Energy Complex Builds on Base/Reversal Threat

January 15, 2019 10:47AM CST


While 04-Dec's 54.55 larger-degree corrective high and key long-term risk parameter remains to be broken to break 4Q18's major slide, the extent and impulsiveness of the market's recovery following 02-Jan's bullish divergence in short-term momentum discussed in that day's Technical Blog is not unimpressive and contributes to a broader base/reversal-threat environment.  IF the recovery from 24-Dec's 42.36 low is indeed the start of a broader correction or reversal of Oct-Dec's meltdown, then it's imperative that rallies now unfold in an impulsive, 5-wave manner.  Given the 3rd-wave appearance of the rally from 02-Jan's 44.35 low to Fri's 53.31 high, we're approaching the past couple days' setback attempt as a (4th-Wave) correction ahead of further (5th-wave) gains to new highs above 53.31.

As a result of this assessment, yesterday's 50.38 low may be used as a micro risk parameter to a still-advised cautious bullish policy.  From an intermediate-term perspective 26-Dec's 47.00 (suspected 1st-Wave) high serves as our short-term risk parameter the market is required to fail below to jeopardize the impulsive integrity of a broader bullish count and resurrect a broader bearish one.

Crude Light 240 Min Chart


Crude Light Daily Chart

The daily log chart above shows the magnitude of Oct-Dec's 45% collapse and 04-Dec's 54.55 larger-degree corrective high the market is required to recoup to, in fact, break the major downtrend.  As mentioned above, the past couple weeks' recovery is impressive and with each new high contributes to a base/reversal count that, above 54.55, warns of correction or reversal higher that could be major in scope, especially given the historical extent to which the sentiment/contrary opinion indicators have understandably gotten beaten up.  This bearish sentiment cannot be ignored as a warning of upside vulnerability beyond some level like 54.55.

These issues considered, a cautious bullish policy remains advised for shorter-term traders with protective sell-stops advised just below 50.38 and/or 47.00 commensurate with one's personal risk profile.  Long-term players remain OK to maintain a cautious bearish policy with a recovery above 54.55 required to negate this call, warrant covering remaining exposure and shift directional focus to approaching setback attempts as corrective buying opportunities.

Crude Light Weekly Chart



The technical construct and expectations for diesel are pretty much the same as those detailed above in crude oil with the early-Jan rally leaving 26-Dec's (suspected 1st-Wave) high in its wake as our new short-term risk parameter the market needs to sustain qains above to maintain a more immediate bullish count.

Heating Oil 240 Min Chart


Heating Oil Daily Chart

07-Dec's 1.9534 larger-degree corrective high remains intact as our key long-term risk parameter the market needs to recoup to break 4Q18's major downtrend and confirm a major correction or reversal higher.  The prospect hat Oct-Dec's decline is a complete 5-wave Elliott sequence coupled with the market's rejection of the exact (1.6379) 50% retrace of Jan'16 - Oct'18's massive 0.8538 - 2.4500 bull market would seem to contribute to a base/reversal-threat argument.

In sum, a cautious bullish policy remains advised for short-term traders with a failure below 1.7493 required to negate this call and warrant its cover.  Long-term players remain OK to maintain a cautious bearish stance with a recovery above 1.9534 required to negate this call and warrant its cover.

Heating Oil Weekly Chart



Rbob Feb '19 240 Min Chart


The technical construct and expectations for RBOB are the same as those detailed above for diesel and crude with the key short- and long-term risk parameters and directional toggles located at 1.3380 and 1.5177, respectively.

Rbob Feb '19 Daily Chart


Rbob Feb '19 Weekly Chart


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