Disappointing earnings moved equities marginally lower, but the investment world holds their breath in anticipation of Bernanke’s testimony on Wednesday. As has been reported by nearly every business news organization out there, traders seek the answer to when QE will end. Fed member George noted he’s in favor of raising the discount rate to 1%, and tapering should begin in the first half of 2014.
Consumer prices rose 0.5% in June. This was the strongest pace in 5 months. This data point may give the Fed reason to pause in their accommodating ways. US industrial production also rose in June on the back of increased auto and machinery business. The expectation was for a rise of 0.2%, but the data came in at 0.3%.
The expectations for the DOE inventory report are as follows: CRUDE: -2.2 MB; MOGAS: -400 KB; DIST: +1.7 MB
The API inventory numbers are as follows: API: Crude: -2.6 mb; Cushing -88 kb; API: Gasoline +2.5 mb; Dist +3.8 mb
Daily Moving Averages: 21, 55, & 100: 100.23, 96.99 , 94.96
Weekly Moving Averages: 21, 55, & 100: 94.87 , 92.66 , 93 .76
Although August made the attempt to better 107.00, it was rebuffed following a brief foray above the round figure.
- It appears that August remains in a congestion zone and continues to work in what is likely to be a large degree wave 4.
- This is the toughest segment of the move to trade. It is usually the pattern that catches both the bulls and the bears, but it is the latter that gives the pattern the final high.
- August is likely to move lower for Wednesday. There is likely crude building up in Cushing with the Canadian rail system in Quebec compromised. That was bringing Bakken crude to Irving’s refinery.
- Therefore it explains why the calendar spreads and Sept arb look weak for Tuesday.
- Our model sees the likelihood of August sliding to 105.40 to 105.20 in the early session. However, this is minor support for a retracement.
- The pivot to a test of 104.00 is a five-minute settle below 104.60.
- August will have resistance at 106.75 to 107.00. The upside pivot is 107.10.
- Busting above that level will open up the alternate model for the day.
- This will call for August to rise above 107.45 to see the 108.00 to 108.20 zone. We would be a seller at that level. The protective stop placed above 108.35.
CRUDE WKLY 071513
Daily Moving Averages: 21, 55, & 100: 105.19 , 104.13 , 105.29
Weekly Moving Averages: 21, 55, & 100: 105.65 , 108 .69, 110.14
When one looks at the September contract chart one sees that it has a rising wedge for this last climb.
- A rising wedge is always at the terminus of the move and presages a reversal.
- Sept will test the Tuesday high, but it likely to fail at the 108.40 to 108.50 zone.
- The pivot is 108.70. With a five-minute settle above that level Sept will attempt a run to 109.70 to 109.95.
- That will represent an alternate count to the preferred model.
- The model for Wednesday is for further weakness to develop from the 108.60 area.
- This will seek the minor downside pivot at 107.65.
- Once through that level September will cascade lower to see 106.55 to 106.40..
- The key downside pivot to the intraday chart is 106.30.
- We are a seller of the rally. This will be attempted at 108.40. Our protective stop placed above 108.65.
BRENT WKLY 071513
Daily Moving Averages: 21, 55, & 100: -2.49, -3.09 , -4.34
Weekly Moving Averages: 55, 100, & 200: -7.37 , -10.80 , –15.83
We misinterpreted the Sept pattern. Instead of pushing to a new high, it remains in a downward biased correction.
- It appears the downside has more to come.
- Sept has a downside pivot at -2.90 that will create the momentum when broken.
- This will give the bulls a shove to exit positions that have been profitable.
- The downside target in this event is -3.10 to -3.35. this carries a pivot of -3.50.
- The key pivot that will extend the pattern lower is a break of -3.90.
- In that case Sept will drip to -4.20 to -4.30.
- We do not have the strong conviction for this model so will will opt out of a trade for Wednesday.
wti-brent wkly 071513
Daily Moving Averages: 21, 55, & 100: 2.8718, 2.8505 , 2.9066
Weekly Moving Averages: 21, 55, & 100: 2.9294 , 2.8913 , 2.8788
It has been noted that Irving has been in the spot market buying gasoline for their requirements.
- But the pattern indicates that the buying is either been completed or is nearly so.
- If the pattern is complete, it did so in one of the more bearish formations. It is known in Elliott terms as a failed fifth wave.
- This is a graphic example of a change in psychology.
- However, to confirm this view will require August to fall below 3.12, which is doing as we write.
- August will pick up downside momentum with a bust of 3.0930.
- We are a seller of the rally. There will be minor resistance at 3.1350 to 3.1400. The pivot is 3.1510.
- The key downside pivot that will confirm a significant top to the wave is a daily settle below 3.0700.
- The API’s if correct, will have the products under pressure for Wednesday and will drag crude down with it.
MOGAS WKLY 071513
Daily Moving Averages: 21, 55, & 100: 2.446, 2.544 , 2.513
Weekly Moving Averages: 21, 55, & 100: 2.513 , 2.451 , 2.404
August moved higher as per our expectations Tuesday.
- It jumped the 100 DMA on the continuation chart and never retested it. August also settled well above the key upside pivot of 2.535.
- There will be more upside to come for August Wednesday.
- It is likely to find minor support at 2.535 to 2.53.
- The minor downside pivot is 2.525.
- If pierced August will then move to the 2.505 to 2.50 area. This is expected to hold.
- The objective for this leg higher is 2.58 to 2.585.
- While not expected, a daily settle above that level will usher in a jump to 2.62 to 2.63.
- We are a buyer of the dip.
ethanol wkly 071513
Daily Moving Averages: 21, 55, & 100: 2.9397 , 2.9082 , 2.9133
Weekly Moving Averages: 21, 55, & 100: 2.9224 , 2.9955 , 2 .9983
We were looking for August to punch to a new high to complete this formation.
- It appears likely this was seen with Tuesday’s price action.
- Although it did not meet our ultimate target at 3.07, the pattern requirements were met.
- August will confirm a top to this march with a break of 3.0150.
- If that occurs August will drop quickly below 3.00 to see 2.97 to 2.9650.
- We are a seller of the rally.
- There will be initial resistance at 3.05 to 3.0550.
- Failure to break over that zone will indicate a weakening market.
- The alternate model calls for a test of 3.07 to 3.0750 with a successful break of the 3.06 pivot.
- However, we do not expect August to maintain that level for long.
- Our sell trade will be instituted at 3.05. The protective stop above 3.06.
HEAT WKLY 071513
Daily Moving Averages: 21, 55, & 100: 3.698 , 3.888 , 3.903
Weekly Moving Averages: 21, 55, & 100: 3.880 , 3.477, 3.236
The change in views of the weather patterns has the pattern muddled.
- The knife fight between the bulls and the bears has resulted in a draw for now.
- However, with temps looking cooler for an extended period beyond the end of July, one has to feel there will be an affect on price if seen.
- The bulls have a problem in that the rise off the 3.545 area took the form of an A-B-C correction. That is not a bullish indicator.
- There will be minor support at 3.625 to 3.61.
- August will show the bearish development with a break of 3.60.
- Breaking that mark will drop it to test trend support at 3.540.
- We are neutral of this market for Wednesday.