RJO FuturesCast

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AUG CRUDE OIL – The market’s recovery this morning above our 67.16 short-term risk parameter confirms a bullish divergence in momentum that defines Mon’s 63.40 low as the END of the decline from 22-May’s 72.90 high and start of at least an interim correction of May-Jun’s 72.90 – 63.40 decline, the 50% and 61.8% retracements of which cut across at 68.15 and 69.27, respectively (for what these “derived” levels are worth). Per such, Mon’s 63.40 low becomes our new short-term risk parameter from which non-bearish decisions like short-covers and cautious bullish punts can be objectively based and managed.
Crude Oil 240 Min Chart
Crude Oil Daily Chart
The Fibonacci fact that this bullish divergence in mo stems from pretty much the exact (63.34) 61.8% retracement of Feb-May’s 58.07 – 72.90 rally on a daily log scale basis above reinforces at least an interim base/reversal condition. The likely prospect for an “outside week up” shown in the weekly log chart below further reinforces this count calling for gains in the days or perhaps even weeks ahead.

This said, 22-May’s 72.90 high remains intact as key resistance and our long-term risk parameter this market is still required to recoup to negate a major PEAK/reversal environment and reinstate the secular bull. In sum, we believe the current intermediate-term strength should first be approached as a (B- or 2nd-Wave) correction within a broader peak/reversal PROCESS that could span weeks or event months. But while recent bearish policy has been advised to be covered, the market’s position back in the middle of the 63.40 – 72.90-range presents poor risk/reward merits for initiating directional exposure. Per such, a neutral/sideline policy is advised for the time being to avoid what we believe are increased odds of aimless and frustrating and costly whipsaw risk typical of the middle-halves of ranges.

Crude Oil Weekly Chart

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