JUL CRUDE OIL
Fri’s clear and now sustained break above the prior week’s resistance and highs around the 34.66-area reaffirms the still-developing uptrend and reversal from 21-Apr’s 6.50 low and leaves Thur’s 31.14 low in its wake as the latest smaller-degree corrective low the market is required to sustain gains above to maintain a more immediate bullish count. its failure to do so will confirm a bearish divergence in daily momentum, break the uptrend and expose a potentially more protracted corrective relapse. Per such, this 31.14 level becomes our new short-term but key risk parameter from which a bullish policy and exposure can be objectively rebased and managed.
Former 34.60-area resistance would be expected to hold as new near-term support heading forward.
The daily log scale chart above shows the developing potential for a bearish divergence in momentum, an indicator that would be considered CONFIRMED to the point of non-bullish action like short-covers IF the market fails below 31.14. Until and unless such sub-31.14 weakness is proven, the trend remains up on all practical scales and should not surprise by its continuance or acceleration.
The sentiment fact that our RJO Bullish Sentiment Index has spiked to historically extreme heights would contribute to at least an interim peak/correction count IF the market failed below 31.14. Until it does, sentiment/contrary opinion is not an applicable technical tool. And indeed, the historically low levels sentiment understandably reached during Mar/Apr’s complete meltdown that contributed to our base/reversal count introduced in 30-Apr’s Technical Blog are still being reflected by a mere 27% reading in the Bullish Consensus (marketvane.net). These issues considered, a bullish policy and exposure remain advised with a failure below 31.14 sufficient to warrant defensive steps by both short- and long-term traders as the technical levels between 31.14 and 21-Apr’s 6.50 low are nebulous and inefficient. In lieu of such sub-31.14 weakness, further and possibly accelerated gains remain expected.
JUL HEATING OIL
After confirming a bearish divergence in short-term momentum below 22-May’s 0.9750 smaller-degree corrective low and then nullifying this divergence with overnight’s recovery above 26-May’s divergence resulting 1.0712 high and short-term risk parameter, the technical construct of diesel is, for all intents and purposes, the same as that detailed in crude oil above. Overnight’s resumption of what’s now a 5-week uptrend leaves Fri’s 0.9562 low in its wake as the latest smaller-degree corrective low the market is now minimally required to fail below to confirm a bearish divergence in momentum, break the 5-week uptrend and expose a more protracted correction or reversal lower. In this regard, this 0.9562 low becomes our new short-term risk parameter from which a resumed bullish policy and exposure can be objectively rebased and managed.
The daily chart above shows the developing POTENTIAL for a bearish divergence in momentum as well as the reaffirmed 5-week uptrend that requires a relapse specifically below 0.9562 to threaten. Against the magnitude of Jan-Apr’s meltdown and given that this market has barely retraced a Fibonacci minimum 38.2% of that collapse depending on whether one considers a log scale basis shown in the weekly log chart below or a linear scale shown in the daily chart above, we cannot ignore an alternate bearish count that would suggest the 5-week recovery is merely a (4th-Wave) correction ahead of a resumption of the secular bear market. Commensurately larger-degree weakness below 13-May’s 0.8074 next larger-degree corrective low would be required to resurrect such a broader bearish prospect.
Market sentiment/contrary opinion levels remain depressed around historically bearish levels that, combined with the clear break of Jan-Apr’s downtrend, still reinforces a broader base/reversal count until threatened by weakness below at least 0.9562 and preferably 0.8074.
These issues considered, a bullish policy and exposure remain advised for longer-term players with a failure below 0.9562 required to pare exposure to more conservative levels and commensurately larger-degree weakness below 0.8074 required to jettison remaining exposure altogether to circumvent the risk of a resumption of the secular bear. Shorter-term traders whipsawed out of bullish exposure following 28-May’s bearish divergence in short-term momentum are advised to first approach setback attempts to former resistance-turned-support around the 1.0625-area OB as corrective cautious buying opportunities with a failure below 0.9562 required to negate this specific call and warrant its cover. In lieu of such sub-0.9562 weakness, further and possibly accelerated gains are expected.
The technical construct of RBOB is virtually identical to that detailed above in diesel with last week’s 0.9891 low and 13-May’s 0.8639 low considered our new short- and longer-term risk parameters from which a resumed or continued bullish policy can be objectively rebased and managed. Former 1.0900-area resistance is considered new near-term support ahead of further and possibly accelerated gains straight away.