MAY CRUDE OIL

In 06-Apr’s Technical Blog we discussed the market satisfying two of our three base/reversal requirements.  With Thur’s relapse below 07-Apr’s 23.54 low that confirms a bearish divergence in short-term momentum and exposes the short-term trend as down, the market has the opportunity to satisfy the key third requirement of proof of labored, corrective behavior on a relapse attempt.

Indeed, by breaking 07-Apr’s 23.54 initial counter-trend low, the market has confirmed 03-Apr’s 29.13 high as the end of the rally from 30-Mar’s 19.27 low and left last Thur’s 28.36 high in its wake as the latest smaller-degree corrective high the market is now required to recover above to render the sell-off attempt from 29.13 a 3-wave and thus corrective affair that would reinforce a base/reversal count that we believe could be major in scope.  Until and unless that 28.36 high is recouped, there’s no way to know that the price action from 18-Mar’s 20.52 low to 03-Apr’s 29.13 high isn’t a (4th-Wave) correction ahead of a resumption of the secular bear trend to new lows below 19.27.

IF the current relapse IS part of a broader base/reversal count however, then we would expect a relapse-stemming bullish divergence in short-term momentum somewhere between spot and 30-Mar’s 19.27 low, and perhaps around the (22.56) 61.8% retrace of the initial 19.27 – 29.13 rally.  Very, very short-term strength above overnight’s 24.74 high would tilt the directional scales higher and provide an early indication of the bullish count, leaving whatever low is left in the wake of that 24.74+ recovery as a new micro risk parameter from which bullish punts can be objectively based and managed.

From a longer-term perspective and as discussed last week, our base/reversal-threat count s predicated on:

• a confirmed bullish divergence in daily momentum
• an arguably complete 5-wave Elliott sequence down from 06-Jan’s 64.72 orthodox high
• historically bearish sentiment levels and
• an “outside WEEK” (lower low, higher high and higher and higher close than the previous week’s range and close) the week of 30-Mar’s 19.27 low.

These facts and observations identify that 19.27 low as THE key risk parameter the market needs to break to nullify this base/reversal count.  In effect, the market has identified 19.27 and 28.36 as the key directional triggers heading forward.  We will be watchful for a relapse countering bullish divergence in short-term momentum from current mid-22-handle-area prices for an early indication of the bullish count and favorable risk/reward buying opportunity.  In lieu of such a mo failure and/or a recovery above at least 24.74, further lateral-to-lower prices should not surprise, including a resumption of the major bear to new lows below 19.27.

MAY HEATING OIL

The technical construct and expectations for heating oil are identical to those detailed above for crude with the key short- and long-term risk parameters noted at 1.0777 and 0.9303, respectively.  Needless to say, a break of 01-Apr’s 0.9303 low will reinstate the secular bear trend, but the market’s ability to SUSTAIN losses below 0.9303 will become a pivotal longer-term factor with respect to a base/reversal environment that could be major in scope.

These issues considered, a neutral/sideline policy is advised for the time being.

MAY RBOB

Fri’s break to yet another new high for the two-week recovery is consistent with our base/reversal count discussed in 02-Apr’s Technical Blog.  This continued recovery leaves last Wed’s 0.6252 low in its wake as the latest smaller-degree corrective low it now needs to sustain gains above to maintain a more immediate bullish count.  In this regard this 0.6252 level becomes our new short-term risk parameter from which a cautious bullish policy can be objectively rebased and managed.  A failure below this level will expose at least a (B- or 2nd-Wave) correction of the rally from 23-Mar’s 0.4605 low OR a (5th-Wave) resumption of the secular bear trend.

From a longer-term perspective and as with crude oil, the daily (above) and weekly (below) log scale charts show:

• a confirmed bullish divergence in daily momentum
• an arguably complete 5-wave Elliott sequence down from 06-Jan’s 1.9791 orthodox high amidst
• historically bearish sentiment levels.

These facts and observations identify 23-Mar’s 0.4605 low as THE key risk parameter this market is required to break to nullify a base/reversal count that we believe will be major in scope and reinstate the secular bear trend.  Until and unless such sub-0.4605 weakness is proven, long-term players are advised to maintain a bullish policy and exposure.  Shorter-term traders with tighter risk profiles remain advised to maintain a bullish policy with a failure below 0.6252 required to defer or threaten this call enough to warrant a move to the sidelines to circumvent the depths unknown of either a deeper correction of the rally from 0.4605 or a resumption of the secular bear.