Although the Middle East is on fire with sectarian violence, WTI managed the close the day virtually unchanged. There are problems that have developed in Iraq, Tunisia, Syria, Libya, and Egypt. Different sects of Islam are competing with one another for religious supremacy and orthodoxy. When it comes to Iraq, the sectarian war targets northern pipelines through the Kurdish region. Although this has not affected the price of oil thus far, it is something that should be watched. WTI has been dominated by the actions of the arb and the calendar spreads. Both of these spreads have been under pressure the past few days and are responsible for WTI being knocked from its lofty perch above 109.00.
Other geopolitical events are centered in Asia, where China and Japan have aired their differences regarding disputed islands and the mineral riches beneath them. The islands are also claimed by Vietnam and the Philippines. War ships have been sent to the area by all factions involved. Although intended bellicose action is unlikely, a multitude of competing navies in such a tight area leaves open the possibility for accidents.
Tropical Storm Dorian still has a path that can brush the East Coast of the US, pending a turn to the North. Traders are keeping this in their sights as well.
Daily Moving Averages: 21, 55, & 100: 103.84, 98.54, 96.02
Weekly Moving Averages: 21, 55, & 100: 95.58, 93.08, 94.02
Our forecast for Thursday was for Sept to fall to the 104.30 level for a test of that pivot.
Although Sept broke below that level it failed to settle below it and it held 104.00.
Moreover, the move to 104.08 completed a leg to the downside.
This is going to give way to a correction of the move down from 108.93.
If this model is correct Sept will find support at 104.80 to 104.70. The minor downside pivot is 104.45. The key downside pivot is 104.00.
Sept is seen holding the 104.75 level to give it a punch higher. This will point to Sept rising to 106.40 to 106.60. The upside pivot is 107.07.
We are a cautious buyer of the dip. This will be attempted at 104.75. The protective stop placed below 104.50.
However, we will also sell the strong rally at the 106.80 level with a stop placed above 107.10.
It will be a two way market governed by the wanderings of the Sept arb.
Daily Moving Averages: 21, 55, & 100: 106.98, 104.69, 105.07
Weekly Moving Averages: 21, 55, & 100: 105.37, 108.88, 110.14
We had the ignominious distinction of having our sell order elected and stopped out within fifteen-minutes.
While we do not usually fare this badly, the chief job of the markets is to cause the greatest amount of pain for the greatest number or traders. Thursday, with our humility intact, we were subject to the pain.
It appears that Sept wants to grind higher.
There will be initial support at 107.40, which represents a strengthening market if held. The minor pivot is 107.20.
Key ratio retracement support is found at 106.90 to 106.80. This support carries a pivot of 106.50.
Sept’s initial hurdle to overcome is 108.00 to 108.10. The hinge for the trade is 108.65.
The key upside pivot is 109.20.
We are slightly better disposed to the bull side of the ledger, but view it with caution.
Any foray to the long side should wait for 106.85 before trying the trade. Placement of the stop is below 106.50.
Daily Moving Averages: 21, 55, & 100: -1.20, -1.66, -2.58
Weekly Moving Averages: 55, 100, & 200: -6.70, -9.87, –15.36
Sept fell to our targeted are Thursday as increased production weighed on the bulls.
Although we have labeled the chart below as an A-B-C correction, it may just as easily be a 1-2-3.
The difference is the latter is more bearish and promises a new low.
The former is a bullish correction.
What separates the two? The upside pivot at -1.75.
Violation of this mark on a fifteen-minute basis will swing the pattern towards the A-B-C interpretation.
This will allow for Sept to rise to -1.00 to -90.00 as a retracement of the move down from above level.
The downside pivot to this model is -2.35. A fifteen minute settle below that mark will signal a continued fall to -2.60 to -2.70.
Sept has an extension pivot at -2.85. Busted and it will fall to -3.25 to -3.35.
We are neutral of this market for Friday.
