The Daily Energy Technical Report 6.21.13

MrTopStep.com

Oil was down more than 3%, and at the time of this writing, equities were also down sharply with the DOW down nearly 300 points. The rolling thunder began with the statement from the Fed Chairman that paring down on bond buying will begin at the end of 2013. Fund managers came into the market as buyers knowing the Bernanke “put” was in place. The “put” refers to the continued support of the markets by keeping interest rates low. However, selling in most markets accelerated when the bond auction showed a move to higher yields. Those who came late to the party are now moving money out of markets indiscriminately.

Poor economic data from China put Asia on the defensive and caused sharp downside gaps. The Chinese flash PMI dropped to 48.3 in June from 49.2 in May, well below the 50 mark, which separates economic contraction and expansion.

In the US, jobless claims rose by more than 14K. Although there was a bright spot, as existing home sales jump 4.2% in May. The market pendulum was overextended in favor of the bulls and it now needs to overextend in favor of the bears before the zero point is reached.Perceptions proceed prices. Fundamentals do not matter in the short run.  Only the hogs get slaughtered.

The EIA reported that crude oil output for the U.S. was up 14.9% from year ago levels, but oil use was down 1.1% to 18.5 mb.

WTI
WTI S2 S1 CLOSE R1 R2 TREND
DAILY 9122 9427 9540 9590 9723 DOWN
WEEKLY 8735 9126 9785 10300 10877 PEAK

 Daily Moving Averages: 21, 55, & 100: 95.20, 93.91 , 94.17

Weekly Moving Averages: 21, 55, & 100: 94.19 , 91.42 , 93 .44

Aside from the Fed story, there are several bearish technical factors we need to assess.

  • As we pointed out the short-term cycles turn down this weekend. They were one day early, which is within the timing window.
  • Moreover, the market turned after having completed a three-legged advance. This is a bearish correction.
  • But we also would like to bring the attention to the market action within the red rectangle.
  • This is from last year. It is the analogue for the pattern we are currently working in.
  • Notice that following the big dump there was sideways action before a colossal unraveling of length was seen.
  • This was primarily due to an excess of long positions held by the managed funds and pension funds. It is a similar situation to today.
  • We are a seller of the rally. This is at the 95.80 to 95.90 zone. The upside pivot is 96.15.
  • Our initial target is 94.30 to 94.20 with a break of 94.60. The lower levels are very important levels for the bulls to protect.
  • It is home to the 100 DMA on the continuation chart as well as the 3.82 retracement of the move from 86.29 to 99.21.
  • A daily settle below will call for a trip to 91.50 to 91.20.

 

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CRUDE 062113

 

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crude wkly 061713

BRENT
BRENT S2 S1 CLOSE R1 R2 TREND
DAILY 9966 10051 10215 10322 10479 DOWN
WEEKLY 9427 10046 10593 10885 11577 PEAK

Daily Moving Averages: 21, 55, & 100: 103.50 , 103.13 , 107.35

Weekly Moving Averages: 21, 55, & 100: 107.89 , 108 .09, 110.48

We noted a weak correction for Thursday was seen on the continuation chart.

  • The momentum indicator at the chart’s bottom shows an overbought market that is coming to realize that the Fed’s kool-aid has a bitter taste to it when left too long.
  • The arguments by the bulls that demand would pick up in the second half of the year was shot down with the China PMI numbers Thursday morning.
  • Inflation is low and oil use is down. Additionally, the Saudi’s would like nothing more than to see Iran suffer now that a holy war has been declared.
  • Yes, there will be a point that the Saudis will pull in production, but Iran will hurt more than they.
  • We look to sell the rally for August.
  • There will be initial resistance at 103.00 to 103.25. The minor  pivot is 103.50.
  • Although August fell to the .50 retracement at 101.75 in late trading, the pattern does not look complete.
  • Thus with a break of 101.70 August is likely to plumb 100.80 to 100.50.
  • The funds are still heavily long and are waiting for a bounce to sell. Shouldn’t you be too?

 

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BRENT 062113

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brent wkly 061713

WTI-BRENT
WTI-BRENT S2 S1 CLOSE R1 R2 TREND
DAILY -828 -774 -701 -665 -603 UP
WEEKLY -1126 -993 -786 -698 -470 UP

Daily Moving Averages: 21, 55, & 100: -7.65 , -7.69 , -8.14

Weekly Moving Averages: 55, 100, & 200: -9.27 , -13.71 , –17.13

While we thought that August would congest lower Thursday, it held our pivot and never looked back.

  • The Chinese data was the reason for the bounce and it does make the pattern look far more bullish.
  • August made it to the key upside pivot at -6.98 Thursday, but failed to settle above.
  • However, that matters little as the wave structure looks posed to take on the -5.00 area in the short-term.
  • We are a buyer of the dip.
  • August will have our attention with a retrace to -7.55 to -7.75.
  • The minor pivot is -7.90. The key pivot is -8.28.
  • August’s upside target for Friday is initially found at -6.70 to -6.50.
  • The key objective is -6.00.

