JUN CRUDE OIL
The knife in crude is falling like it has never fallen before. Most traders know that there’s a unique opportunity “down here”, but trying to catch it before the market provides the bottoming behavior and PROCESS it typically does to identify a more reliable low is certainly subjective at this point and, we think, suicidal. Typically, trends “slow down” before bottoming. This slow down process typically includes a corrective rebound and another round of new lows that the market then fails to sustain. And “failing to sustain” requires either 1) a recovery above a prior corrective high or 2) recovering above an initial counter-trend high. The market has satisfied neither of these requirements.
Perhaps overnight’s spasm from today’s 11.79 low in the Jun contract to 17.17- an almost unheard of 50% move within an hour- is such an interim corrective rebound and part of the slowdown process before yet another round of new lows.
Currently and as a direct result of today’s continued meltdown, the 240-min chart below shows that the market has defined today’s 22.58 high as the latest smaller-degree corrective high. Per such, we’re identifying this 22.58 level as our new short-term risk parameter the market is minimally required to recover above to jeopardize the impulsive integrity of a still-developing 5-wave sequence down from 09-Apr’s 33.15 high. Until this level is recouped, a (prospective 5th-Wave) resumption of the bear to new lows below 11.79 should not surprise.
If the bear tries to resume but bottoms at a level higher than 11.79 AND THEN recoups the spasm high at 17.17, that high would then be considered an initial counter-trend high and the market would have satisfied one of our momentum failure conditions and rejected/define a more reliable low and support from which non-bearish decisions like short-term covers and cautious bullish punts can only then be objectively based and managed.
On a broader scale the daily (above) and weekly (below) log scale charts show one of the great meltdowns of all time. The prospect of a complete or completing 5-wave Elliott sequence down from early-Jan’s high is clear. Understandably historically bearish sentiment/contrary opinion levels will, no doubt, contribute to a base/reversal environment and opportunity that will be massive in scope. But neither of these factors matters one bit currently, as MOMENTUM is the technical tool used to effectively navigate a trend’s end.
As always, referring to any market, let alone a meltdown like as “oversold” is inept and outside the bounds of prudent technical discipline.
In sum, the trend not only remains down on all scales, it is arguably ACCELERATING lower. MINIMALLY at this juncture, a recovery above 22.58 is required to jeopardize the impulsive integrity of this bear. Until the market proves strength above 22.58, we believe at least one more round of new lows below 11.79 is forthcoming. If the market survives a retest of the low and then recovers above an overnight initial counter-trend high at 17.71, that will constitute a bullish divergence in very short-term momentum and leaves a couple lows in its wake from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.
JUN HEATING OIL
Not surprising, the technical construct and expectations for diesel are the same as those discussed above for crude. Overnight’s clear and decisive break below last week’s 0.8976 low obviously reaffirms the secular bear trend and leaves smaller- and larger-degree corrective highs in its wake at 0.9795 and 1.1104, respective, that now serve as our short- and long-term risk parameters to a still-advised bearish policy and exposure. Former 0.90-handle-area support, since demolished, now serves as new near-term resistance.
Here too, market sentiment is wafting around historically bearish levels typical of major BASE/reversal-threat conditions. But traders are reminded that sentiment is not an applicable technical tool in the absence of an accompanying bullish divergence in momentum. Herein lies the importance of the specific corrective highs and risk parameters identified above.
In sum, a bearish policy and exposure remain advised with strength above at least 0.9795 required threaten this call enough to warrant defensive paring or neutralizing exposure. In lieu of such strength, further and possibly steep losses should not surprise.
Yesterday’s failure below 13-Apr’s 0.7150 minor corrective low and short-term risk parameter confirms our peak/correction/reversal count introduced in yesterday morning’s Technical Blog and leaves 14-Apr’s 0.8215 high in its wake as the END of the recovery from 23-Mar’s 0.5189 low and our new short-term but key risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed.
On a broader scale and as discussed, we don’t know if Mar-Apr’s 38.2% retrace of Feb-Mar’s (prospective 3rd-Wave) decline from 1.7780 to 0.5189 is just a (4th-Wave) correction ahead of a resumption of the bear to new lows below 0.5189 OR the (A- or 1st-Wave) start to a larger-degree correction or reversal higher. As Crude and heating oil are melting down, a similar resumed meltdown in gas below 0.5189 should hardly come as a surprise. But 23-Mar’s 0.5189 low remains intact and is a supportive element the ear would need to break to reinstate the secular downtrend.
IF the market is bottoming, then 1) the market needs to survive its retest of the 0.5189 low and 2) it needs to arrest the clear and present intermediate-term downtrend with a confirmed bullish divergence in short-term momentum at some level north of 0.5189. We will be watchful for this in the days ahead and favorable risk/reward opportunity from the buy side would be presented. In lieu of such conditions being met, traders are advised to prepare for or position for a resumption of the secular bear to new lows below 0.5189.