The market’s recovery yesterday above 29-Jan’s 1.5461 corrective high confirms a bullish divergence in momentum that defines 04-Feb’s 1.4345 low as one of developing importance and arguably the end of a 5-wave Elliott sequence as labeled in the 240-min chart above and daily active-continuation chart below. Left unaltered by a relapse below 1.4345, we believe the market is now vulnerable to a larger-degree correction or reversal of Jan-Feb’s meltdown that could be extensive. Per such, this 1.4345 level serves as our new long-term risk parameter from which longer-term players can objectively base non-bearish decisions like short-covers and cautious bullish punts.
Yesterday’s 1.4975 low is a smaller-degree corrective low from which shorter-term term traders can base non-bearish decisions ahead of further lateral-to-higher prices.
the fact that this price action stems from the lower-quarter of the past couple years’ lateral range amidst the lowest levels in the Bullish Consensus (marketvane.net) measure of market sentiment in over TWO YEARS would seem to reinforce this base/correction/reversal count.
These issues considered, traders have been advised to neutralize all previously recommended bearish policy and are further advised to move to a cautious bullish policy from, the 1.5300-area OB with a failure below 1.4975 required for shorter-term traders to step aside and larger-degree weakness below 1.4345 for long-term players to cover ahead of a resumption of the broader bear. In lieu of such weakness, we anticipate further lateral-to-higher prices that could be extensive, given the magnitude of Jan-Feb’s meltdown.
MAR HEATING OIL
Unlike gas, diesel has yet to confirm a bullish divergence in momentum on a scale sufficient to break Jan-Feb’s plunge. But the prospect that this 2.1056 – 1.5684 decline is a complete 5-wave Elliott sequence is clear as labeled in the daily chart below. Downside momentum is clearly waning and creates the POTENTIAL for a bullish divergence in momentum. This potential will be CONFIRMED to the point of non-bearish action like short-covers and new bullish punts on proof of strength above 06-Feb’s 1.6783 high that would render that high an initial counter-trend high.
Against this base/reversal PROSPECT, we find it interesting that yesterday’s 1.6100 was basically the exact 61.8% retrace of last week’s 1.5684 – 1.6783 rally. This exact Fib retrace could be the (b- or 2nd-Wave) correction within a base/reversal process. Given this backdrop, we feel comfortable concluding 04-Feb’s 1.5684 low as a more reliable low from which non-bearish decisions can be objectively based and managed by shorter-term traders. And even yesterday’s 1.6100 low can serve as a micro risk parameter for cautious bullish punts.
On a broader weekly log scale basis, the chart below shows both sentiment/contrary opinion indicators we monitor closely falling to understandably but historically low levels not seen in at least nearly two years. Such pessimism is typical of broader base/reversal environments and will be a very applicable base/reversal contributor following proof of commensurately larger-degree strength above 1.6783.
These issues considered, we believe the past week’s price action to be an early indication of a base/correction/reversal PROCESS that could leave the market vulnerable to relative steep gains in the weeks and possibly months ahead IF it can recover above 1.6783, our new long-term bear risk parameter. This said, we believe the market has provided enough short-term “non-weakness” to render a cautious bullish punts by short-term traders a favorable and objective risk/reward proposition with weakness below 1.6100 threatening this call and further weakness below 1.5684 negating it and reinstating the major bear.
MAR CRUDE OIL
Given the extent to which crude has retested 04-Feb’s 49.31 low and short-term risk parameter, this market seems to be the dog of the sector. Or perhaps it’s the leader that will eventually lead the resumption of the major downtrends across the sector that will negate the base/correction/reversal threats cited above. Regardless, only a glance at the 240-min chart above and daily log chart below is needed to see that the market has identified 04-Feb’s 49.31 low as THE level the market needs to break to mitigate any base/reversal count and reinstate the bear and 06-Feb’s 52.20 high as THE level it needs to recoup to confirm a bullish divergence in daily momentum and reinforce a broader base/reversal count similar to gas and diesel.
Waning downside momentum and the prospect that Jan-Feb’s plunge is a complete 5-wave Elliott sequence are factors crude oil has in common with gas and diesel. The only thing now is that the market needs to prove strength on a daily scale above 52.20 to signal the turn.
The market’s flirt with the lower-quarter of the past couple years’ range amidst the return to historically bearish levels in the Bullish Consensus are clearly factors that would seem to reinforce a base/correction/reversal count.
These issues considered, a cautious bullish policy from 50.40 OB is advised for short-term traders with a failure below 49.31 negating this call and reinstating the bear. Longer-term players are advised to pare bearish exposure to more conservative levels “down here” and reverse into a cautious bullish policy on a recovery above 52.20 that we believe could expose a potentially protracted correction or reversal higher.