 

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WTI-BRENT 062113

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wti-brent wkly 061713

RBOB
RBOB S2 S1 CLOSE R1 R2 TREND
DAILY 26880 27285 27872 28120 28510 DOWN
WEEKLY 26880 27855 28967 29770 30780 PEAK

Daily Moving Averages: 21, 55, & 100: 2.8347, 2.8298 , 2.9380

Weekly Moving Averages: 21, 55, & 100: 2.9582 , 2.8748 , 2.8823

Although July fell to trend support Thursday, it is likely to move lower.

  • Although there may be a little bounce in the overnight market we stress the operative word is little.
  • US gasoline use was down 3.3% on the year.
  • July is likely to see strong resistance at 2.81 to 2.8150.
  • The upside pivot is 2.8250.
  • We are a seller of the rally. This will attempted at 2.81. Our protective stop above 2.82.
  • With a bust of the trend line at 2.7750 another round of stop loss selling will be seen. Moreover, margin calls will be going out and 10:30 Friday morning may prove interesting.
  • As much as the talking heads on the financial networks are trying to explain nothing has changed, they are wrong. Psychology has changed and that is the BIGGEST factor in any market.

 

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MOGAS 062113

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mogas wkly 061713

ETHANOL
ETHANOL S2 S1 CLOSE R1 R2 TREND
DAILY 2400 2426 2456 2476 2501 CONGEST
WEEKLY 2327 2420 2500 2620 2760 CONGEST

Daily Moving Averages: 21, 55, & 100: 2.569, 2.547 , 2.505

Weekly Moving Averages: 21, 55, & 100: 2.506 , 2.421 , 2.420

July fell to trend line support and a double bottom Thursday.

  • It appears to have completed a pattern at the low of Thursday.
  • This model calls for a retracement of the move down from 2.520.
  • The model is based on July holding 2.43 to 2.425.
  • The minor downside pivot is 2.41.
  • The key downside pivot is 2.40, which is also the 100 DMA.
  • In keeping with our view that July is likely to congest higher, there is initial resistance at 2.47 to 2.475.
  • The upside pivot is 2.485.
  • There is strong trend resistance at 2.50.
  • We are neutral of this market for Friday.

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ETHANOL 062113

 

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ethanol wkly 061713

DISTILLATE
HEAT S2 S1 CLOSE R1 R2 TREND
DAILY 27790 28075 28722 29115 29400 DOWN
WEEKLY 27780 29150 29622 30540 31045 PEAK

Daily Moving Averages: 21, 55, & 100: 2.8862 , 2.8836 , 2.9551

Weekly Moving Averages: 21, 55, & 100: 2.9657 , 2.9723 , 3.0014

The funds have jumped in with both barrels in this market; they are driving the price ever closer to $3.00.

  • The perception of the removal of stimulus was enough to move those with bovine tendencies t he sidelines.
  • Although July is likely to bounce from 2.8650, it is a weak pattern and a rally should be sold.
  • There is minor resistance at 2.8950.
  • This level is also a minor upside pivot. If it’s broken, it signals a broader recovery, though not a change in trend.
  • With a break of the minor upside pivot, July will be on track to see 2.91 to 2.9150.
  • The closest pivot to this level is 2.93.
  • We see further downside to come, be it Friday or Monday.
  • There is an initial downside target at 2.83 to 2.8250 once 2.86 is broken.
  • Key trend support is at 2.78.
  • Our model suggests that 2.78 will be tested in the short run.
  • We are a seller of the rally at 2.91 with a stop over 2.92.
  • All of the moving averages (21, 55, and 100) have been settled below.

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HEAT 062113

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heat wkly 061713


NATGAS
NATGAS S2 S1 CLOSE R1 R2 TREND
DAILY 3645 3733 3877 3935 4033 CONGEST
WEEKLY 3305 3645 3733 3957 4197 DOWN

Daily Moving Averages: 21, 55, & 100: 3.959 , 4.060 , 3.835

Weekly Moving Averages: 21, 55, & 100: 3.812 , 3.388, 3.256

The bulls were saved by the 100 DMA on Thursday despite the fact that inventories came in higher than expected, and weather forecasts are vacillating. 

  • July was down 2.2% on the day, in the largest decline since June 6.
  • Friday is likely to be a day of congestion, but it is imperative that 3.835 holds.
  • There is initial resistance  at 3.935.
  • July is at a bifurcation point in the pattern, which means we can interpret it 2 ways with equal probability.
  • Our primary outlook calls for July to show weakness early on Friday, as well as a test of the 100 DMA AT 3.83.
  • An intraday break of this level will cause a drop of another 10 cents to 3.74 to 3.73.
  • We are a seller of the rally at 3.92 with a stop over 3.94.
  • The alternate count is that weather turns more bullish and lifts July to test 4.00.
  • We noted in industry reports that wells are being drilled much faster and cheaper than in the past. The IEA sees natural gas as the motor fuel of the future, and this will be very supportive of the market in the long term.

 

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NAT 062113

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