Posted on Jul 29, 2022, 10:17 by Dave Toth

Since Tue morning’s bullish divergence in RBOB momentum addressed in that day’s Technical Webcast, we’ve been discussing the developing base/correction/recovery scenarios across the entire complex.  With this morning’s recovery above 19-Jul’s 100.99 smaller-degree corrective high and short-term risk parameter, the crude oil market has joined the fray.  As a result of this 100.99+ poke, the 240-min chart below shows that this market has defined smaller-degree corrective lows at 96.04 and 93.01 that it is now required to sustain gains above to maintain a more immediate, if interim bullish count.  Per such, these levels represent our new mini and short-term risk parameters from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.

The importance of these recent lows and short-term BULL risk parameters is that it remains indeterminable whether Jun-Jul’s approximate 22% decline is the (1st-Wave) start of a major peak/reversal process OR the completing C-Wave of a 4-month and major bull market correction ahead of a resumption of the secular bull trend.  In either case, a (2nd-Wave) corrective rebound or the 5th-Wave resumption of the secular bull calls for higher, and potentially much higher prices from here.

The fact that this market has obviously recognized the lower boundary of the past four months’ lateral range as support is clear and in effect until and unless this market relapses below recent lows at 93.01 and certainly 90.56.  Until and unless such weakness is proven, traders are advised not to underestimate the extent to which this market might now be able to move higher.

On an even longer-term basis and as recently discussed, the combination of:

  • a confirmed bearish divergence in weekly momentum amidst
  • historically frothy sentiment/contrary opinion levels and
  • an arguably textbook complete 5-wave Elliott sequence from Aug’21’s low

is a unique and compelling list of factors that warn of a major peak/reversal threat.  Corrective rebounds WITHIN such a peak/reversal PROCESS are commonplace however, and this is what might be signaled by today’s recovery above 100.99.

These issues considered, traders are advised to move to a neutral-to-cautiously-bullish policy from current 101.35-area prices with a failure below 96.04 threatening this call and warranting a move to the sidelines.  In lieu of such weakness, further and possibly accelerated gains straight away should not surprise.

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