Brent crude (QA) remains in a major (long-term) uptrend with the December looking to be a Wave 2 of the 5-wave pattern. The spot-month contract posted a December low of $72.30, an 86% retracement of Wave 1 from the May 2023 low of $68.20 through the September high of $97.67. A deep retracement is characteristic of Wave 2. As expected, and based on aBenjamin Franklin Fish Analogy*, the 3-mont Wave 2 selloff led to renewed buying during January. Wave 3 is now expected to take out the Wave 1 high of $97.67 (September 2023). Theoretical Positions: Previous short futures were covered and new longs established as the spot-month contract took out the previous 4-month high of $87.49 during August. This has longs at roughly $87.50. Additional longs could be established near the January close of $80.55 based on the idea Wave 2 has bottomed.
WTI crude oil (CL) is in a major (long-term) uptrend. Similar to Brent, WTI looks to have completed a Wave 2 bottom with the December 2023 low of $67.71. Wave 3 is now expected to take out the Wave 1 high of $95.03 (September 2023). Theoretical Positions: Long positions were established on the move above the previous 4-month high of $83.53 (April 2023). Additional longs could be established near the January 2024 close of $75.85 on the idea Wave 2 has bottomed.
Distillates (HO, heating oil, diesel fuel, jet fuel, etc.) remain in a major 5-wave uptrend with the December low of $2.4838 looking to be a Wave 2 bottom. Seasonally the market tends to rally through late April, with a Wave 3 rally expected to take out the Wave 1 peak of $3.5092 (September 2023). Theoretical Positions: Traders could be long just above the previous 4-month high of $2.9198. Additionally, those needing to cover diesel needs could do so near the January close of $2.7852 based on the idea Wave 2 has bottomed.
RBOB gasoline (RB) looks to be in a sideways trend. Resistance is at the previous 4-month high of $2.4370 while support is at the 4-month low of $1.9672. Theoretical Positions: None at this time.
Natural gas (NG): The Widow Maker remains anyone’s guess. The spot-month contract posted a bearish outside month of January before closing at $2.10, just off its monthly low of $2.037 and the long-term mark of $1.946 (April 2023). Theoretical Positions: It’s possible traders established long futures positions near the April close of $2.41. Additional longs might have been established during August with the move to a new 4-month high beyond $2.878. It’s also possible those long were sold at the end of November with the spot-month contract price at $2.802 for an average profit of roughly $0.158. Realistically, there are no positions at this time.
*Like guests and fish, markets tend to stink after three days/weeks/months (whatever time frame is being studied) of moving against the trend.
