Daily Spot: Energies
A weekly summary of one complex, including daily updates of other developments elsewhere.
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Crude Oil Nov (CLZ) October’s topping formed a Double Top whose interim consolidation sloped upward. Its test of August’s high formed another, larger Double Top, whose interim consolidation also sloped upward. Corrections are intended to let pessimists trap themselves short. Upsloping corrections reflect optimism, so buying pressure is sorely missed just when it is needed most – to break above the prior high.
The rally into October’s high was signaled above 78.00 (above 77.00 basis Nov at the time). Its complete retracement down to “lower prior highs” at 77.75 is targeted.
Further bounces aren’t necessary to refuel sellers in this pattern. The gap back up to Monday’s close in the 84.00 area should not be filled if 77.75 is in play. Recovering 84.00 now that a dip has tested 80.00 would suggest another upleg was underway instead.
Natural Gas Nov (NGZ) Friday and Monday’s consecutive new low closes (highlighted red) constituted a breakout and its confirmation. Before a bounce could gain traction, it would resolve down in a new low. Tuesday’s inside day (highlighted pink) made that bounce likely Wednesday.
My objective for Wednesday’s bounce was 3.98, but it failed upon probing 3.95. This shallow bounce allows a new low to be shallow, too. I have labeled 3.82 on the chart as having potential for launching a recovery. That said, this depends upon there being some bottoming action, such as a same-day recovery back above prior lows. The trend otherwise remains down.
Gold Dec (GCZ) Wednesday’s sideways ranging hardly bounced, certainly not relative to the Dollar’s retracement. Resistance at Tuesday afternoon’s 1347.40 high was influential, which helps to confirm that its resistance is relevant. Also that its resistance is being chipped away. Retest of Tuesday’s 1357.70 gap open remains likely – potentially up to 1363.00 or 1366.00 – before resuming the decline.
30-year Treasury Dec (USZ) Wednesday absorbed a second consecutive lower open to probe a fresh bounce high, where RSIs deteriorated. The path up to 133’06-133’10 could dip first to 131’25. A close under 131’25 would suggest 133’06-133’10 won’t be tested before resuming the decline.
Dollar Basket Dec (DXZ) Wednesday’s steep morning drop kept the door open for forming a more durable bottom. Despite attacking Monday’s 77.14 close before noon, the entire afternoon hovered narrowly just above it. The inhibition to filling the gap reflects optimism, at least enough to expect one more dip before a more substantial rally leg can begin – preferably after testing 76.65.
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Daily Spot coverage schedule is: Currencies (Mon), Metals (Tue), Energies (Wed), Rates (Thu), Softs (Fri, coming).