Technically Speaking

Weekly Analysis: Energy Markets

Brent Crude Oil: The spot-month contract closed $4.81 higher at $57.80. The secondary (intermediate-term) trend is up. The spot-month contract moved to a new 4-week high of $59.06 last week, confirming the bullish crossover by stochastics the week of January 12. Initial resistance is pegged at $62.22, the 23.6% retracement level of the previous downtrend from $117.34 through the low of $45.19. The 38.2% retracement level is up at $72.75.

Crude Oil: The spot-month contract closed $3.45 higher at $51.69. The secondary (intermediate-term) trend is up. The spot-month contract moved to a new 4-week high of $54.24, confirming the bullish crossover by stochastics the week of January 26. The last two weeks have also established, though not to the letter of the definition, a 2-week key reversal. The initial rally could be limited to the 23.6% retracement level of $59.78 by bearish fundamentals, indicated by the continued downtrend (strengthening contango/carry) in the nearby futures spread. Also, Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long futures position by 2,075 contracts. The 38.2% retracement level of the previous downtrend from $112.24 through the recent low of $43.58 is up at $69.81.

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Distillates: The spot-month contract closed 15.28cts higher at $1.8391. The secondary (intermediate-term) trend is up. The spot-month contract posted a new 4-week high of $1.8747, confirming the bullish crossover by stochastics the week of January 12. Support continues to come from commercial traders, as indicated by the solid uptrend (strengthening backwardation/inverse) in the nearby futures spread. However, Friday's CFTC Commitments of Traders report showed noncommercial interests reducing their net-long futures position by 4,293 contracts. Initial resistance is pegged at $1.9850, the 23.6% retracement level of the previous downtrend from $3.2668 through the recent low of $1.5890. The 38.2% retracement level is up at $2.2299.

Gasoline: The spot-month contract closed 14.39cts higher at $1.4491. The secondary (intermediate-term) trend is up. The spot-month contract posted a number of bullish signals last week. First, it left a breakaway gap above the previous week's high of $1.4475, establishing a new 4-week high of $1.6260. This confirms the bullish crossover by stochastics established the week of January 12. Friday's CFTC report showed noncommercial interests reducing their net-long futures position (early in the week) by 1,196 contracts. Bearish fundamentals indicated by the downtrend (strengthening contango/carry) in the nearby futures spread) could limit the rally to $1.7081, the 23.6% retracement level of the previous downtrend from $3.2672 through the low of $1.2265. The 38.2% retracement level is up at $2.0060.

Ethanol: The spot-month contract closed 7.20cts higher at $1.4390. The secondary (intermediate-term) is sideways as the spot-month contract continued to consolidate. A breakout above the 4-week high of $1.5040 would confirm the bullish crossover by stochastics established last week indicating a move to an uptrend. If this occurs, initial resistance is pegged at $2.0532, the 33% retracement level of the previous downtrend from $3.5780 through the recent low of $1.2920.

Natural Gas: The spot-month contract closed 11.2cts lower at $2.579. The secondary (intermediate-term) trend remains down as the spot-month contract posted a new low of $2.567 last week. Weekly stochastics are below the oversold level of 20% indicating the market is in an oversold situation. Pressure continues to come from commercial traders, as indicated by the sharp downtrend (strengthening contango/carry) in the nearby futures spread. Also, Friday's CFTC Commitments of Traders report showed noncommercial interests increasing their net-short futures position by 12,233 contracts to a total of 241,077 contracts. This is the largest net-short futures position held by this group since the week of March 14, 2011.

Propane (Conway cash price): Conway propane closed 5.63cts higher at $0.5050. The secondary (intermediate-term) trend is now up as the spot- month contract took out the previous 4-week high of $0.4850. This confirms the bullish crossover by stochastics the week of January 12. The initial upside target is $0.7455, the 33% retracement level of the previous downtrend.

Last Friday's CFTC Commitments of Traders were report showed positions as of Tuesday, February 3.

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