Thursday, June 23, 2011

Brent/ Gasoline Neckline Breaks Etc.

As discussed in the Tues. June 21 post For the Bears 
Brent and Rbob were within easy spittin' range of some important technical points being taken out.
Today obviously we saw that. Take a look at the damage done in the Brent.

Active Mo. Daily
click to enlarge
The first and most obvious damage is Brent's settle below the long term head and shoulders neckline AND the trendline that has defined the uptrend for the last year.
These lows also happen to produce fresh lows for the last 4 mo.s, as well as breaking below the 6 week old consolidation.
Additionally if you more closely examine the move down from the June 13 high of 119 you will note that this leg now exceeds the c =.618 of a, leaving the bulls c=a at 102.20 as the next most likely support. And really, there ain't a whole lot of price action between here and there.
 
Word of caution; retesting the neckline ( and chopping above and around it) is common.

Rbob was a similar story, it took out the neckline and .382 retrace, but found support at the c= .618 of a, and the daily trendline .
Active Mo. daily
 click to enlarge
Clearly fresh lows below the above mentioned support will be very negative.

There has been a host of negative news out, both directly and indirectly related to the oil market.
The list is impressive.
 Saudi Arabia going it's own way on production. (Is there a cartel in the wake of that?)
The continuing soap opera of the Eurozone dysfunction.
US domestic economic woes from housing to employment (for starters).
Not to mention Federal and state budget deficits and the paralysis demonstrated by all involved.
The inflation problems in emerging countries and the increasing efforts to clamp down on that ( China comes to mind).
All in all almost too much, and at a certain point the news is out and discounted.
But Brent is NOT at any kind of low, or oversold point. Neither the weekly , daily or hourly 14 RSI is showing any positive divergence (at least on my charts).
So it appears rather that the market is finally overcoming a massive orgy of bullish sentiment, see May 8 post CFTC C.O.T., Heating Oil Fundamentals, etc.

Current
Large Spec Net Long Crude
A long way to go.
And Brent perhaps even more so.










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