NOV HEATING OIL

Overnight’s break below last week’s 3.1259 initial counter-trend low confirms a bearish divergence in at least daily momentum and potentially in WEEKLY momentum that raises the odds that 14-Sep’s 3.4178 high is THE END of a textbook and major 5-wave Elliott sequence up from 04-May’s 2.1500 low, exposing a major correction or reversal lower.  Overnight’s resumed weakness also leaves Fri’s 3.3564 high in its wake as the latest smaller-degree corrective high this market is now required to recoup to render the sell-off attempt from 3.4178 a 3-wave and thus corrective affair that would mitigate a broader peak/reversal count and resurrect the 5-month uptrend.  Per such, we’re defining 3.3564 and 3.4178 as our new short- and long-term parameters from which traders can objectively base non-bullish decisions like long-covers and new bearish punts.

The daily log scale chart above shows the bearish divergence in momentum that arguably defines 14-Sep’s 3.4178 high as the end of the 5-wave Elliott sequence up from 04-May’s 2.1500 low.  If correct, even a Fibonacci minimum 38.2% retrace doesn’t cut across until the 2.8877-area.  But for some very long-term reasons discussed below, such a break to the 2.88-area may only be the initial drip before the deluge that would be the resumption of Jun’22 – May’23’s INITIAL decline in a new secular bear market in diesel prices.

On a broader scale, the weekly log close-only chart below also shows the prospect of a complete and textbook 5-wave sequence up from the May low with the nicely developing potential for a bearish divergence in momentum if this market can close out the week below 01-Sep’s 3.1202 corrective low.  Contributing mightily to a broader peak/reversal threat is the frothy extent to which the Managed Money community has its neck sticking out on the bull side.  At a current 81% level representing a whopping 50K long positions reportable to the CFTC versus only 12K shorts, fuel for downside vulnerability is in ample supply.

What’s also notable about this weekly perspective is that despite the admittedly impressive extent of this year’s recovery, it still pales in comparison to Jn’22 – May’23’s $2.05, 47% collapse.  Indeed, by thus far stalling around the exact (3.4128) 61.8% retrace of last year’s meltdown, this year’s entire recovery attempt remains well within the bounds of a mere (B- or 2nd-Wave) CORRECTION within a massive, multi-quarter peak/reversal count that, if correct, warns of an eventual resumption of last year’s collapse to levels potentially well below 2.0000.  Such a move is on NOBODY’S call sheet at this time and would likely only be accompanied or caused by a meltdown in the global economy.  Please see our latest E-Mini S&P update for major peak/reversal-threat elements in equities.

Lastly and on an even broader monthly log basis, the chart below shows:

• the market’s gross failure to sustain 2022 “breakout” above 2008’s previous all-time high around 4.15
• a textbook complete and massive 5-wave Elliott sequence up from Apr’20’s 0.6724 low amidst
• expectedly stratospheric sentiment/contrary opinion levels and
• an extensive and 5-wave impulsive INITIAL counter-trend plunge from Jun’22’s 4.6070 orthodox high to May’s 2.1500 low.

Jun’22 – May23’s plunge “only” retraced 38.2% of the 2020 – 2022 secular bull.  A resumption of last year’s correction or reversal lower could easily lead to a 50% retrace around 1.7600.  At this juncture, this is long-term speculation and we certainly cannot conclude such a long-term bearish count from only the past few weeks’ weakness.  But by virtue of this recent weakness, the market HAS identified some developing and objective resistance levels and bear risk parameters at 3.3564 and especially 3.4178.  If this bearish count and prospect is totally wrong and the diesel bull has a long way to go, then the onus is now on the bull to BEHAVE LIKE ONE and resume trendy, impulsive behavior to the upside above these resistance levels and risk parameters.  Until and unless such strength is shown, further and possibly long-term protracted losses should not surprise.

These issues considered, any/all previously recommended bullish exposure for long-term commercial players has been nullified, and a new bearish policy is advised.  Strength above at least 3.3564 and preferably 3.4178 s required to pare and then neutralize new bearish exposure.  A bearish policy and exposure remain advised for shorter-term traders with a recovery above 3.3564 required to negate this call and warrant its cover.  Yesterday’s 3.2124 minor corrective high can be used as a mini bear risk parameter, but this tight a risk parameter includes whipsaw risk.

NOV RBOB

The only change we have in our RBOB analysis is the trailing of short- and longer-term bear risk parameters following the past couple days’ continued drubbing.  The 240-min chart above and daily log chart below show that this continued slide leaves smaller- and larger-degree corrective highs in its wake at 2.4370 and 2.5791 that this market must now recoup to defer and threaten a major peak/reversal count.  Per such, these levels serve as our new short- and long-term parameters from which a still-advised bearish policy and exposure can be objectively rebased and managed.

And it should be noted that this broader peak/reversal performance in gas started out exactly as the weakness in heating oil has as discussed above.

Also, by breaking early-May’s major corrective low on a weekly log close-only basis below, this market has confirmed a bearish divergence in WEEKLY momentum that all but confirms this entire year’s recovery attempt as an extraordinarily labored 3-wave CORRECTION that now exposes a resumption of last year’s INITIAL (A- or 1st-Wave) phase of a new secular bear market to eventual new lows potentially well below $2.00.  Such a bear would likely be caused by a collapse in demand caused by a defaulting global economy.

In sum, a bearish policy and exposure remain advised with a recovery above at least 2.4370 required to pare or neutralize exposure.  In lieu of such strength, the trend is clearly down on all practical scales and should not surprise by its continuance or acceleration straight away.