SEP CRUDE OIL
Overnight’s clear break above the past month’s 41.63-to-41.26-area resistance reinstates the major reversal from 21-Apr’s 6.50 low and leaves corrective lows in its wake at 39.97, 38.54 and 38.54 that the market is now expected to sustain gains above to maintain a more immediate bullish count. Its failure to do so would threaten and then negate a bullish construct and warn of a larger-degree correction lower. Per such, these specific levels represent our new micro-, short- and long-term risk parameters from which traders can objectively rebase and manage the risk of resumed bullish policies and exposure commensurate with their personal risk profiles.
Former 41.63-to-41.26-area resistance would be expected to hold as new near-term support per any broader bullish count.
These risk parameters may come in handy given a list of threats to the bull, including:
- upside momentum that’s been waning since early-Jun
- an arguably complete or completing 5-wave Elliott sequence up from 21-Apr’s 6.50 low as labeled in the daily log chart above
- the quick return to historically frothy levels in our RJO Bullish Sentiment Index
- the market’s engagement of a key former support from Dec’18 around 42.36 that, since demolished in Mar, now serves as a resistance candidate with the neighboring
- (43.05) 61.8% retrace of Jan-Apr’s 65.65 – 6.50 meltdown.
HOWEVER, NONE of these facts and observations are applicable in the absence of an accompanying confirmed bearish divergence in MOMENTUM needed to, in fact, break the clear and present uptrend. Every successful commodities trader and analyst knows the “trend is your friend” and that trying to pick tops is futile. We have specified the risk levels this market, quite simply, now needs to fail below to defer, threaten and then negate the 3-month uptrend. And until such weakness is proven, the uptrend is intact and its upside potential is indeterminable and potentially extreme.
These issues considered, a bullish policy remains advised for long-term players with a failure below 38.54 required to pare exposure to more conservative levels and commensurately larger-degree weakness below 34.36 to neutralize remaining exposure and circumvent the depths unknown of a correction lower that could be extensive. Shorter-term traders whipsawed out of bullish exposure following 24-Jun’s bearish divergence in short-term mo are advised to first approach setback attempts to 41.60 OB as corrective buying opportunities with a failure below 39.97 required to defer or threaten this call enough to warrant its over. In lieu of weakness below at least 39.97 and preferably 38.54, further and possibly accelerated gains should not surprise.
AUG HEATING OIL
With the exception of our RJO Bullish Sentiment Index that remains relatively low for diesel, the technical construct and expectations are identical to those detailed above in crude oil following overnight’s clear breakout above 06-Jul’s 1.2583 high that reinstates the 3-month uptrend. This resumed rally leaves smaller- and larger-degree corrective lows in its wake at 1.2018 and 1.1296, respectively, that now serve as our new short- and longer-term risk parameters from which a bullish policy and exposure can be objectively rebased and managed.
Former 1.25-handle-area resistance is considered new near-term support ahead of further and possibly accelerated gains straight away.