Daily Moving Averages: 21, 55, & 100: 2.9674, 2.8842, 2.9100
Weekly Moving Averages: 21, 55, & 100: 2.9315, 2.8985, 2.8816
It has been a tumultuous week for the bulls.
However, the nearly twenty-cent drop from the 3.16 area high appears to have run its course.
This model, however does call for a test of the 2.9775 level before August makes the next jump higher.
August will have initial support at 3.0050 to 3.00.
A strengthening market will hold this level. There is no good pivot for this support, therefore if one were to trade this level one would probably use a 2.99 stop.
But the key downside pivot, which was our candidate for second support for Thursday is 2.9775.
This is an important support level from varied sources.
We think it will hold.
That will give Aug the basis for its next leg to the upside.
Let us be clear this is a correction and not a change of trend.
There will be initial resistance at 3.0450 to 3.05.
The minor pivot is 3.0590.
Its key upside pivot i s a daily settle above 3.0850.
We are a cautious buyer of the dip. This will be at 3.00 with a stop below 2.99.
With the RINS market jumping around this is a risky trade. It is not for everyone.
Daily Moving Averages: 21, 55, & 100: 2.428, 2.519, 2.514
Weekly Moving Averages: 21, 55, & 100: 2.519, 2.455, 2.400
With the grain complex under severe pressure there was only one way for August to go.
We warned of the dangers to the bulls if 2.30 was given.
While we thought that it would take a daily settle to trip the pivot, the intraday break was all that was needed.
With August closing on the low of the day it is highly likely there will be follow through selling if not Friday then Monday.
We say that because August can retrace a little Friday before the next shift lower, but that is not required by the pattern.
There will be resistance at 2.265 to 2.27. The minor pivot is 2.28.
The support below 2.20 is the 2013 low of 2.17.
It is likely that Aug will bounce on the first pass from that level, but there is no pivot that is close by to trade against.
Regardless this is a sell the rally market and the buying of a dip can be injurious.
A daily settle below 2.17 will give a nod to 2.11 to 2.10 and the potential to see 2.00 is in the offing.
Daily Moving Averages: 21, 55, & 100: 2.9997, 2.9321, 2.9189
Weekly Moving Averages: 21, 55, & 100: 2.9217, 3.0027, 3.0001
August fell the the 21 DMA on the continuation chart (blue line) and bounced smartly.
While it appears that it completed a leg at the 3.00 area, it is likely to be tested early Friday.
This will put initial support at 3.02 to 3.0150.
The minor pivot is 3.01. The key pivot is 3.00.
A break of the latter will drop Aug to 2.99 to 2.9850.
However, it is likely that August holds above 3.01 if our model is correct.
In so doing it will have a climb to 3.0750 to 3.08. The upside pivot is 3.0810.
Although look for it to chop higher, the pattern is sufficiently neutral as to stay away for Friday.
Daily Moving Averages: 21, 55, & 100: 3.669, 3.840, 3.920
Weekly Moving Averages: 21, 55, & 100: 3.904, 3.494, 3.235
Injections were not as bad as feared, but it mattered little.
Although the forecast was for a build of 47 bcf and it came in at 42, the cooling degree days are falling fast.
The weather in the Northeast is fully 25 to 30 degrees cooler than it was earlier in the week.
The peak of cooling demand has been seen and the bulls are trying to exit gracefully.
Our longer term view is for the continuation chart to test the 3.00 level for the shoulder months.
We are a seller of the rally. August will have initial resistance at 3.68 to 3.69, but with a pop of that level a run to 3.72 may be seen.
That is the ideal area to post a sale, but for those that wish to be aggressive we suggest the 3.68 level.
August’s initial objective is 3.59 to 3.58. This is pattern support and is usually good to hold for the first pass.
However, we are not looking to buy the dip.
Rather if the bears press the level a drop to 3.47 to 3.46 is a potential.