News from China that they’re prepared to make all efforts to strengthen their economy assuaged fears of a hard landing. This rescued WTI from its low of the day below 105.50. One of the reasons for the early weakness was a Senate subcommittee hearing regarding the efficacy of commercial banks controlling oil pipelines, power plants, and metals warehouses. Violence in Cairo and the Sinai peninsula contributed to the strengthen September early in the day. This was in reaction too the overthrow of the Mursi government. The euro zone consumer sentiment for July was the best level in 2 years.

The Richmond Fed noted that manufacturing activity in the region declined in July.

In the Gulf of Mexico, a natural gas well was evacuated after a blowout off of Grand Isle, Louisiana. It had little impact on the price of crude, but helped boost natural gas prices.

DOE ESTIMATES: CRUDE: -2.1MB; MOGAS: +900kb; DIST: 1.6 mb runs -0.3%.

The API reported the following: CRUDE: -1.4 mb; Dist: -710kb; Mogas: -89 kb; Cushing -2.1 mb

WTI

 Daily Moving Averages: 21, 55, & 100: 102.61, 98.11, 95.61

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

Although not quite making it all the way to our 105.20 target, Sept did usher in the down leg we sought.

• The move down from 108.93 was a five wave decline.
• This is in the process of being corrected.
• Normally this will mean another leg to the downside to follow the retracement.
• The target for the retracement is 107.60 to 107.75. The minor pivot is 107.95. This will invalidate the look for another leg to the downside.
• Its key upside pivot is 108.95. Although not expected a break of that level brings Sept to the key upside pivot for the continuation chart at 109.32.
• We view this market as a two way endeavor for Wednesday. Trade the extremes.

BRENT

Daily Moving Averages: 21, 55, & 100: 106.42, 104.59, 105.15

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

Monday and Tuesday had nearly the same price action.

• This is a mark of realignment in the September arbitrage.
• Sept has generated a “W” formation on the hourly chart.
• The neckline to the formation is 108.70. This type of structure acts similarly to a head and shoulders bottom when the neckline is removed.
• This is a neutral pattern waiting for an event to push it in one direction or the other.
• We will use the upside pivot of 108.70 to signal a rise to 109.20 to 109.35.
• The downside pivot of 107.55 will net a drop to 106.65 to 10640. This support has a pivot of 106.30.
• We opt for the sidelines pending further data.

WTI-BRENT

Daily Moving Averages: 21, 55, & 100: -1.39, -1.84, -3.00

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

The outlook for Tuesday was for downside follow through.

• September dove to the -2.00 area before bargain hinting step in to close Sept well of the day’s low.
• Sept does appear to have another leg to the upside if it can break the minor pivot at -1.15.
• If successful in this regard, Sept will nuzzle -.75 to -.65. The minor pivot is -.50.
• The key pivot is +.05. Our model suggests Sept will retrace a good percentage of the move down from +.05.
• It will launch into a new pattern with a break over +.10.
• This will look at +.30 to +.40.
• This will be a two way market for Wednesday.
• buy the dip; sell the rip.

RBOB

Daily Moving Averages: 21, 55, & 100: 2.9342, 2.8778, 2.9148

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

Although we were looking for August to move lower Tuesday, it did so, but held above our objective for the day.

• It does appear as if August completed the leg to the downside with the drop to the 3.02 area.
• It is in the process of correcting the move down from 3.1632.
• This will give August a look at 3.1075 to 3.11.50.
• The minor pivot is 3.1260.
• It appears that August will work within the confines of the Friday to Tuesday range.
• There is likely to be support for this view at 3.0350 to 3.03. The downside pivot is 3.02.
• While we favor an upside turn for August, we will take an aggressive approach and call for a bullish play.
• This will be to buy Aug at the 3.0650 to 3.06 area. The pivot to protect is 3.0550.
• As long as the pivot is inviolate August will attempt a rise to the above mentioned target.The trade recommendation is valid as long as August does not break 3.0850 prior to being elected.

ETHANOL

Daily Moving Averages: 21, 55, & 100: 2.446, 2.532, 2.516

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

August met our targeted resistance and fell without taking prisoners.

• The deluge of selling was sparked by improving crop conditions and ratings.
• As we pointed out Tuesday a daily settle below 2.40 was likely to give August a look at the 2.30 area.
• We stand by that statement.
• August will have minor resistance at 2.40 to 2.405.
• This will carry an upside pivot of 2.410.
• There is likely to be a break of the Tuesday low of 2.36.
• This case will provide the bears with an initial look at 2.335 to 2.33.
• while this be an area for August to pause in its descent, the important pivot is 2.305.
• Although not anticipated for Wednesday a daily settle below 2.305 has 2.22 to 2.200 written upon the tombstones of the bulls.

DISTILLATE

Daily Moving Averages: 21, 55, & 100: 2.9771, 2.9264, 2.9164

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

August fell to our initial target at the 3.04 area and bounced appreciably.

• It did complete a formation at that mark and is correcting the move down from 3.1325.
• This will give rise to August for a test of 3.0950 to 3.10. The upside pivot is 3.1135.
• Refinery run rates will be something this trader will look at.
• If they continue to be high there will be pressure on the products, unless demand has picked up considerably.
• Nevertheless, it is likely that August is repelled from the 3.1000 level on its first pass.
• It has minor support at 3.0550 to 3.05. This will keep August in an upward biased correction as long as it holds.
• The key downside pivot to the intraday pattern is 3.04.
• We are neutral of this market for Wednesday.

NATGAS

Daily Moving Averages: 21, 55, & 100: 3.672, 3.856, 3.915

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

August met our upside objective Tuesday, but could do little more than that.

• The structure of the rise gives one the impression that there is to be a downside leg to come.
• On the hourly chart the retracement has taken the form of a typical bearish correction.
• With a five-minute settle below the minor pivot of 3.72 August will signal a return to 3.685 to 3.67.
• The key trend support hits the chart at 3.545 for Wednesday.
• This is a must protect for the bulls although the key downside pivot is 3.525.
• The upside pivot to this model is 3.765.
• August’s key upside pivot is 3.835. Although not expected, a break over that level will eye the 3.910 to 3.93 zone.
• We are a seller of the rally. This will be at the 3.75 level with a protective 3.765.