly accelerated gains are anticipated, including a multi-month or even multi-quarter run at Jan's 1.7750 high on a weekly log active-continuation chart basis.  Former 1.52-handle-area resistance is considered new near-term support.

NY Harbor 240 min Chart

NY Harbor Daily Chart

NY Harbor Weekly Chart

NY Harbor Weekly Chart

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