RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

Energies

Nat Gas Reaffirms Bear, Defines $2.51 as Key Flexion Point

Posted 12/09/2019 7:59AM CT | RJO Market Insights

Overnight’s break below 02-Dec’s 2.289 low and our short-term risk parameter rendered early-last-week’s recovery attempt a 3-wave and thus corrective affair consistent with the still-unfolding downtrend from 05-Nov’s 2.980 high.  This resumed slide defines 03-Dec’s 2.510 high as the latest (suspected 4th-Wave) corrective high the market is now required to sustain losses below to maintain a more immediate bearish count.  Its failure to do so will confirm a bullish divergence in momentum and resurrect a base./reversal count that, again, we still believe could be major in scope.  Per such this 2.510 high becomes our new key risk parameter from which longer-term players can objectively rebase and manage the risk of a still-advised bearish policy and exposure.

The daily log chart below also shows the market respecting former 2.47-to-2.51-area support, since broken on 29-Nov, as a new key resistance area the bear is now fully expected to sustain losses below per any broader bearish count.  This reinforces the importance of last week’s 2.510 high as a pivotal level and condition around which longer-term traders are advised to toggle directional biases and exposure.

From a shorter-term basis, we’re identifying a minor intra-day low at 2.368 from 04-Dec in the 240-min chart below as the smaller-degree 1st-Wave of an eventual 5-wave sequence down from that 2.510 high and our new short-term risk parameter from which shorter-term traders with tighter risk profiles can objectively rebase bearish exposure.  A recovery above 2.368 would jeopardize the impulsive integrity of a bearish count that, with prices at historically low levels, warrants a more conservative approach to bear risk assumption.

While there’s no question that on all “practical” scales the trend is down, long-term players are reminded of an important combination of historically low levels of market sentiment and the market’s proximity to the lower-quarter of the past 10-YEAR range.  This remains a slippery slope for bears “down here”, warranting a close watch of MOMENTUM and the bear’s ability to continue to behave like a bear with sustained, trendy, impulsive behavior lower.

As scary as the historically bearish sentiment levels are, we remind traders that sentiment/contrary opinion is not an applicable technical tool in the absence of a confirmed bullish divergence in momentum of a scale sufficient to break the broader downtrend.  Herein lies the reason we’re placing such an emphasis on 03-Dec’s 2.510 corrective high.  If we’re supposed to be short “down here” around 2.23-area levels ahead of further losses to at least the 1.60-area (for at least a 2:1 risk/reward ratio), then this market shouldn’t come anywhere near that 2.51 larger-degree corrective high.  If it does, with an early warning coming from a recovery above our short-term risk parameter at 2.368, then a count calling for a major base/reversal will be resurrected, warranting a shift back to a bullish policy.  While the market remains below at least 2.368, there’s no way to know how low “low” is.

In sum, a bearish policy remains advised for long-term players with a recovery above 2.368 required to pare exposure to more conservative levels and subsequent strength above 2.510 required to neutralize remaining exposure and reversed into a cautious bullish position.  Shorter-term traders whipsawed out of bullish exposure as a result of last week’s bullish divergence in short-term mo are OK to consider cautious bearish exposure from suspected resistance from the 2.300-area OB with a recovery above 2.368 required to negate this call and warrant its cover.  In lieu of such 2.368+ strength, further lateral-to-lower prices should not surprise.  This said, overall, traders are urged to remain suspicious and flexible “down here”.

RJO Market Insights

RJO Market Insights specializes in forward-thinking analysis, focused on potential market-moving events and dominant factors driving price discovery. Detailed fundamental and technical coverage across multiple commodity sectors is combined with objectively-constructed trade recommendations to provide an industry-leading product for R.J. O’Brien’s Institutional clients, commercial hedgers, introducing brokers and individual investors free of charge. Content is distributed in both text and audio formats, with specialized service offerings provided by account type.
For more information on RJO Market Insights, contact your broker or RJO representative.