The motivating force for the bulls in this entire rally has been the calendar spreads and the arb. Once they turned, there was no other alternative but to take profits. For example, Aug/Dec crude fell 22% on the day. The Aug arb hit our target to the penny as well, and started a massive sell off. Weaker crude helped support the Dow Jones, as it’s on pace for a record high. The factor that began the decline in Asia was a slower growth forecast by the IMF. Early morning disappointment spurred by US jobless claims, rising 16K to 360K. This contradicted expectations for a decline to 335K. The short term psychology of the energy complex has turned.WTI
Daily Moving Averages: 21, 55, & 100: 98.74, 96.14 , 94.54
Weekly Moving Averages: 21, 55, & 100: 94.39 , 92.18 , 93 .55
Our target for this leg was 107.20. During Asian trading that level was hit.
- It was then that the outlook for Chinese growth was revised lower.
- This started a bout of profit taking, but it was the news that the Seaway pipeline was running at reduced rates that exacerbated the decline.
- As the pipeline runs less crude Cushing will build. The arb was softer on this and the calendar spreads were hammered.
- Based on the model below there is more downside to come for this correction.
- We are a seller of the rally. There is good resistance at 105.10 to 105.30. The pivot is 105.50.
- The high of the week has been seen although that was a call in real time trading, it seems trite now that the day is over.
- The immediate target is 104.10 to 103.90. However, below that level August will seek 102.30 to 102.15.
- The funds have become gorged with length. They will be feeling the pressure below 104.00. Between flat price, arbs and calendar spreads the volume is staggering. Buying the dip is not the play for Friday.
CRUDE WKLY 070813
Daily Moving Averages: 21, 55, & 100: 104.63 , 103.80 , 105.44
Weekly Moving Averages: 21, 55, & 100: 106.08 , 108 .37, 110.14
Although it is tough to see in the picture below, the circled formation is a key reversal to the downside.
- This is a pattern that moves above the previous day’s high only to settle below the previous day’s low. It is a sign that psychology has changed dramatically.
- Although our objective for Thursday was a little higher than the posted high of the day, the pattern was satisfied.
- The process will now center on correcting the move up from 99.67. This will put the minor pivot at 106.75. It is with a break of this mark that August will spill to 105.50 to 105.30.
- The extension pivot is 104.90.
- The partial reason for the weakness is a lowering of expectations for Chinese growth.
- We are a seller of the rally.
- This will be attempted at 107.90. The protective stop placed above 108.50.
- We care not to buy the dip Friday unless much lower prices prevail.
BRENT WKLY 070813
Daily Moving Averages: 21, 55, & 100: -3.67, -4.13 , -5.45
Weekly Moving Averages: 55, 100, & 200: -8.07 , -11.70 , –16.24
On time and on price August met its objective in overnight trading.
- The slowing of the Seaway pipeline causes the reversal of fortune.
- There are many funds that have plowed into this trade over the last two weeks.
- There will be selling on the rally.
- It is likely to rally off the -3.00 area.
- There will be resistance at -2.00 to -1.90.
- The minor pivot is -1.65.
- The model we employ suggests that there will be more downside to follow.
- This will eye the -3.50 to -3.65 area.
- We are a seller of the rally at -2.00. The protective stop above -1.65.
wti-brent wkly 070812
Daily Moving Averages: 21, 55, & 100: 2.8366, 2.8334 , 2.9079
Weekly Moving Averages: 21, 55, & 100: 2.302 , 2.8813 , 2.8758
Although WTI has a bearish look to it, this is anything but.
- late breaking news has one of the crude units at Whiting down unexpectedly.
- Although it is not the big tower, the refinery does supply fuel to the NY harbor.
- That shot August higher after regular trading hours.
- This is a strengthening market that appears to have much higher to go.
- There will be support at 3.00 to 2.9950.
- The pivot is 2.98.
- we are a buyer of the dip at 3.00. The protective stop below 2.99.
- August is at the time of this writing poised to break a key pivot on the August contract chart.
- This will signal a dash to 3.08 to 3.0850.
- Summer demand and summer heat bring chaos to exothermic reactions.
mogas wkly 070813
Daily Moving Averages: 21, 55, & 100: 2.446, 2.544 , 2.508
Weekly Moving Averages: 21, 55, & 100: 2.509 , 2.444437 , 2.407
Strength in Corn following the USDA report brought August along for the ride.
- But there is another factor and that is rising gasoline prices and demand.
- The price structure is supportive for higher prices.
- There is still the key upside pivot of 2.48 that will need to be bettered.
- But once that is accomplished August will rise to the 100 DMA on the continuation chart at 2.509.
- A daily settle above that mark has it leaping to 2.58 to 2.60.
- The support for this pattern hits at 2.45 to 2.445.
- Holding that zone will show a strengthening market and increased momentum.
- The key downside pivot ot the intraday chart is 2.415.
- We are a buyer of the dip.
ethanol wkly 070813
Daily Moving Averages: 21, 55, & 100: 2.9247 , 2.8982 , 2.9177
Weekly Moving Averages: 21, 55, & 100: 2.8310 , 2.9865 , 2 .9970
This has been the laggard to the upside, but it managed to eke out a new high for the move.
- But it does appear as if August completed the pattern and is ripe for a correction.
- August will be correcting the move up from 2.8500 on the continuation chart.
- This will be signaled with a break of 2.98.
- In this case, a drop to 2.970 to 2.9650 is expected.
- However, the key downside pivot to the intraday chart is 2.9625.
- With its removal August will test the 100 DMA at 2.93.
- We are a seller of the rally.
- This will be at 3.0050. The protective stop placed above 3.0170.
- The levels posted in the price matrix represent an alternate view of the pattern.
HEaT WKLY 070813
Daily Moving Averages: 21, 55, & 100: 3.723 , 3.929 , 3.887
Weekly Moving Averages: 21, 55, & 100: 3.857 , 3.458, 3.241
The fundamental analysts hit the nail on the head with a build of 82 BCF.
- The bulls were hoping that the hot weather would have created a bigger draw.
- They were disappointed and the prices related that.
- There is likely to be more downside to come.
- The weather has moderated and wells are coming on fast and furious. Moreover, we hear they are cheaper to drill.
- Fracking is a wonderful thing for consumers, but it is hell for bulls.
- August is seen moving down to the 3.54 to 3.53 area Friday.
- The key pivot is 3.525.
- Busting this level will spill the contract to 3.42 to 3.40.
- we are a seller of the rally. This will be at the 3.67 with a protective stop above 3.70.
- Basic Materials Industry