It was a day of reckoning for the bears in both equities and energy Thursday. The spur to higher prices came on the back of much better than expected jobless claims. They showed a drop of 334,000 as 24,000 furloughs were avoided. The Leading Economic Indicator was flat for the month of June.
The story in WTI was a combination of the better than expected claims number and a massive surge in the September arb. That strength permeated the complex, but was focuses primarily on the petroleum. The Fed Chairman in his testimony before the Senate Thursday reiterated his House declarations. This too added to the ebullient mood facing the petro complex. In the Nat gas pit, a turnabout in the weather forecast produced a huge swing to the upside as 3.60 held and the 3.72 pivot was pulverized. Weather is one of the reasons we do not trade anything that procreates or grows.
Daily Moving Averages: 21, 55, & 100: 101.09, 97.54, 95.25
Weekly Moving Averages: 21, 55, & 100: 94.87, 92.66, 93.76
Following a better than expected Jobless Claims number WTI took off for the stratosphere Thursday.
Much of the increase was attributable to a rapid expansion of the September arbitrage.
This comes despite the fact that oil use in June was down 1% year-on year.
However, when one considers that inventories have dropped precipitously over the last three weeks one can understand the developing dynamic.
It appears that Sept did complete a pattern to the upside, but not the wave, which is the larger degree structure.
The model suggests that Sept will congest lower for Friday initially.
Sept has a minor downside pivot at 107.60 that will give way to a retracement.
This will eye 107.00 to 106.80.
The pivot to this support is 106.40.
Although not expected for Friday Sept is then seen posting a new high for the race higher.
This sets up perfectly for a cyclical downturn due Monday. This is the short-term cycles we refer to.
We are a buyer of the dip. This trade will be attempted at 106.90. Our protective stop placed below 106.40.
Sept will demonstrate renewed strength with a rise above 108.20.
In this event the immediate target is 108.75 to 109.00.
However, breaching 109.15 on a five-minute basis will nab a dart to 109.75 to 109.95.
Daily Moving Averages: 21, 55, & 100: 105.44, 104.39, 105.22
Weekly Moving Averages: 21, 55, & 100: 105.65, 108.69, 110.14
September is in the final stages of this advance.
The final leg of the move has taken on the form of a rising wedge.
This type of pattern occurs at the terminus of a trend.
Sept has a target for the top of the wedge at 109.10 to 109.20.
The pivot to the formation is 109.47. Above that level a different formation will take over.
Nevertheless, it is likely that Sept will post a top for Friday.
This will be confirmed with a break of the minor downside pivot at 108.00.
Just below this pivot is the wedge support at 107.75. Although these levels are close to one another, the break of 108.00 is significant, but the break of 107.75 on a daily settlement basis will be the big clue to skidoo.
We are a seller of the rally. This will be at 109.15. The stop will be placed above 109.50.
Daily Moving Averages: 21, 55, & 100: -2.32, -2.68, -3.83
Weekly Moving Averages: 55, 100, & 200: -7.37, -10.80, –15.83
Friday may well be the day that September crosses the bar from negative to positive.
It was a romp of the bulls once September broke the upside pivot at -1.90.
Shorts scrambled for cover and there appears to be more left to come.
Judging by the disparity between the WTI and Brent charts a run to +20 to +30 cannot be ruled out.
We are a buyer of the dip.
Sept is seen with support at -1.25 to -1.50.
The pivot is -1.65. The key downside pivot is a daily settle below -2.00.
Our trading plan will be to buy Sept at the -1.40 level with a protective stop below -1.65.
Daily Moving Averages: 21, 55, & 100: 2.8938, 2.8635, 2.9085
Weekly Moving Averages: 21, 55, & 100: 2.9294, 2.8913, 2.8788
Based on our labeled model below August has a new high that is likely.
This model will be dismantled with a break of 3.07.
But Aug held above that level Thursday and appears ready to punch higher.
Once through 3.1510 it is likely that it races to 3.19 to 3.1950.
August will have minor resistance ahead of the 3.15 level at 3.14 to 3.1450.
Nevertheless a punch higher looks probable.
We are a buyer of the dip at 3.0850. The protective stop below 3.0780.
This trade is valid as long as August has not bettered 3.15 before being executed.
Daily Moving Averages: 21, 55, & 100: 2.448, 2.541, 2.515
Weekly Moving Averages: 21, 55, & 100: 2.513, 2.451, 2.404
We suggested that August had another leg to the upside for Thursday. WRONG!
It broke the downside pivot at 2.50 and has sealed the top of the pattern at the 2.56 area.
This has altered the pattern and signals a correction of the move up from 2.306.
August is seen retracing to 2.465 to 2.46 with a break below the minor pivot of 2.48.
The risk marker to the 2.46 level is 2.445.
August has initial resistance at 2.525 to 2.53. the minor pivot is 2.535.
The key upside pivot is 2.56. We are a seller of the rally.
Daily Moving Averages: 21, 55, & 100: 2.9514, 2.9176, 2.9137
Weekly Moving Averages: 21, 55, & 100: 2.9224, 2.9955, 2.9983
Although this pattern is nearing completion, it appears to have more upside to come before the peak is seen.
Our model sees August as being in the third wave of a five wave complex.
This segment has more upside before a pullback will be seen. The initial target is 3.13 to 3.1350.
However, a bust of 3.14 will nail a jump to 3.1650 to 3.17.
August has support just below its close for Thursday at 3.0950 to 3.09.
The minor pivot to this support is 3.0800.
But the key support for the pattern rests at 3.0760 to 3.070.
The key downside pivot is a daily settle below 3.0650. in this event an important top is seen that will probably last for a week or two.
We are a buyer of the dip at 3.0750 with a protective stop below 3.0650.
Daily Moving Averages: 21, 55, & 100: 3.677, 3.866, 3.909
Weekly Moving Averages: 21, 55, & 100: 3.880, 3.477, 3.236
Just as the sun has toasted so many on the beaches of the Northeast this week, so too were we toast in our forecast for Thursday.
Much better than expected inventories gave the bulls just what they needed.
The pivot at 3.72 once busted revealed a multitude of stops.
August’s rise is not complete.
There is likely to be a minor retracement from 3.835.
This will establish support at 3.75 to 3.73. This carries a risk marker of 3.71.
It is probable that August flies higher from this retracement.
If this model is correct, it will seek 3.8850 to 3.91.
The latter level represents the 100 DMA on the continuation chart.
While there is likely to be resistance there on the first pass, a daily settle above it will be very bullish.
An intraday break of the moving average will net a rise to 4.00.
We are a buyer of the dip at the 3.75 level. Our protective stop placed below 3.71.
Hopefully our sun scorched head will have better results Friday than Thursday.