When it came to U.S. economic data points the picture was a portrait in mixed colors. Although the Chicago Fed’s National Activity Index improved, existing home sales fell. The Chicago Fed showed its key economic indicator read at -0.13 in June, but this was better that the May report of -0.29. Existing home sales fell in June by 1.2 percent.  This was lower than analysts’ estimates.

However, in the energy market profit taking was the blue plate special for Monday. It was seen following the Sept arb moving above zero mark for the second time in as many days, but it failed to hold the key level. This spurred profit taking in the arbitrage and was able to push the Sept contract lower on the day. This following the near parabolic rise in the front month WTI contract. The slope of the trend was at 80 degrees. An incline that is unsustainable.

WTI

 Daily Moving Averages: 21, 55, & 100: 101.96, 97.90, 95.46

Weekly Moving Averages: 21, 55, & 100: 95.58, 93.08, 94.02

Our model for Monday held open the potential for a marginal new high, but with the arb seeing relief after pressing above level profit taking hit Sept.

• The slope of the rise was parabolic and this is impossible to sustain.
• One should note the clearly delimited five-wave structure on the chart below.
• The minor downside pivot to confirm a completed pattern was removed Monday.
• We are in a sell the rally mode.
• A weakening market will fail to better 107.25 to 107.40. The minor pivot is 107.65.
• The downside pivot is 106.50. This will signal an extension of the corrective downside pattern.
• In this event a drop to 105.90 to 105.70 is in order. A word of caution, this is a market engorged with speculative length. When the funds head for the doors no prisoners will be taken.
• We are a seller of the rally. This will be at 107.20 to 107.40. Our protective stop above 107.65.
• A potential exists for Sept to plumb the 105.00 to 104.90 zone.
• The key upside  pivot is 108.60.

BRENT

Daily Moving Averages: 21, 55, & 100: 106.06, 104.51, 105.15

Weekly Moving Averages: 21, 55, & 100: 105.37, 108.88, 110.14

The model pictured below is one of a completed wave structure.

• Although the key downside  pivot to the intermediate term formation is still intact, the intraday chart is showing signs of weakness.
• The key downside pivot that confirms a completed wave is a daily settle below 106.00.
• Nevertheless, Sept is seen likely to develop weakness over the next few sessions.
• It will have minor resistance at 108.50 to 108.60. the minor upside pivot is 108.72.
• The key upside pivot is 109.20.
• We are a seller of the rally. This will be attempted at 108.50 with a protective stop placed above 108.72.
• Sept will initially tag 107.30 to 107.15. The pivot is 107.00.

WTI-BRENT

Daily Moving Averages: 21, 55, & 100: -1.54, -2.00, -3.25

Weekly Moving Averages: 55, 100, & 200: -6.70, -9.87, –15.36

The last grain of sand the dune could hold was seen atop the Sept arb Monday.

• The pattern was completed with the punch above level at the +.08 level.
• We were looking for Sept to test the key downside pivot of -1.00 Monday.
• It busted that level and is extending lower.
• There is likely to be more downside to follow Monday’s sell off.
• What was support will now be resistance. The initial hurdle will be found at the -1.00 mark.
• The minor upside pivot is -.65.
• Sept has the probability for a correction back to the -2.00 area or below.
• We are a seller of the rally.
• This will be at -1.00. The protective stop placed above -.65.

RBOB

Daily Moving Averages: 21, 55, & 100: 2.9199, 2.8935, 2.9133

Weekly Moving Averages: 21, 55, & 100: 2.9315, 2.8985, 2.8816

It was an anathema that the bulls ignored the increased refinery runs late last week.

• But the injustice was rectified Monday. It did so in an impulse or trending move lower.
• August is not complete yet to the downside.
• We are a seller of the rally.
• There will be initial resistance at 3.08 to 3.0850. The minor pivot is 3.09. The key pivot to the intraday chart is 3.1350.
• The initial target for August to probe is 3.01 to 3.0050.
• It has an extension pivot of 2.9975.
• Dropping through that mark will signal a return to 2.98 to 2.9750.
• Although we see a material correction likely, we do not feel the ultimate high for the market has been seen yet.
• Once seen that will be a duzy of a sale. Nevertheless that is probably two weeks or more in the future.

ETHANOL

Daily Moving Averages: 21, 55, & 100: 2.459, 2.532, 2.517

Weekly Moving Averages: 21, 55, & 100: 2.519, 2.455, 2.400

We saw a bearish impulse for our outlook Monday.

• We were not disappointed as August withdrew from the 2.48 area.
• August fell and settled below the downside pivot of 2.44 Monday.
• This will set up a test of key ratio support at 2.405 to 2.40.
• The pivot to further weakness is 2.395.
• Although on an intraday basis August may only see 2.385 to 2.38, a daily settle below 2.40 will open the door for a test of the 2.300 area.
• We are a seller of the rally.
• August will have resistance at 2.45 to 2.455. The pivot is 2.46.
• The key pivot to the intraday chart is a break above 2.48.
• Breaking above that level will move August into a full correction of the move down from  2.558.
• Note the momentum indicator below the chart is showing signs of a weakening market.

DISTILLATE

Daily Moving Averages: 21, 55, & 100: 2.9662, 2.9230, 2.9145

Weekly Moving Averages: 21, 55, & 100: 2.9217, 3.0027, 3.0001

Our admonition for Monday was that August  completed a wave to the upside at 3.1325 last week and a material correction was likely.

• For our model, August completed a large degree wave 3 at the above mentioned peak.
• This will mean that August will move lower to continue the correction.
• The initial target zone is 3.0450 to 3.04.
• The extension pivot is 3.0290.
• Although the ratio retracement for this type of formation hits at 3.09 to 3.0950, a weakening market will fail to better 3.08.
• The downside objective beyond 3.0290 is 3.0150 to 3.01.
• We are a seller of the rally. This will be at the 3.0925 level. The protective stop placed above 3.10.
• Increased refinery runs is the reason for the weakness.

NATGAS

Daily Moving Averages: 21, 55, & 100: 3.674, 3.862, 3.912

Weekly Moving Averages: 21, 55, & 100: 3.904, 3.494, 3.235

Whither the wind blows is how this market goes.

• The heat wave for the East Coast has broken and with it so too prices.
• Although it appears as if August will bounce further off the 3.64 low of Monday, there will be resistance at 3.74 to 3.76.
• The minor pivot is 3.775. The key upside pivot is a daily settle above 3.815, which is trend line resistance.
• Our primary model calls for August to rise to 3.75 and then come under renewed pressure.
• We are a seller of the rally. This will be at 3.745; the protective stop placed above 3.76.
• August is seen probing 3.615 to 3.605.
• A break of that zone on an intraday basis will net a decline to 3.56 to 3.545.
• The key downside pivot is 3.525.