RJO FuturesCast

Daily Futures Market News, Commentary, & Insight

APR CRUDE OIL

The market’s failure overnight below a minor corrective low and short-term risk parameter at 63.39 discussed in Mon’s Technical Blog confirms a bearish divergence in short-term momentum.  This mo failure defines Mon’s 67.98 high as the end of a smaller-degree 5-wave Elliott sequence up from 03-Mar’s 59.24 next larger-degree corrective low and key risk parameter as labeled in the 240-min chart below.  Per such, this 67.98 high serves as one of developing importance and our new short-term risk parameter from which non-bullish decisions like long-covers and cautious bearish punts can be objectively based and managed  by shorter-term traders with tighter risk profiles. Clearly, 67.98 is THE high and resistance this market is now required to recoup to reinstate and reaffirm the major bull trend.

What’s also clear is that this smaller-degree weakness is of an insufficient scale to conclude anything more than another interim corrective hiccup within the major bull trend from a longer-term perspective.  Indeed, commensurately larger-degree weakness below 03-Mar’s 59.24 next larger-degree corrective low remains required to confirm a bearish divergence in DAILY momentum (above) to break the uptrend from 02-Nov’s 33.64 low.  Per such, this 59.24 low remains intact as our key longer-term risk parameter.  In effect and far from uncommon, we have a situation where the shorter-term trend is down within the longer-term trend that remains up, so acknowledgement of and adherence to technical and trading scale is paramount.

Might the rally from Nov’s 33.64 low be a complete 5-wave Elliott sequence that, amidst historically frothy levels in our RJO Bullish Sentiment Index, warns of a peak/correction/reversal scenario that could be extensive in scope? Absolutely. However, we cannot objectively make a play that way until and unless this market fails below at least 59.24.

Might today’s bearish divergence in admittedly short-term momentum be the start of such a larger-degree mo failure?  Yep.  But again, we cannot objectively make a play that way until and unless this market fails below at least 59.24.

These issues considered, shorter-term traders have been advised to move to a neutral/sideline position in order to circumvent the depths unknown of another interim smaller-degree correction or the start of a more protracted reversal lower. A recovery above 67.98 is required to negate this call, reinstate the secular bull and warrant a return to at least a cautious bullish policy.  We will be watchful for a relapse-stemming bullish divergence in short-term mo to reject/define a more reliable low and support from which the longer-term bull might resume and also from which a resumed bullish policy by shorter-term traders may have favorable and objective risk/reward merits. A bullish policy remains advised for long-term commercial players with a failure below 59.24 required to negate this call and warrant its cover.

APR HEATING OIL

The technical construct and expectations for diesel are identical to those detailed above in crude with Mon’s 1.9868 high serving as our new short-term risk parameter following overnight’s bearish divergence in short-term mo, and 02-Mar’s 1.7882 larger-degree corrective low remaining intact as our key long-term bull risk parameter.

An interesting aside is the Fibonacci fact that the rally from 02Nov20’s 1.0252 low is virtually identical in length (i.e. 1.000 progression) to Apr-Aug’20’s preceding 0.6724 – 1.3054 rally on a weekly log active-continuation basis below.  Commensurately larger-degree weakness below 02-Mar’s 1.7882 larger-degree corrective low and key risk parameter is required however to render this Fib relationship, as well as historically frothy sentiment levels, applicable to a broader peak/reversal-threat environment.

In sum, shorter-term traders traders have been advised to take profits and move to a neutral/sideline position while longer-term players remain advised to maintain a bullish policy with a failure below 1.7882 required to move to the sideline.  Needless to say, a recovery above 1.9868 nullifies this short-term weakness, renders it another correction and reinstates the major bull.  In effect, the market has identified 1.9868 and 1.7882 as the key directional triggers heading forward.

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