Posted on Apr 03, 2023, 08:17 by Dave Toth
MAY CRUDE OIL
Today’s sharp spike higher confirms our broader base/correction/recovery count introduced in 27-Mar’s Technical Blog and leaves Thur’s 72.61 low in its wake as the latest smaller-degree corrective low this market is now minimally required to fail below to mitigate this call. This said, the extent and impulsive nature of the rally from 24-Mar’s 66.82 low has “3rd-wave” written all over it, suggesting at least an interim (suspected 4th-Wave) correction ahead of a subsequent (5th-Wave) continuation of the rally before the prospect for a top to this move develops. Per such, we believe we’ll be able to trail/tighten this shorter-term bull risk parameter to the lower boundary of such a setback once this price action unfolds. For the time being however, we’re defining 72.61 as our new short-term parameter from which shorter-term traders with tighter risk profiles can objectively rebase and manage the risk of a continued bullish policy and exposure.
On a broader scale, the daily log scale chart above and weekly chart below show the factors on which our base/correction/recovery count is predicated, including:
- the market’s gross failure to sustain mid-Mar’s breakdown below the prior QUARTER’S support-turned-resistance around the 70.080-to-72.46-area
- the understandable erosion in sentiment/contrary opinion levels to at least year-and-a-half lows and, in the case of our RJO Bullish Sentiment Index, the lowest in 6-1/2- YEARS
- the nicely developing potential for a bullish divergence in WEEKLY momentum (confirmed above 18-Jan’s 82.66 larger-degree corrective high, and
- 20-Mar’s 64.36 low stalling within $0.73-cents of the (65.09) 50% retrace of the entire secular bull market from Apr’20’s 6.50 low to 14Jun22 orthodox high of 123.68.
This is a unique and compelling list of factors that warn of a base/correctio/recovery that could be significant relative to Jun’22 – Mar’23’s $59.32, 48% decline. Granted, a break above 18-Jan’s 82.66 larger-degree corrective high remains required to confirm a bullish divergence in weekly momentum and, in fact, break the 9-month downtrend. But as a result of this combination of factors listed above, 20-Mar’s 64.36 low is now considered as important and formidable a technical threshold as 82.66. What we must beware of now is challenging, volatile lateral-to-LOWER price action in the weeks ahead as the market attempts to rebut the past couple weeks’ rally that may only be the initial A- or 1st-Wave of a more protracted recovery in the months ahead.
Lastly and per our warning above regarding challenging, volatile behavior in the weeks and months ahead, the monthly chart below shows the market’s position deep, deep within the middle-half bowels of its massive but lateral historical range. Such range-center environments are fertile ground for aimless whipsaw risk that warrants a more conservative approach to directional risk assumption. Such an approach places emphasis on tight but objective risk parameters. Jan’s 82.66 high and 20-Mars 64.36 low are obvious important technical flexion points. What the market has in store for us between these thresholds, especially after today’s massive gap-up open to the extreme upper recesses of the past four months’ range, may be nothing short of a roller-coaster ride. Traders are urged to act accordingly with respect to directional risk assumption commensurate with their own personal risk profiles.
These issues considered, a bullish policy remains advised with a failure below 72.61 minimally required to threaten this call and warrant its cover. Traders also have the option of taking profits on longs and acknowledging and accepting whipsaw risk, above 18-Jan’s 82.66 high, in exchange for deeper nominal risk below 72.61. Needless to say, a relapse below 64.36 is required to mitigate what could be a multi-month correction higher and reinstate the secular bear, while a break above 82.66 confirms the correction and exposes indeterminable gains thereafter.
MAY HEATING OIL